Former presidential candidate Steve Forbes criticized the Bush administration for failing the country in its handling of the financial crisis and the Obama administration for willfully misinterpreting the election results.

But he saved his most vitriolic barbs for former Federal Reserve Chairman Alan Greenspan and current Chairman Ben Bernanke. In fact, he placed much of the blame for the financial crisis at the feet of Greenspan and Bernanke for their failed monetary policy. Forbes, the president and chief executive officer of Forbes and editor-in-chief of Forbes magazine, made the remarks while providing his take on the financial crisis, the economy and the government to a packed house at the Financial Advisor Symposium on Wednesday in Orlando, Fla. More than 500 advisors from around the country attended the 12th annual event, co-sponsored by Financial Advisor magazine.

Forbes, a Republican candidate in the 1996 and 2000 U.S. presidential primary races, called Obama and his supporters "neosocialists" who totally, willfully, misunderstood the election results. Rather than representing a call for liberal policies on health care and the like, the election of Obama was a repudiation of what happened to the economy, he said.

"The Bush administration, it pains me to say as a Republican, didn't know what it was doing on the financial crisis, what led up to it and why it happened," Forbes said.

Contrary to the opinions of many media professionals, economists and government policy makers, the free markets do work and did not cause the financial crisis, he continued. Rather, in every major economic catastrophe, including this one, it has been major government policy mistakes that were in large part responsible for causing the problems, Forbes said.

First and foremost, he blamed the Federal Reserve, led by Alan Greenspan, for its monetary policy. "We would have never had the housing bubble we did if they hadn't kept interest rates at an artificially low level," he said. "It wasn't good monetary policy ... it was monetary policy on steroids!"

Pumping huge amounts of money into the economy, beginning in 2004, led to higher prices for oil, gold, wheat and other commodities. "We heard some trying to blame the Chinese for flooding us with savings ... but there's no such thing as excessive savings," Forbes said.

Rather, our credit standards for mortgages grew increasing lax, a situation brought on by a bubble mentality that held that housing was a "no-lose proposition," Forbes said.

Those mistakes were further aggravated in 2007 by another big one: the government requirement for mark-to-market accounting, which devastated bank balance sheets at precisely the wrong time. Before 2007, capital was valued, for regulatory purposes, at its purchase price, he explained. Changing the rules so that capital would be recorded on balance sheets at its current value was a "dumb idea for regulatory purposes," he maintained, because it actually distorts values--inflating them when times are good and puncturing them when the economy is going down. In fact, he noted, mark-to-market was banned in 1938. "Bad ideas are like monsters in the movies; they keep coming back," he quipped.

In late March, the U.S. Congress "actually did something positive" by telling the Financial Accounting Standards Board to get rid of the mark-to-market rule in two weeks' time. The result? "The bleeding stopped" and the stock market rallied, Forbes said.

"Today, this is part of the reason that the credit system is working, but we're not out of the woods yet," Forbes said.

A big reason problems are still persisting is because the regulatory system is still "anti-lending," and as a result, banks are still cutting lines of credit and raising interest rates for small businesses, he said.

But the biggest threat to the economy is the weak dollar, Forbes maintained. "We need a strong, stable dollar. A weak dollar means a weak recovery ... Even Bill Clinton understood it," he said.

The last time the United States allowed a weak dollar was when Jimmy Carter was in office and look what happened to him; it's political poison, said Forbes.

Stimulus spending and rebates won't grow the economy if tax rates aren't cut, Forbes continued, because such spending doesn't create wealth or increase productivity as tax cuts would. "It's the equivalent of taking a bucket of water from one of the pool and pouring it in the other end," he said.

Forbes also offered his five simple rules of economic progress:

  • Laws must be enforced, especially property rights and contracts.
  • Policies should result in a strong, stable dollar.
  • Taxes need to be cut. As he has done many times over the years, he called for a flat tax and a complete overhaul of the U.S. tax system.
  • Make it easy to start a legal business.
  • Remove barriers to doing business, such as unnecessary licensing requirements.

Forbes also argued for revamping the U.S. Social Security system by allowing younger people to save for retirement in their own accounts.

Socializing health care isn't the answer, he said. Instead, health care should be a free-market system where consumers know the price of services and can shop for what they need. Encouraging competition would bring down the price and make health care more affordable, he said.

Following his speech, an attendee asked if Forbes would again try a run for the U.S. presidency.

Forbes replied with a decisive "no," but he assured the crowd that he'll be publicly agitating for his beliefs nevertheless.