Image via WikipediaI was somewhat taken aback by Tyler Cowen's claim at money.cnn that you cannot trust your gut in uncertain times, especially if the......

It is fashionable these days to blame the mortgage/liquidity mess on Bush. One current canard is that the lax regulatory environment he facilitated is the cause. We call these people 1) partisan, 2)ignorant or 3)both. The single most important regulatory issue relevant to the current mess is the repeal of Glass Steagal, which allowed traditional commercial banks to pursue their investment banker wannabe tendencies. We know what happened when they became syndicators, and stopped holding the loan risk on their own books. GS was repealed during the term of a certain William Jefferson Clinton.

The blame Bush crowd also conveniently forgets that the root cause of the mortgage mess, a social policy imlemented in the good name of "affordable housing" encouraged (in fact, strongarmed) lenders to make bad loans - excuse me, "sub-prime" loans, for fear of criminal redlining charges. That run-up was initiated by Bill Clinton's HUD, run by Andrew Cuomo.

And of course LTCM signaled that the Feds would stand behind the entire financial system if all hell broke loose. LTCM was 1998. Inconvenient facts, indeed.

All this blaming of the guy who was in the chair when things finally blew up is analogous to a life-long smoker who finds out he has lung cancer, but then wants to blame the doctors who might not have read the imaging studies correctly, or soon enough, or wants to blame the oncologist who didn't get just the right chemo regimen. But blame the root cause - smoking? - no way.

I of course understand the politics of blaming Bush. But you know you are conversing with a rank partisan hack uninterested in understanding or learning valuable lessons from policy mistakes when you hear "blame Bush, Bush, Bush."

What was the stick they used? I really doubt that it was Guantanamo.

You really are clueless about the New York Fed aren't you? It is the most powerful Fed Bank. It has a permanent seat on the FMOC and is typically its Vice Chairman, its current is Thomas Geithner the incoming Sec. Treasury. Geithner was the guy who arranged the sale of Bear Stearns.

That isn't usually the kind of person you want to piss off.

Wall Street was just "jawboned" into saving one of its members.

That is what you call strong arm tactics? So a mugger is really just a "jawboner"?

If that's all it took again in 2008, I would have been pretty happy actually.

(So no, there was no bailout "signal." None of my (or your) taxes went into the LTCM deal.)