How the Democrats Created the Financial Crisis

[bluffmanxx]

How the Democrats Created the Financial Crisis

Some interesting "truth" here...actual truth BTW.

sadly 2 of 3 people blame the republicans and the crisis has thus helper Barack Obama...

we have heard that "there is plenty of blame to go around", and other similar diversionary lines...and while it would probably be had to find someone connected to the issue who is "blameless" it is not so hard to find out who stood in the way of reforms that could have avoided this mess.

Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

so you tell me, which party bares the brunt of the blame???

yet somehow the spin machines have duped the nation into believing that the guilty are innocent and those who tried to actually do something are guilty. the same sort of BS that is being used to drag Sarah Palin through the mud.

Tell me, do you really want these sorts of people to have control of the White House, the Senate and Congress...to effectively have a blank check??

[bluffmanxx]

The Rest of the Meltdown Story

Political correctness won the day. Washington made it clear to banks and other lending institutions that if they did not do something .. and fast .. to bring more minorities and low-income Americans into the world of home ownership there would be a heavy price to pay. Congress set up processes (Research the Community Redevelopment Act) whereby community activist groups and organizers could effectively stop a bank’s efforts to grow if that bank didn’t make loans to unqualified borrowers. Enter, stage left, the “subprime” mortgage. These lenders knew that a very high percentage of these loans would turn to garbage – but it was a price that had to be paid if the bank was to expand and grow. We should note that among the community groups browbeating banks into making these bad loans was an outfit called ACORN.

These garbage loans to unqualified borrowers were then bundled up and sold. The expectation was that the loans would be eventually paid off when rising home values led some borrowers to access their equity through re-financing and others to sell and move on up the ladder. Oops.

Right now this crisis is being sold to the American public by the left as evidence the failure of the free market and capitalism. Not so. What we’re seeing is the inevitable result of political interference in free market economics. Acme bank didn’t want to loan money to Joe Homebuyer because Joe had a spotty job history, owed too much money on his credit cards, and wasn’t all that good at making payments on time.

[bluffmanxx]

September 11, 2003
New Agency Proposed to Oversee Freddie Mac and Fannie Mae

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

guess who shot this one down??

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

maybe it is not Canada's fault after all.......

[spaceboy761]

Stop looking for political blame. There is none. It makes for great headlines in an election year, but it makes absolutely no sense. I would bet that less than 2% of the elected officials involved actually understood this crap well enough to effect it. The only piece of legislation you could point a finger at is Sarbanes-Oxley, and that thing passed almost unanimously.

Both sides made unwitting mistakes that we can point out for the hell of it, but the other side did strongly oppose any of them because they didn't understand the ramifications either. The Democubs pushed their social mandates when it was financially irresponsible (although the ratings agencies should have diffused the problem right away), and the Republicans pushed their beloved deregulation of the credit market when it was financially irresponsible (although the investment banks continually underwrote the garbage). Notice how every political action should have had a financial solution. Politicans aren't supposed to understand this crap, they are lawyers. Financial professionals should have.

This is a financial problem, with financial culprits, and a financial solution in which the government will have to unfortunately play a role.

[Major_Payne]

there is some interesting stuff in here

[bluffmanxx]

Originally Posted by spaceboy761

Stop looking for political blame. There is none. It makes for great headlines in an election year, but it makes absolutely no sense. I would bet that less than 2% of the elected officials involved actually understood this crap well enough to effect it. The only piece of legislation you could point a finger at is Sarbanes-Oxley, and that thing passed almost unanimously.

Both sides made unwitting mistakes that we can point out for the hell of it, but the other side did strongly oppose any of them because they didn't understand the ramifications either. The Democubs pushed their social mandates when it was financially irresponsible (although the ratings agencies should have diffused the problem right away), and the Republicans pushed their beloved deregulation of the credit market when it was financially irresponsible (although the investment banks continually underwrote the garbage). Notice how every political action should have had a financial solution. Politicans aren't supposed to understand this crap, they are lawyers. Financial professionals should have.

This is a financial problem, with financial culprits, and a financial solution in which the government will have to unfortunately play a role.

well, the FBI is now investigating those "financial professionals".

for those who prefer video...i just found this a few minutes ago.

Stop looking for political blame.

this from the guy who posted the non story about wasilla alaska charging for rape exam kits.

[spaceboy761]

Supposedly, the FBI investigation is considered routine then taxpayer money is involved. I guess we'll find out how 'routine' they are in a few weeks.


Also, I never said that I wouldn't stop looking for political blame in issues not involving finance! Speaking of such...

The bridge failed, but the 'Road to Nowhere' was built - CNN.com

[mrkromer]

I forgot where I read it, but I still agree with the news story that said something to the effect of "The private sector has created this, and now they need the public sector to get them out of it." Even with the government basically requiring lenders to open the books, so to speak, no private company has ever HAD to make the stupid loans, right?

mike

[Garmer]

Originally Posted by bluffmanxx

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
(...)
But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

HR 1461--a bill that was supposed to create a “world class regulator”--is in fact a world class failure. Not only does it fail to improve significantly upon the regulatory authority of the Office of Federal Housing Enterprise Oversight (OFHEO), but it actually increases the opportunities for Fannie and Freddie to exploit their subsidies in order to expand into other areas of residential finance. While the bill makes some modest improvements to the weak regulatory structure of OFHEO today, these improvements do not bring the authority of the new regulator of Fannie Mae and Freddie Mac to the level currently exercised by federal bank regulators. Moreover, the deficiencies of the bill so far outweigh its modest regulatory improvements that the taxpayers and the economy generally would be better off with current law. Under these circumstances, unless there is a reasonable chance that the bill can be strengthened on the House floor, in the Senate, or in conference, it does not deserve to proceed further in the legislative process.
AEI - Short Publications - H.R. 1461: A GSE "Reform" That Is Worse than Current Law

Rather than a tough reform bill, the bill was basically a dream come true for Fannie Mae and Freddie Mac. They'd get to continue to grow their portfolios to juice their earnings; they'd have a new affordable housing slush fund to reward legislators who played ball; their new regulator wouldn't have much sharper teeth than the old one; they wouldn't have to raise capital or sell assets to meet stricter capital requirements; and they'd get a year without much of anyone looking over their shoulders.
Fannie & Freddie: let the fingerpointing begin!

If that bill had become law, then the world today would be different.

Objection...speculations It might have made a difference or it might not - how can you be so sure that specific bill would have saved the US from the financial crisis? Apparently some sort of regulation was needed and would probably have made a difference but something points to this one being flawed.

Also, as far as I know the Bush-administration (who aren't democrats! ) felt the same way about it:

The Administration has long called for legislation to create a stronger, more effective regulatory regime to improve oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks ("housing government-sponsored enterprises" or "housing GSEs") and appreciates the considerable efforts of Chairman Oxley and Chairman Baker in crafting H.R. 1461. However, H.R. 1461 fails to include key elements that are essential to protect the safety and soundness of the housing finance system and the broader financial system at large. As a result, the Administration opposes the bill.
http://www.whitehouse.gov/omb/legisl...r1461sap-h.pdf

That's all, let the fingerpointing continue!!

[spaceboy761]

Way to go with an impartial source:

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)