Cain: I didn’t realize in 2005 that the housing bubble existed
posted at 12:45 pm on October 12, 2011 by Ed Morrissey
As Jazz Shaw predicted, the national media has suddenly begun doing a lot of homework on Herman Cain now that he’s riding high in the polls, and the first one to take a crack at the new Not-Romney is NBC’s Chuck Todd. Todd challenges Cain on a 2005 column he wrote that dismissed concerns of a “bad economy” and a housing bubble, the latter of which at least turned out to be all too true. Cain admits that he didn’t see it coming, which prompts the obvious follow-up question from Todd about just how good his economic instincts actually are. This starts about four and a half minutes in, if you want to cut to the chase:
TODD: All right, you predicted that if — now that you’re in the top tier, you were going to get more questions. I promise you this is not a “pop quiz” about foreign leaders. I actually want to go into some things that you’ve written. This is something you wrote in 2005, saying, arguing that there was no housing bubble. You wrote this in 2005, in Business and Media Institute, you said, “Coverage of the Bush economy reads like a collection of Democratic Party press releases, calling a strong economy everything from struggling to volatile or dicey. That kind of ignorance makes homeowners fear that their most expensive possession could turn worthless overnight. That won’t happen.” August 2005.
The housing situation — that did happen, and it only happened within three years. What did you miss in 2005 about the housing bubble?
CAIN: What I missed in 2005 was just how bad Fannie Mae and Freddie Mac had distorted the housing market. That’s why I said what I said in ’5. I further learned later, in terms of Fannie Mae and Freddie Mac — I honestly did not realize just how bad it was, just how bad it was, just how bad the whole bundling and derivatives thing was, and that we were on the brink of a total financial meltdown. So I learned later on by looking into it deeper that the situation was a lot worse than I thought in 2005.
TODD: Well, in 2008, this is September 1st, 2008, another column you wrote about the economy, and it reads as follows. You wrote, “The supposed failure of Bush’s economic policies has been a constant theme of the Democrats since the 2006 elections. When the Democrats regained control of the House and Senate by convincing enough of the voters that the economic sky was falling, and that the war in Iraq could not be won. Based on all of their convention speeches, they plan to continue those themes right through Election Day on November 4.”
Economic sky was [not] falling, you said September 2008. Fifteen days later, of course, the Lehman Brothers collapse — we know what happened after that: a total near sky-is-falling moment. So how — I guess I would say this. How do you reassure voters that, despite all the experience you’re running on in the business community, your time on the Fed, you missed the housing bubble and you missed the economic collapse.
CAIN: Well, it’s real simple, Chuck. I have economic advisers working with me now who spend time studying these various analyses. When I wrote those papers, I was only responding to reports that I, like everybody else, was getting through the media, those kind of public reports. I wouldn’t –
TODD: Which turned out to be right, by the way. You were criticizing those reports, but they turned out to be right.
CAIN: Well, yeah. But what I am saying is I’m going to have, I will have people around me who are going to help me do deeper analyses on some of these things, okay? So yeah, I missed some of these things. I’m not perfect. I’m very quick to say I’ve made a mistake or I missed it, but I didn’t have sophisticated analyses helping me to draw the conclusions I was drawing at that time. And remember, I have admitted that the housing bubble and the economic meltdown of 2008 — it was much worse than I ever realized until the Lehman Brothers situation started, and until more and more was revealed about the depth of the problems at Fannie Mae and Freddie Mac. I admit I didn’t know all of the details of those situations.
That’s not exactly a confidence builder. If Cain didn’t have access to “sophisticated analyses,” then why was he drawing conclusions at all? And how sophisticated an analysis would it have taken to see housing prices had become serious decoupled from inflation starting in 1999? By 2005, the Bush administration had already warned Congress twice about the housing market, specifically about exposure at Fannie Mae and Freddie Mac, to no avail. It’s not as though the overheating in the housing market was a secret in August 2005.
Given the paper trail, this is as good of an answer that Cain could have produced, but it’s going to stick to him like his Greenspan comment last night. The saving grace of this issue in the Republican primary is that his main competition didn’t exactly set off warning flares in 2005 or 2008, either — but this will definitely be a big talking point in the general election if Cain is on the ticket.
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