Tuesday, September 23, 2008

How the Democrats Created the Financial Crisis

The emphasis in the story below are mine, including the disclaimer about the author’s relationship to John McCain. Not withstanding that, the fact speak for themselves and the money received by the democrat players is common knowledge now. What I have yet to see is a list of republicans who have received money from Freddie and Fannie during the same time frame as when Obama, Clinton, and Dodd got theirs.

The democrats are again starting to squawk about the plan put forth by the President. I’ll take a moment of your time here to explain a thing or two about that. First and foremost, only Congress can spend money. The President can ask for money and propose ways to spend money but he cannot, himself, appropriate a dime without Congress’s approval.

Secondly, having over seven years experience dealing with congress, the President surely knows that anything he proposes will get modifies during that proposal’s trip through both houses of Congress. It is better to ask for way more than he want, or realistically expects to get, so that in the end, when Congress is done modifying it, he has a good chance of getting what he reasonably hopes to get out of it. That is, if he started with a reasonable request, it would get trimmed and changed so much that, in the end, he’d wind up with nothing of what he wanted. The only way to get what is needed is to start by demanding a great deal more. (It would be different if the President were a democrat, of course.)

Another thing is that the democrats have done so much to create this mess (see below and other emails by yours truly) that he’d be truly incompetent to suggest that they, and by extension all of Congress, have any say over what happens with the bailout process. The courts, too, have been so complacent in dealing with democrat’s policies that they can be seen, easily be seen as just and extension of the DNC; and so to get them involved would be akin to involving the democrats. It is a terrible situation, however one looks at it and it would be better if a committee answerable to the President along would be better than just one person; but that would lead to the democrat’s majority in Congress finally controlling who sat on such a committee as well. What is he reasonably to do? At least the Secretary of the Treasury is answerable to the President and the President tried to restrict Fannie and Freddie back in 2003, the democrats made the mess and resisted all attempts to avoid it, so how can anyone seriously not understand why he’s trying to wrest any control over the bailout from the democrats? He may not be able to do it but he’s at least making the attempt.

That the democrats desire to profit from the bailout is axiomatic, too. That’s what they do and have done forever. It was the democrats that changed Washington time and again so that their would be huge amounts of money to plunder; and they their friends have never restrained themselves from plundering it, either. Note how the top one hundred, top level managers have taken over a billion dollars in ‘bonus money’ for the hard work they did plundering Fannie Mae and Freddie Mac… bonuses… can you imagine that? Can you imagine that they are getting away with it; and that it is still going on as the institutions crumble around us all, they are collecting over a billion dollars in bonuses (collectively).

They should be paying back every cent they have in the world, followed by about twenty years, each, in Federal Prisons. The real prisons, too, not the country clubs with restricted access; but in with the kidnapers, murderers, and other bank robbers. Just because they committed their crimes with a pen, rather that a gun, doesn’t make those crimes any less heinous… but they are collecting bonuses instead. I can’t speak for anybody else but that makes me mad enough to spit. (It makes me a lot madder than that but one needs to be discreet when putting words to paper (so to speak).) What can I actually do, though, besides just talking about it? What can any one person do?

Maybe it’s time to start a private militia? That is the purpose of the Second Amendment, after all is said and done. It’s for words alone are not enough but something has to be done and the government is the problem. That’s what the author of the Second Amendment said it was for. It has nothing at all to do with hunting; it is to ensure that the rest of the Constitution is adhered to by the government, is what it is all about, what it has always been about. That’s why the democrats are always trying to eliminate it, too.

They are so good at fooling people though, so damned good at that. The press is on their side, too, making the job of fooling people so damned easy. I used to wonder why, what was in it for the press but then it became clear enough. The press, print and broadcast, is owned by very few people and by and large they are democrats, too. The owners, the people you almost never hear the names of, get to wet their beaks in the public trough, too. Like so many democrat operatives, like Jamie Gorelick, who made over $26 million out of Fannie Mae. From Wikipedia on her:

http://en.wikipedia.org/wiki/Jamie_Gorelick ...

Federal National Mortgage Association
Even though she had no previous training nor experience in finance, Gorelick was appointed Vice Chairman of Federal National Mortgage Association (Fannie Mae) from 1997 to 2003. She served alongside former Clinton Administration official Franklin Raines, and earned over $26,000,000 during her six years there. During that period, Fannie Mae developed a $10 billion accounting scandal.
On March 25, 2002, Business Week interviewed Gorelick about the health of Fannie Mae. Gorelick is quoted as saying, “We believe we are managed safely. We are very pleased that Moody’s gave us an A-minus in the area of bank financial strength -- without a reference to the government in any way. Fannie Mae is among the handful of top-quality institutions.” One year later, Government Regulators “accused Fannie Mae of improper accounting to the tune of $9 billion in unrecorded losses”.
In an additional scandal concerning falsified financial transactions that helped the company meet earnings targets for 1998, a “manipulation” that triggered multimillion-dollar bonuses for top executives. Gorelick received $779,625.

She served Clinton well, covering his (and her) ass as a member of the 9/11 Commission, whereas she should have been being investigated by said commission. They all get paid well out of public money; and so it goes with the owners of the MSM. The people get fooled and pay the tab, too; what a sweet deal for those in control of it. Which is why they now are screaming about Bush’s plan that excludes them from any control – it’s hard to know what they worry about the most, getting caught or losing their access to the feeding trough.

This isn’t the end – but I’m just to angry now to say any more. Ideas on what to do are welcome; we need a plan of action that will work.

Following is a tale by Kevin Hassett, written on Bloomberg.com, highlights and emphasis are my contribution – no words have been changed. Here, too, is the URL where you can find it for yourself:


This is the end of my words and the bebining of Kevin Hassett's...

How the Democrats Created the Financial Crisis

Commentary by Kevin Hassett

Sept. 22 (Bloomberg) -- The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.

Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.

But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.

In the times that Fannie and Freddie couldn’t make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Turning Point

Take away Fannie and Freddie, or regulate them more wisely, and it’s hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Commission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.

Then legislative momentum emerged for an attempt to create a “world-class regulator” that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.

Greenspan’s Warning

The clear gravity of the situation pushed the legislation forward. 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.

Different World

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.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: “It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.”

Mounds of Materials

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that’s worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

(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.)

To contact the writer of this column: Kevin Hassett at khassett@aei.org

Last Updated: September 22, 2008 00:04 EDT

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[End of blog]


There is a virtuous fear which is the effect of faith, and a vicious fear which is the product of doubt and distrust. The former leads to hope as relying on God, in whom we believe; The latter inclines to despair, as not relying on God, in whom we do not believe.Persons of the one character fear to lose God; those of the other character fear to find Him.--Pascal

“Democracies are most commonly corrupted by the insolence of demagogues.” —Aristotle

“Understanding is the reward of faith. Therefore seek not to understand that you may believe, but believe that you may understand.” —Augustine of Hippo

“The object of life is not to be on the side of the majority but to escape finding oneself in the ranks of the insane.” – Marcus Aurelius

Veritas vos Liberabit!

God Bless America, we need it!


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