The Financial Disaster, The Real Culprits!

[jdmidwest]

Was emailed this today from a Conservative, Republican friend and thought I would pass it on. Looks like Obama has already changed the US.

http://www.youtube.com/watch?v=pAF6vNtEgGA

[denjac]

Wow an eye opener for sure.

[twosets]

I agree that the Dems are responsible for the creation of these lending vehicles, but if this problem were just limited to poor people who could not make thier house payments it would be easy to solve.

These lending practices infected the entire market and alteration of rules that allowed investment banks to get into the mortgage business let this blossom out of control. Both parties are to blame for that.

Middle level home owners borrowed out more than 100% of the equity and spent it on new cars and consumer goods.

Rich guys got 100% loans on 4 new $1,000,000 houses in a 10 unit subdivision(I saw this myself), speculating on additional appreciation.

All of these lenders thought that they could insure these things and leave someone else holding the bag.

[jdmidwest]

I don't think the article inferred that it was only poor people that caused it, it was the lending industry that allowed the loans to exceed appraised values of homes in the first place. Large amounts of money was spent advertising the schemes and it really snowballed. Equal lending practices made it available to anyone, and many took advantage of it. Now they are upside down on a house that is worth less than what they owe. One little financial problem and the mortgage is in jeopardy.

Most upstanding institutions did not pull this practice, just ones like Countrywide and others. Most of the time they never had the loan in the first place, they were just a mortgage broker, the middleman. And I don't tend to blame the democrats for the whole mess, Congress in general should have been involved in this along time ago as a whole, not as partisans fighting each other.

What the video did point out was certain individuals did not make the best judgements, especially Obama. Look what he was involved in during his short career as a politician and try to fathom what could happen if he becomes President of the USA.

[twosets]

I agree JD, I think that arguements are stronger when they tell the whole picture, and not just the point that supports the case that you are trying to make.

I think that Obama was more of an observer of this situation and his group (ACORN) benefited from this situation, but he was not a player.

He has never been a player, and that may be the scariest thing of all.

[sparkleminnow]

Sorry guys but the republicans are not at fault. There are sources that abound relating how G. Bush had pushed for tighter regulation of Fan & Fred, at the prompting of Alan Greenspan...way back in '01. I have posted YouTube video of a C-Span covered investigative commitee, of Fan & Fred. The Dems that chaired that commitee were raging about the repubicans being on a witch hunt. They insisted that NOTHING was wrong with these two mortgage companies. They lavished praise on Frank Raines for his fantasic work there. Funny, they were handing out indictments for people like Ken Lay of Enron, and gloating how he would "get his" in prison from a fellow inmate named "Spike". Funny, but I think that if F & F were thhe responsiblity of the Republicans, there would be hearings out the wazoo. And, since Frank Raines was appointed by Bill Clinton, there is ZERO outrage at how he lined his pockets to the tune of 100 million dollars. Where is the ourage? Where are the hearings, and investigations? Where are the allegations of the GREED of Frank Raines. After all, he's just a greedy CEO who got rich while the poor are booted out of their homes. At least...that's how it would be portrayed if the Republicans were behind this. But, it's a Democrat debacle, and so, there will be as little said about F & F as is possible. In fact, we are doing it now! All the blame is being heaped upon the private finacial institutions such as AIG. They took a fall because they bought packages of loans from F & F. Other insitutions did as well. That's where ALL of this started. It's where IT SHOULD END!!! At the feet of the Democrats in Congress!!

Bush attempted Fan & Fred reform dozens of times. Dems would NOT listen!

Barney Frank 'Fesses Up on Financial Crisis

September 23, 2008 10:35 AM ET | Sam Dealey

Over the past few weeks I've been skeptical of claims by Rep. Barney Frank, chairman of the House Financial Services Committee, that he's been a consistent and leading voice for reform of Fannie Mae and Freddie Mac, the two government-sponsored home-lending giants whose fall is the immediate cause of the current financial turmoil. The Massachusetts Democrat and I went at it here and here and here. Now, finally, Frank acknowledges that he dismissed ample warnings about Fannie and Freddie shenanigans five years ago.

The Real Culprits In This Meltdown

By INVESTOR'S BUSINESS DAILY | Posted Monday, September 15, 2008

Big Government: Barack Obama and Democrats blame the historic financial turmoil on the market. But if it's dysfunctional, Democrats during the Clinton years are a prime reason for it

Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

The untold story in this whole national crisis is that President Clinton put on steroids the Community Reinvestment Act*, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory."

Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the '90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.

And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.

As soon as Clinton crony Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud.

Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million.

Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses.

In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk.

But it was too little, too late. Raines had reportedly steered Fannie Mae business to subprime giant Countrywide Financial, which was saved from bankruptcy by Bank of America.

At the same time, the Clinton administration was pushing Fannie and her brother Freddie Mac to buy more mortgages from low-income households.

The Clinton-era corruption, combined with unprecedented catering to affordable-housing lobbyists, resulted in today's nationalization of both Fannie and Freddie, a move that is expected to cost taxpayers tens of billions of dollars.

And the worst is far from over. By the time it is, we'll all be paying for Clinton's social experiment, one that Obama hopes to trump with a whole new round of meddling in the housing and jobs markets. In fact, the social experiment Obama has planned could dwarf both the Great Society and New Deal in size and scope.

There's a political root cause to this mess that we ignore at our peril. If we blame the wrong culprits, we'll learn the wrong lessons. And taxpayers will be on the hook for even larger bailouts down the road.

But the government-can-do-no-wrong crowd just doesn't get it. They won't acknowledge the law of unintended consequences from well-meaning, if misguided, acts.

Obama and Democrats on the Hill think even more regulation and more interference in the market will solve the problem their policies helped cause. For now, unarmed by the historic record, conventional wisdom is buying into their blame-business-first rhetoric and bigger-government solutions.

While government arguably has a role in helping low-income folks buy a home, Clinton went overboard by strong-arming lenders with tougher and tougher regulations, which only led to lenders taking on hundreds of billions in subprime bilge.

Market failure? Hardly. Once again, this crisis has government's fingerprints all over it.

*In the original version of this editorial, the Community Reinvestment Act was mistakenly listed as the "Community Redevelopment Act".

[twosets]

Hey Sparkle

I am a conservative dude, but we Republicans had control of both houses before the midterm elections. Our Senate and House, both partys, failed miserably in this deal to protect our financial system, and now they are going to control the whole thing.

I am perfectly willing to lay a lot of blame on the Dems for getting this whole ball rolling, but regulations on investment banks were relaxed at this time as well.

Good old Jethro Kit Bond has his name high up on the F&F donation list.