Obama predicted the economic crisis

During the debate last night, Obama said we need a President who can “see around the corners“:

Part of the job of the next commander-in-chief, in keeping all of you safe, is making sure that we can see some of the 21st Century challenges and anticipate them before they happen.

We haven’t been doing enough of that. We tend to be reactive.

Everyone knows that Obama opposed the Iraq war. What is striking is the accuracy of his prediction:  i.e., that the war would be long and costly and make America less secure.

Obama also predicted the economic crisis. He wrote a letter to Chairman Bernanke and Secretary Paulson in March 2007 — eighteen months ago.

The solution Obama proposed was rather wonkish. He urged Bernanke and Paulson to convene a “homeownership preservation summit” with key players in the world of finance (mortage lenders, investors, federal regulators, etc.). But wonkish or not, Obama zeroed in on the key issue:  that mortgage foreclosures could spill over to damage the broader economy:

There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit …

A consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don’t let this opportunity pass us by. [emphasis added]

In September 2007 — one year ago — Obama addressed similar concerns to Wall Street. He referred to the speech during the last night’s debate; Ezra Klein provides an excerpt:

We have not come this far because we practice survival of the fittest. America is America because we believe in creating a framework in which all can succeed. Our free market was never meant to be a free license to take whatever you can get, however you can get it. And so from time to time, we have put in place certain rules of the road to make competition fair, and open, and honest. We have done this not to stifle prosperity or liberty, but to foster those things and ensure that they are shared and spread as widely as possible.

In recent years, we have seen a dangerous erosion of the rules and principles that have allowed our market to work and our economy to thrive. Instead of thinking about what’s good for America or what’s good for business, a mentality has crept into certain corners of Washington and the business world that says, “what’s good for me is good enough.” …

The quick kill is prized without regard to long-term consequences for the financial system and the economy. And while this may benefit the few who push the envelope as far as it will go, it’s doesn’t benefit America and it doesn’t benefit the market. Just because it makes money doesn’t mean it’s good for business. [emphasis added]

Wouldn’t it be nice to have a President who can “see around the corners”? Who doesn’t wait until a crisis has blown in like a hurricane and caused devastating harm? A President who doesn’t merely react, but has the foresight to prevent a crisis from taking shape?


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