Posted by
Restless Native on Wednesday, September 24, 2008 12:00:00 AM
Why tell the truth about the current mess when it is so easy to blame greedy lenders and evil capitalists? You don’t have to be editor of the Harvard Law Review to see the heart of the problem is banks lending money to people that had no business getting a loan.
Barack Obama calls for more regulation. He is wrong. The free market did not fail. Democrats beat it to death with a hammer.
Remember that every penny the government spends comes from the sweat of an American taxpayer. The top 50% of taxpayers’ makeup 97% of all personal income tax paid. Private business powers the federal government and self-interest – the universal drive to better ones position in life – powers business. A free market is democracy in action where dollars spent act as votes for goods and services and bad decisions are punished in the marketplace.
Why would greedy banks make risky loans? Because liberal government policies not only forced them, but made it profitable by allowing them to dump the risk on the American taxpayer.
- 1938 – FDR’s New Deal creates Fannie Mae to buy home loans and sell them to Wall Street, with a guarantee that they will be paid, whether or not the original borrower pays.
- 1977 – Community Reinvestment Act (CRA) established by Carter empowers the FDIC and other regulators to punish banks that do not lend to lower income demographics. These same demographics are prone to spotty credit history, job stability, and loan-to-value ratios. Obama worked for ACORN, one of many organizations that spent decades pressuring banks to make risky loans.
- 1995 – Clinton revises the CRA to allow risky ‘subprime’ loans to be packaged up and sold to investors on Wall Street.
- 1998 – Clinton appoints Franklin Raines as head of Fannie Mae, who with Freddie Mac, bought bad loans and bundled them with good ones. Wall Street was glad to buy them because they were insured by the American taxpayer.
- 1998–2003 - Housing boom fuels more bad loans.
- 2003 – Fannie Mae/Freddie Mac reveal they’ve been cooking the books and don’t have a clue.
- 2003 – Bush proposes overhaul of housing finance industry. Democrats shoot it down. Barney Frank, among others, says, “Fannie Mae and Freddie Mac are not facing any kind of financial crisis.”
- 2004 –Franklin Raines, Chief Executive of Fannie Mae, is accused of manipulating earnings in order to maximize his bonus. He settles and walks away with $52 of his $90 million compensation thanks to ‘creative’ accounting.
- 2005 – McCain sponsors legislation to overhaul financial regulations in the housing market, specifically “the enormous risk that Fannie Mae and Freddie Mac pose”.
- 2005 – Obama does nothing, having received over $120,000 from Fannie/Freddie in less than four years.
- 2008 – Enough bad decisions gone unpunished allow the multitude of bad loans to bring down those “too big to fail”.
The only reason investments return anything is because they have risk. Government meddling and over regulation in specific areas inverted the natural order of a free market, encouraging bad behavior and punishing good.
Now the ordinary taxpayer pays the bill while those who indulged in too much house get off with a sweet refinance courtesy of those who followed the rules.
Liberal Democrat’s entitlement philosophy brought this about. Obama doesn’t get that. He won’t be getting my vote this November either.