WHO ARE RESPONSIBLE?

Do Facts Matter?

Abraham Lincoln said, “You can fool all the people some of the time and some of the people all the time, but you can’t fool all the people all the time.”

Unfortunately, the future of this country, as well as the fate of the Western world, depends on how many people can be fooled on election day, just a few weeks from now.

Right now, the polls indicate that a whole lot of the people are being fooled a whole lot of the time.

The current financial bailout crisis has propelled Barack Obama back into a substantial lead over John McCain– which is astonishing in view of which man and which party has had the most to do with bringing on this crisis.

It raises the question: Do facts matter? Or is Obama’s rhetoric and the media’s spin enough to make facts irrelevant?

Fact Number One: It was liberal Democrats, led by Senator Christopher Dodd and Congressman Barney Frank, who for years– including the present year– denied that Fannie Mae and Freddie Mac were taking big risks that could lead to a financial crisis.

It was Senator Dodd, Congressman Frank and other liberal Democrats who for years refused requests from the Bush administration to set up an agency to regulate Fannie Mae and Freddie Mac.

It was liberal Democrats, again led by Dodd and Frank, who for years pushed for Fannie Mae and Freddie Mac to go even further in promoting subprime mortgage loans, which are at the heart of today’s financial crisis.

Alan Greenspan warned them four years ago. So did the Chairman of the Council of Economic Advisers to the President. So did Bush’s Secretary of the Treasury, five years ago.

Yet, today, what are we hearing? That it was the Bush administration “right-wing ideology” of “de-regulation” that set the stage for the financial crisis. Do facts matter?

We also hear that it is the free market that is to blame. But the facts show that it was the government that pressured financial institutions in general to lend to subprime borrowers, with such things as the Community Reinvestment Act and, later, threats of legal action by then Attorney General Janet Reno if the feds did not like the statistics on who was getting loans and who wasn’t.

Is that the free market? Or do facts not matter?

Then there is the question of being against the “greed” of CEOs and for “the people.” Franklin Raines made $90 million while he was head of Fannie Mae and mismanaging that institution into crisis.

Who in Congress defended Franklin Raines? Liberal Democrats, including Maxine Waters and the Congressional Black Caucus, at least one of whom referred to the “lynching” of Raines, as if it was racist to hold him to the same standard as white CEOs.

Even after he was deposed as head of Fannie Mae, Franklin Raines was consulted this year by the Obama campaign for his advice on housing!

The Washington Post criticized the McCain campaign for calling Raines an adviser to Obama, even though that fact was reported in the Washington Post itself on July 16th. The technicality and the spin here is that Raines is not officially listed as an adviser. But someone who advises is an adviser, whether or not his name appears on a letterhead.

The tie between Barack Obama and Franklin Raines is not all one-way. Obama has been the second-largest recipient of Fannie Mae’s financial contributions, right after Senator Christopher Dodd.

But ties between Obama and Raines? Not if you read the mainstream media.

Facts don’t matter much politically if they are not reported.

The media alone are not alone in keeping the facts from the public. Republicans, for reasons unknown, don’t seem to know what it is to counter-attack. They deserve to lose.

But the country does not deserve to be put in the hands of a glib and cocky know-it-all, who has accomplished absolutely nothing beyond the advancement of his own career with rhetoric, and who has for years allied himself with a succession of people who have openly expressed their hatred of America.

Copyright 2008, Creators Syndicate Inc

Deregulation Not to Blame for Financial Woes

By Peter Wallison

The Democrats are wrong in claiming that financial services deregulation is to blame for the current financial crisis-if anything, the financial sector has seen increased regulation since the savings and loan collapse in the 1980s. The lax supervision of Fannie Mae and Freddie Mac, which Republicans sought to strengthen in 2005, is the true culprit of this financial crisis.

In the debate on September 26, Democratic presidential nominee Barack Obama argued that the current crisis in the financial markets is the result of Republican deregulation.

The advertising from his campaign has been saying the same thing, and this claim is becoming a fixed element in the talking points of Democratic candidates this year.

The credibility of the charge depends on ignoring several important facts:

– There has been a great deal of deregulation in our economy over the last 30 years, but none of it has been in the financial sector or has had anything to do with the current crisis. Almost all financial legislation, such as the Federal Deposit Insurance Corp. Improvement Act of 1991, adopted after the savings and loan collapse in the late 1980s, significantly tightened the regulation of banks.

– The repeal of portions of the Glass-Steagall Act in 1999-often cited by people who know nothing about that law-has no relevance whatsoever to the financial crisis, with one major exception: it permitted banks to be affiliated with firms that underwrite securities, and thus allowed Bank of America Corp. to acquire Merrill Lynch & Co. and JPMorgan Chase & Co. to buy Bear Stearns Cos. Both transactions saved the government the costs of a rescue and spared the market substantial additional turmoil.

None of the investment banks that got into financial trouble, specifically Bear Stearns, Merrill Lynch, Lehman Brothers Holdings Inc., Morgan Stanley and Goldman Sachs Group Inc., were affiliated with commercial banks, and none were affected in any way by the repeal of Glass-Steagall.

It is correct to say that there has been significant deregulation in the U.S. over the last 30 years, most of it under Republican auspices. But this deregulation-in long-distance telephone rates, air fares, securities-brokerage commissions, and trucking, to name just a few sectors of the economy where it occurred-has produced substantial competition and innovation, driving down consumer costs and producing vast improvements and efficiencies in our economy.

The Internet, for example, wouldn’t have been economically possible without the deregulation of data-transfer rates. Amazon.com Inc., one of the most popular Internet vendors, wouldn’t have been viable without trucking deregulation.

– Republicans have favored financial regulation where it was necessary, as in the case of Fannie Mae and Freddie Mac, while the Democrats have opposed it. In 2005, the Senate Banking Committee, then under Republican control, adopted a tough regulatory bill for Fannie and Freddie over the unanimous opposition of committee Democrats. The opposition of the Democrats when the bill reached the full Senate made its enactment impossible.

Barack Obama did nothing; John McCain endorsed the bill in a speech on the Senate floor.

– The subprime and other junk mortgages that Fannie and Freddie bought-and the market in these mortgages that their buying spawned-are the underlying cause of the financial crisis. These are the mortgages that the Treasury Department is asking for congressional authority to buy. If the Democrats had allowed the Fannie and Freddie reform legislation to become law in 2005, the entire financial crisis might have been avoided.

Policies that center on deregulation are probably hard for the voting public to grasp, and that has allowed Democratic candidates to spread the idea that there is a connection between deregulation and the current crisis. But an Obama victory, based in part on the claim that deregulation has caused the financial crisis, will create a mandate for new regulation where it isn’t necessary and will do harm to our economy.

2 thoughts on “WHO ARE RESPONSIBLE?

  1. Re: If the Democrats had allowed the Fannie and Freddie reform legislation to become law in 2005, the entire financial crisis might have been avoided.

    Ha! Though the Bush Administration pushed (but not very hard) for the form of tighter regulation, the facts show that it was also pressing very hard for Fannie Mae and Freddie Mac to make more and more loans to the minority areas:

    After all, it was in charge of the Deparatment of Housing and Urban Development (HUD), which set these goals in 2004:
    Quotes:

    HUD Sets New Goals For Fannie, Freddie
    Funds for Lower-Income Buyers to Rise

    By David S. Hilzenrath
    Washington Post Staff Writer
    Tuesday, November 2, 2004; Page E02

    Fannie Mae and Freddie Mac will have to increase their funding of mortgages for low- and moderate-income home buyers, under a new rule the Department of Housing and Urban Development announced yesterday.

    Under the rule, for example, the goal for low- and moderate-income home buyers would be raised from the current 50 percent to 56 percent in 2008 — 1 percentage point less than the 57 percent goal HUD proposed in the spring. The goal for loans in so-called underserved areas would increase from the current 36 percent to 39 percent in 2008, instead of the 40 percent that HUD had proposed.

    The department lowered the goals slightly because it decided to use a different source of data to measure the market’s overall performance, said John C. Weicher, assistant secretary for housing and Federal Housing Commissioner. To meet the new goals, Fannie and Freddie will need to buy over the next four years an estimated 400,000 more qualifying loans than the 10 million loans they otherwise would have bought, Weicher said.

    The rule was intended to make the giant government-sponsored companies match or lead the mortgage industry in funding for the target markets, HUD officials said. The department has alleged that, despite their federal charters and government-conferred privileges, Fannie and Freddie have lagged the industry in the percentage of their business devoted to groups such as minority first-time home buyers.

    Freddie Mac spokeswoman Sharon McHale said the new goals may be so high that the company will be forced to reduce its funding for other borrowers, potentially “making it harder for workforce families and working families with children to get a mortgage.”

    Fannie Mae “will be working with HUD and our housing partners to minimize any unintended consequences for housing that may result from the new goals,” spokesman Charles Greener said.

    Fannie and Freddie have said that it would be hard to meet the proposed percentages in years when there is a big demand for them to fund refinancings for people who already own homes. HUD said it will seek more public comment on that issue and consider addressing it with a separate rule….

    And why was the pressure to increase lending in minority areas so intense? Because Bush himself was in favor of what he called “the Ownership Society.”

    Here is Bush in 2003:

    Here Bush is in 2003 in signing the “American Dream Downpayment Act of 2003:

    “The rate of homeownership in America now stands a record high of 68.4 percent. Yet there is room for improvement. The rate of homeownership amongst minorities is below 50 percent. And that’s not right, and this country needs to do something about it. We need to — (applause.) We need to close the minority homeownership gap in America so more citizens have the satisfaction and mobility that comes from owning your own home, from owning a piece of the future of America.

    Last year I set a goal to add 5.5 million new minority homeowners in America by the end of the decade. That is an attainable goal; that is an essential goal. And we’re making progress toward that goal. In the past 18 months, more than 1 million minority families have become homeowners. (Applause.) And there’s more that we can do to achieve the goal. The law I sign today will help us build on this progress in a very practical way.

    Many people are able to afford a monthly mortgage payment, but are unable to make the down payment. So this legislation will authorize $200 million per year in down payment assistance to at least 40,000 low-income families. These funds will help American families achieve their goals, and at the same time, strengthen our communities.”

    So you could say that Bush contributed to the bubble and to making risky loans.

    Like

  2. And, let me add, what a former lobbiest for Fannie Mae has written: (quotes)

    Maloni (http://housingdoom.com/2008/10/06/bill-maloni-you-want-to-blame-who)

    …it is noteworthy to see what the Bush Administration did before they chose “conservatorship” two months ago for the GSEs.

    In 2004, the Bush Administration pushed the “ownership society” and lauded Fannie’s and Freddie’s work to achieve those homeownership ends.

    In 2005, via regulation, Bush’s HUD upped the Fannie and Freddie housing goals to further enhance homeownership. (Source: Bloomberg.)

    In the 2005 rule making process leading to jacking up the goals, HUD wrote:

    “The GSEs state of the art technology, staff resources, and share of the total conventional conforming market, and financial strength strongly suggest that they have the strength that they have the ability to lead the industry in making home purchase credit available for low-income families and underserved neighborhoods.” (Source: HUD regulation, during rulemaking process.)

    Indeed, the Bush Administration, as recently as six month ago, pushed the companies to buy more mortgages and specifically more risky mortgages.

    Here is what the solons at OFHEO wrote, this spring, when they lowered the capital requirements they recently had increased.

    “Simply put, fully implemented will make available to the Enterprises sufficient capital to permit them to purchase or guarantee about $2 Trillion in mortgages and mortgage backed securities, That support will be there not just for the Enterprises’ traditional conventional market but also for loan modifications, the subprime market, and the temporary jumbo conforming market.” (Source: OFHEO statement, March 19, 2008.)

    THE CORONER OPINED, “THE DNA IS GOP!”

    But, it was the subprime toxic poisons–knowingly purchased by the GSEs– that killed them as privately owned companies.

    Thoughtful or aggressive regulation could have stopped those purchases at Fannie/Freddie and other investors throughout the financial services community had there been anyone with enough guts to blow the regulatory whistle.

    The Bush Administration affirmatively refused to regulate the mortgage bankers and mortgage brokers who generated the subprime loans. It raised no issue with heavily regulated banks, which bought some of the worst mortgage companies.

    Yet, it was the Bush SEC, Bush OFHEO, Bush nominee running the Fed, the Bush Counsel of Economic Advisors, and other Bush regulatory appointments who either missed Wall Street’s greedy subprime creations–which those same investment banks sold to financial institutions all over the world—or just saw them as divine GSE retribution since those loans were coming out of a set, had they been conventionally financed, would otherwise had gone to Fannie Mae or Freddie Mac.

    Whatever the case, no official in the Bush loop said much about the subprime scourge. (Of course, much of that most of the Bushies were busy subverting if not shredding the Constitution.)

    Officials at Indy Mac, WAMO, Wachovia, First National of Nevada, Bear Stearns, Merrill Lynch, Countrywide, Lehman, Fannie and Freddie and hundreds more bought the poison and most paid the price, unfortunately bringing down much of our economy with them. In 2004, the Bush Administration pushed the “ownership society” and lauded Fannie’s and Freddie’s work to achieve those homeownership ends.

    In 2005, via regulation, Bush’s HUD upped the Fannie and Freddie housing goals to further enhance homeownership. (Source: Bloomberg.)

    In the 2005 rule making process leading to jacking up the goals, HUD wrote:

    “The GSEs state of the art technology, staff resources, and share of the total conventional conforming market, and financial strength strongly suggest that they have the strength that they have the ability to lead the industry in making home purchase credit available for low-income families and underserved neighborhoods.” (Source: HUD regulation, during rulemaking process.)

    Indeed, the Bush Administration, as recently as six month ago, pushed the companies to buy more mortgages and specifically more risky mortgages.

    Here is what the solons at OFHEO wrote, this spring, when they lowered the capital requirements they recently had increased.

    “Simply put, fully implemented will make available to the Enterprises sufficient capital to permit them to purchase or guarantee about $2 Trillion in mortgages and mortgage backed securities, That support will be there not just for the Enterprises’ traditional conventional market but also for loan modifications, the subprime market, and the temporary jumbo conforming market.” (Source: OFHEO statement, March 19, 2008.)

    THE CORONER OPINED, “THE DNA IS GOP!”

    But, it was the subprime toxic poisons–knowingly purchased by the GSEs– that killed them as privately owned companies.

    Thoughtful or aggressive regulation could have stopped those purchases at Fannie/Freddie and other investors throughout the financial services community had there been anyone with enough guts to blow the regulatory whistle.

    The Bush Administration affirmatively refused to regulate the mortgage bankers and mortgage brokers who generated the subprime loans. It raised no issue with heavily regulated banks, which bought some of the worst mortgage companies.

    Yet, it was the Bush SEC, Bush OFHEO, Bush nominee running the Fed, the Bush Counsel of Economic Advisors, and other Bush regulatory appointments who either missed Wall Street’s greedy subprime creations–which those same investment banks sold to financial institutions all over the world—or just saw them as divine GSE retribution since those loans were coming out of a set, had they been conventionally financed, would otherwise had gone to Fannie Mae or Freddie Mac.

    Whatever the case, no official in the Bush loop said much about the subprime scourge. (Of course, much of that most of the Bushies were busy subverting if not shredding the Constitution.)

    Officials at Indy Mac, WAMO, Wachovia, First National of Nevada, Bear Stearns, Merrill Lynch, Countrywide, Lehman, Fannie and Freddie and hundreds more bought the poison and most paid the price, unfortunately bringing down much of our economy with them.

    How many Democrats walked those executive offices? And, unless the GOP wants to rewrite history, the Democrat didn’t control Congress in this decade, until 2006, and then the biggest thing they did was to approve legislation creating a stronger GSE regulator and giving Henry Paulson the tools to takedown both companies on “Smashdown Sunday.”

    Fannie’s Board of Directors had several nationally prominent Republicans serving on it, during this time, including Ken Duberstein, former Reagan Chief of Staff and currently and adviser to John McCain (Duberstein recently resigned from the Fannie Board); Steve Friedman (Bush National Economic Adviser); Fred Malek; and Ann Korologos (Labor Secretary for Ronald Reagan).

    Sorry, McCain Campaign, George W. Bush, WSJ, Peter Wallison, Chuck Calomiris, Rush Limbaugh, and hundreds of others with a media forum, you’re spinning,

    Where can anyone—except the haters, the liars, and the right wing nuts–find the “Democrats” in all of this, whom the conservatives blame so much, in anything more than a cheerleading role? They just aren’t there for the blaming.

    As I have written before, the GOP’s DNA is all over the subprime mess and the trillions of dollars and untold pain, suffering and dislocation, economically and spiritually that it is costing our nation.

    I just hope that any voters as well as other thoughtful people–who encounter this hateful effort to politically scapegoat Fannie and Freddie–have the facts to refute it.

    How many Democrats walked those executive offices? And, unless the GOP wants to rewrite history, the Democrat didn’t control Congress in this decade, until 2006, and then the biggest thing they did was to approve legislation creating a stronger GSE regulator and giving Henry Paulson the tools to takedown both companies on “Smashdown Sunday.”

    Fannie’s Board of Directors had several nationally prominent Republicans serving on it, during this time, including Ken Duberstein, former Reagan Chief of Staff and currently and adviser to John McCain (Duberstein recently resigned from the Fannie Board); Steve Friedman (Bush National Economic Adviser); Fred Malek; and Ann Korologos (Labor Secretary for Ronald Reagan).

    Sorry, McCain Campaign, George W. Bush, WSJ, Peter Wallison, Chuck Calomiris, Rush Limbaugh, and hundreds of others with a media forum, you’re spinning,

    Where can anyone—except the haters, the liars, and the right wing nuts–find the “Democrats” in all of this, whom the conservatives blame so much, in anything more than a cheerleading role? They just aren’t there for the blaming.

    As I have written before, the GOP’s DNA is all over the subprime mess and the trillions of dollars and untold pain, suffering and dislocation, economically and spiritually that it is costing our nation.

    I just hope that any voters as well as other thoughtful people–who encounter this hateful effort to politically scapegoat Fannie and Freddie–have the facts to refute it.

    end quotes:

    The part about refusing to regulate the mortgage brokers seems particularly pressing. Not to mention the credit default swaps, ETC.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s