Tuesday, September 16, 2008

Financial crisis or bitter mediine to get better?

Those in the mainstream media seem to be linked (again) (still) with the Democrats in fanning the fears of a Depression!,, Run on banks!...Worst situation in 50 years! as part of the daily headlines. But why is it that the same Congress that wanted to hold days of sessions concerning performance enhancing drugs in baseball, is silent on the issue of the financial malfeasance, greed and lack of controls in the board rooms of these "stalwarts of Wall Street" and mortgage giants??? Political contributions to both parties perhaps from these companies and exposing the kind of ill conceived social programs the Dems want more of, for gays, illegals and other "communities" he is so good at organizing.

Maybe because not only are these same government officials who claimed...........

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the 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.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

And not just the Democrats were saying things like this,,,,,but now these same Congressmen and Senators are claiming that the Evil Bush and his staff are behind yet another failure.... but a closer look at history shows a different story............

The New York Times reported this five years ago:

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.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.


With hindsight, we can see that the Bush administration had accurately diagnosed the problem in the lending market and had a plan to address it. Fannie Mae and Freddie Mac reluctantly supported the plan. However, Democrats objected.

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.

Nothing to see here, no crisis on the horizon. Everybody just move along, now. The Democrats had forced lenders to assume more risk at lower interest rates in the 1990s.

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 Redevelopment 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.

It was the Bush administration that wanted to rein in the madness in the credit markets, and the Democrats who wanted to extend the Clinton policies that created the crisis we have now. After the fit hit the shan, these same Democrats want to shift blame back to the administration that wanted to increase oversight and curtail risk in lending practices.

The Bush administration has much to blame in letting this get out of hand and failing to ensure proper oversight for so long, but clearly the origins of the disaster and the efforts to keep bad policies in place fall on the Democrats in this case. A classic case of "Be Careful What You Wish For"...unfortunately millions have had to suffer for this Social Experiment. Obama's views on things would lead one believe he wants to expand "Social Experimentation".

My thanks to Hotair.com for much of the info and inspiration to this post.

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