The last weeks have reached the height of incredulity with the likes of Barney Frank denying any responsibility for our current financial crisis. Perhaps a look at the root causes is in order.
It all started with Jimmy Carter and the Community Reinvestment Act in 1977, mandating that banks increase leading to low income families in the name of “affordable housing”. More pressure to expand sub-prime lending was put on the banks by the democratic congress in the 1990’s by expanding the 1977 legislation. Along the way the GSE's spent millions lobbying congress and contributing campaign money to the GSE's supporters. Over time, the GSE's became a sort of slush fund for liberal causes, contributing money to all sorts of liberal organizations and causes.
President Clinton’s administration pushed to reform the GSE’s Alan Greenspan made it his personal mission for years - warning over and over again against the size and activities of the GSE's. The Bush administration took up the task along with republicans in Congress. After it came to light that the GSE’s had committed accounting fraud to maximize bonus payouts to executives, the GOP tried to use this as leverage to finally increase oversight and put a regulator in place with real teeth. It was blocked by Barney Frank and his “posse”, the apologists for the GSE’s. I love the video clip circulating on the Internet with Fannie Mae CEO Raines stating that Fannie purchased mortgages were so “riskless” that their capital requirement should be lowered to 2%. He pulled $90M in compensation out of Fannie and is now an advisor to the Obama campaign.
Anyone who challenged the out of control GSE’s was labeled a hater of poor people, an opponent of affordable housing. Congress encouraged and enabled the GSE's to dramatically expand it's purchase of sub-prime loans. With the implicit backing of the government, and the desire to buy this questionable paper, the market rushed to generate as much of it as possible, without much regard to the particulars.
The current Democrat regime holds the repeal of the Glass-Steagall Act, an effort partly architected by McCain advisor Phil Graham, as a catalyst in creating the financial crisis. The Democrats shout out that the reckless obsession with laissez faire financial markets by the GOP are to blame. But as Bill Clinton has recently pointed out, the repeal of Glass-Steagall in 1999 actually increased the stability of the financial sector in this current crisis. Obama accuses McCain of supporting irresponsible deregulation, but the truth is more about allowing consumers to use ATM’s across state line and the like.
This all is a great example of how members of congress should be barred from accepting campaign contributions from lobbyists who represent the industry or companies that the members oversee on their respective committees.
It is quite amazing the way the democrats have convinced the uninformed majority that the problem is everyone’s fault but their own.
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