The truth is that all men having power ought to be mistrusted. ~ James Madison
President Barack Obama and liberal members of Congress continue to blame former President George Bush for the current problems with our economy and we’re likely to hear that more and more as the mid-term elections draw near. But frankly, both sides are to blame. And Barack Obama helped in the effort as well by representing ACORN in lawsuits against banks to force them to comply with the easy loans for people who couldn’t afford the houses they were buying, enabling the mortgage meltdown that began this financial crisis.
The saga goes back to the Carter administration and the Community Reinvestment Act that had the well-intentioned goal to reduce discriminatory loan practices in low-income neighborhoods. However, what started our economy on the downhill path was the Clinton administration that wanted home ownership for everyone and pushed for less restrictive credit and lower down payments to qualify for mortgage loans. Banks were pressured to extend home mortgages to individuals whose credit was generally not good enough to qualify for conventional loans. President Bill Clinton’s Secretary for Housing and Urban Development, Andrew Cuomo, helped lead the way for the mortgage meltdown by ratcheting up federal affordable-housing mandates. Cuomo and the Department of Housing and Urban Development Department (HUD) forced the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") to buy more sub-prime mortgages, as part of Cuomo’s efforts to increase the number of minority home owners. Strict regulations forced lenders into high-risk areas with lower lending standards. These high-risk loans forced banks to abandon sound business practices. They had to make the loans or face stiff government penalties.
So President Clinton’s acceleration of the Community Redevelopment Act and Cuomo’s help in implementation created the market for the risky subprime loans that Democrats now decry as greedy and predatory – it was all the fault of those big, bad bankers … and Bush!
Adding fuel to the fire were Freddie and Fannie, both of which underwrote a plethora of risky home mortgages to buyers who couldn’t repay them.
Barney Frank and Chris Dodd were also knee deep in the middle of this fiasco. To initiate controls over Fannie and Freddie, then-Rep. Richard Baker proposed a bill in 2000 to reform Fannie and Freddie's oversight. Rep. Frank of Massachusetts, who is the House Banking Committee chairman, opposed this legislation to provide oversight in 2000 (when Clinton was still president), saying the legislation and concern about Fannie and Freddie was "overblown."
Of note is that even the Government Accountability Office recommended reform of Freddie and Fannie in a 2004 report.
In 2005, Sen. Chuck Hagel introduced the Federal Housing Enterprise Regulatory Reform Act of 2005 (S.190), designed to establish a single, independent regulatory body with jurisdiction over Fannie and Freddie. Sen. John McCain became a cosponsor of S.190 in 2006, but Democrats blocked these reforms, too. At the time, Barney Frank said that Fannie and Freddie posed no risk to taxpayers.
Senator Christopher Dodd, who heads the Senate Banking Committee, along with Frank, consistently blocked efforts to rein in Fannie and Freddie. Dodd also got preferential treatment from Countrywide, one of the largest subprime loan providers, on two mortgages. Both Dodd and Frank also received campaign contributions from Fannie and Freddie.
According to OpenSecrets.com, from 1989 to 2008, Dodd was the number one recipient of Fannie and Freddie campaign contributions at $165,400, followed by Barack Obama, who received $126,349 in contributions after being elected to the Senate in 2004.
In addition to those mentioned above, there are plenty of others to blame for the crisis. The Federal Reserve cut interest rates after the dot-com meltdown, consumers obliged themselves of the easy loans and bought homes way beyond their means, real estate agents saw higher commissions and encouraged buyers to get into those more expensive homes, mortgage brokers offered the subprime adjustable rate loans with low initial payments, Wall Street firms bundled the risky loans into mortgage-backed securities, ACORN intimidated banks to give risky mortgages and Barack Obama represented ACORN in lawsuits against banks to force them to lower credit standards.
While President Bush foresaw the dangers posed by Freddie Mac and Fannie Mae, and called as early as 2002 for greater regulation of the two, he could have done more to curb excesses in the housing market, more to police Wall Street and more to roll back the Clinton easy mortgage measures.
The saga continued as Bush signed into law the Troubled Asset Relief Program (TARP) that allowed the United States Department of the Treasury to purchase or insure up to $700 Billion of "troubled assets” to address the subprime mortgage crisis. In doing so, he said, “I’ve abandoned free market principles to save the free market system.” Oh, our founders were surely turning in their graves!
To make matters worse, the TARP fund has become a perpetual piggy bank for the Obama administration and Congress, and the program was a no-strings-attached windfall that was used by financial institutions to pay down debt, acquire other businesses or invest for the future or in overseas interests rather than in jobs and programs to help our economy. TARP emboldened Obama and Congress to keep up the spending spree with the porkulus $800 billion American Recovery and Reinvestment Act of 2009 and other bills that have now pushed U.S. debt over $13 trillion.
All of this and the continuing failed policies of the Obama administration have just made the economic situation worse and postponed the inevitable bottoming out of the economy stopping the market from correcting itself. Government intervention started this whole mess back in the Carter administration and has continued to make it worse. Our founders based this nation on a free market and every time throughout history that government has intervened rather than let the free market prevail, it has made the situation worse and prolonged the pain.
The lesson in all this is that we have ventured away from our founding principles of limited government and we desperately need to return to those principles. Further, we shouldn’t believe the campaign rhetoric on either side. Listen, but verify. Do your research on what all politicians stand for and look at the record of their actions. If there is no record, don’t fall for the hope and change message or imprint your own hopes and dreams on them. Get to the bottom of their true ideology and beliefs. Be an educated voter.
A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government. ~Thomas Jefferson
The following are some interesting videos featuring some of the cast of characters who facilitated the meltdown.
No comments:
Post a Comment