This is a bit long due to back-up detail on why USofA
NOW has so many 'bad loans'. While both
Republicans/Democrats took campaign money from
'Freddie & Fannie', the totals work-out like this:
Democrats (16) took $966,778 while 8 Republicans
took $419,648 (43% of the Democrat take).
But Obama (at $105,849) was 2nd highest recipient of this slush money & he has been in the Senate for only 3 years -- while most of the others were there for all of the yrs between 1989- 2008. I'd guess Fannie & Freddie saw him as a Comer..:!!
Also note how many of the Democrats are Party Leaders ~
(Dodd/Obama/Clinton/ Conrad/Emanuel/Frank/Pelosi &
Hoyer. Note ~ how few Republican Leaders are listed (Blunt). Makes you wonder about our Democrat Leadership in Congress..:!!.
PS ~ Because this table only lists the top 25
'takers' of this money, there are others on this
gravy train.. But given Democrats that were running
Fannie/Freddie, it is likely that Democrats in Congress got
most of that money ~ like they got of the money going to
the top 25.
Congress Lies Low to avoid Bailout Blame by Terry Jones:
The Congress says it likely will adjourn this month
having done nothing on the most important issue in America
right now: the financial meltdown from the subprime lending
crisis. Can Congress just walk away from a problem it helped
create? Maybe ~ maybe not.
There's now some talk of a 'grand deal'
between Congress/Treasury/The Fed & for a
'permanent' solution: creating a government agency
to buy-up all the bad subprime debt, just like theResolution Trust Corp. did with bad real estate in the 1980/1990s.
Already, The USofA's Treasury & Federal
Reserve are spending hundreds of billions of dollars to keep
the subprime crisis from crashing the world economy. The
collapse of twin mortgage giants Fannie
Mae & Freddie Mac along with the failures of Lehman
Bros., Bear Stearns & insurer AIG, expose taxpayers to
more than $1 trillion in liabilities.
Until now Congress has been surprisingly passive. As
Sen. Majority Leader Harry Reid put it, 'no one knows
what to do' right now ~ Funny, since it was a
Democrat-led Congress that helped cause the problems in the
first place..:!!
When House Speaker Nancy Pelosi recently barked
'no' at reporters for daring to ask if Democrats
deserved any blame for the meltdown, you saw denial in
action. Pelosi & followers would've you believe this all happened because of President Bush & his loyal Senate lapdog ~ McCain.
Or that big, bad predatory Wall Street banks deserve all
the blame. 'The USofA is not protected from the
risk-taking & the greed of these financial
institutions' ~ she said recently while vowing
congressional hearings.
Only one problem: It's untrue ~ Yes, banks did
overleverage & take risks they shouldn't have. But
the fact is ~ President Bush in 2003 tried desperately to
stop Fannie/Freddie from metastasizing into the problem they
have since become.
Here's the lead of a NYTimes story on 9/11/03:
'The Bush administration today recommended a most
significant regulatory overhaul in housing finance industry
since the savings & loan crisis a decade ago'.
Bush tried to act. Who stopped him? Congress, especially
Democrats with their deep financial & patronage ties to
the two government-sponsored enterprises, Fannie &
Freddie.
'These two entities -Fannie/Freddie are not facing
any kind of financial crisis,' said Rep. Barney Frank,
then ranking Democrat on the Financial Services Committee.
'The more people exaggerate these problems, the more
pressure there is on these companies, the less we will see
in terms of affordable housing'. It's pretty clear
who was on the right side of that debate.
As for presidential contender John McCain, just 2 yrs
after Bush's plan, he also called for badly needed
reforms to prevent a crisis like one we're now-in.
'If Congress does not act,' McCain said in
2005, 'American taxpayers will continue to be exposed
to the enormous risk that Fannie Mae & Freddie Mac pose
to the housing market, the overall financial system &
economy as a whole'..:!!
Sounds like McCain was spot-on. But his warnings, too,
were ignored by Congress.
To hear today's Democrats, you'd think all this
started in the last couple yrs. But the crisis began much
earlier. The Carter-era Community Reinvestment Act forced
banks to lend to uncreditworthy borrowers, mostly in
minority areas.
Age-old standards of banking & prudence got thrown
out the window. In their place came harsh new regulations
requiring banks not only to lend to uncreditworthy
borrowers, but to do so on the basis of race.
These well-intended rules were supercharged in the early
1990s by President Clinton. Despite warnings from GOP
members of Congress in 1992, he pushed extensive changes to
the rules requiring lenders make questionable loans.
Lenders who refused would find themselves castigatedpublicly as racists. As noted this week in an IBD editorial, no fewer than 4 federal bank regulators
scrutinized financial firms' books to make sure they were in compliance. Failure to comply meant your bank might not be allowed to expand lending, add new branches or merge with other companies. Banks were given a so-called
'CRA rating' that graded how diverse their lending portfolio was. It was economic hardball.
'We've used every means at our disposal to end
discrimination & end it as quickly as possible'
Clinton's comptroller of the currency, E.Ludwig, told
Senate Banking Committee in 1993 & they meant it.
In the name of diversity, banks began making huge
numbers of loans that they previously would not have
& opened branches in poor areas to lift CRA
ratings.
Then Congress gave Fannie/Freddie the go-ahead to
finance it all by buying loans from banks,
repackaging & securitizing them for resale on the open
market.
That's how the contagion began. With those changes,
the subprime market took off. From a mere $35 billion in
loans in 1994, it soared to $1 trillion by 2008.
Wall St eagerly sold the new mortgage-backed securities.
Not only were they pooled investments, mixing good &
bad, but they were backed with the implicit guarantee of
government..:!!
Fannie Mae and Freddie Mac grew to become monsters,
accounting for nearly half of all U.S. mortgage loans. At
the time of their bailouts this month, they held $5.4
trillion in loans on their books. About $1.4 trillion of
those were subprime.
As they grew, Fannie/Freddie was heavily involved in
'community development', giving money to local
housing rights groups & 'empowering' the
groups, such as ACORN, for whom Barack Obama once worked inChicago.
Warning signals were everywhere. Yet at every turn,
Democrats in Congress halted attempts to stop the madness
& happened in 1992, again in 2000/2003 & in 2005.
It may happen this year, too.
Since 1989, Fannie/Freddie have spent an estimated $140
million on lobbying Washington. They contributed millions to
politicians, mostly Democrats including Senator Chris Dodd
(# 1 recipient) & Barack Obama (# 3 recipient, despite
only 3 yrs in office).
The Clinton White House used Fannie & Freddie as a
patronage job bank. Former executives & board members
read like a who's who of the Clinton-era Democratic
Party, including Franklin Raines, Jamie Gorelick, Jim
Johnson & current Rep. Rahm Emanuel.
Collectively, they & others made well more than
$100 million from Fannie & Freddie, whose books were
cooked Enron-style during the late 1990s/early 2000s to
ensure executives got massive bonuses.
They got the bonuses. You get the bill.
© 2008 Investor's Business Daily.
