Proof the Economy isn't Bush's Fault - From the NYTs of All Places

Bookmark this page, so when the people you know who are “drinking the Obama Kool-Aid” tell you it was all Bush’s fault, print this and give it to them.

Also it is well documented that President Bush and Senator McCain (and other Republicans) tried numerous times to stop this policy, and each time were stopped by threatened filibusters and other tactics. This policy was directly responsible for hundreds of billions of dollars in losses at Fanny Mae and Freddie Mac, which caused the “house of cards” to fall and confidence to plummet.

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From Humanevents:

On November 12, 1999, President Clinton repealed the Glass-Steagall Act, which for 55 years had prevented banks, the nation's lenders, to get into the so-called "investment banking" business (stock brokers). With lots of pressure in Congress by the Democratic members of the New York contingent, the Senate and House caved in and trashed a law which had provided stability in both the banking industry and on Wall Street.

What follows next reads like a third-rate screen play.

Banks jumped into the fray, and, encouraged by the Wall Street Democrats, began buying up and merging with Investment Banks, swapping assets, creating new loan "instruments" and weakening both independent systems.

Also in 1999, Clinton appointed Franklin Delano Raines, a Harvard Law School graduate and his Director of the U.S. Office of Management and Budget (OMB), to become the CEO of the obscure but powerful Fannie Mae giant GSE (Government Sponsored Enterprise), which had been "privatized" and listed on the New York Stock Exchange.

Mr. Raines immediately went to work lobbying Congress for less regulation and more "flexibility" in creating the massive dodgy-loan portfolio of under-qualified home loans to fellow minorities which would continue to grow and was encouraged by Barney Frank, another former Democrat & Harvard Law School graduate who now heads up the House Financial Services Committee -- which has key oversight over both Fannie Mae and Freddy Mac.

The good results of Mr. Raines' efforts soon became apparent.

On December 21, 2004, Raines accepted what he described as "early retirement" from his position as Fannie Mae's CEO while U.S. Securities and Exchange Commission investigators continued to investigate alleged accounting irregularities. The Office of Federal Housing Enterprise Oversight (OFHEO), the regulating body of Fannie Mae, has now accused him of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses.

Then, in 2006, the OFHEO filed suit against Raines in order to recover the $50 million in personal payments made to Raines based on Fannie Mae's overstated earnings which were initially stated to be $9 billion but have since been reduced to under $6.3 billion.

Undeterred, Mr. Raines now works for another Harvard Law School graduate, Mr. Barack Obama's presidential election campaign -- as an advisor on mortgage and housing policy matters.

Meanwhile, continuing pressure by the New York Democratic Congressional caucus encouraged both retail banks and the new mortgage subsidiaries of investment banks to also make home loans to less qualified borrowers (read: low income, poor-credit, deadbeat, and undocumented liars) -- if they wanted to continue to be able to benefit from light supervision and aggressive merger and acquisition practices.

By the end of the '90s, no less than nine separate, independent, and uncoordinated Federal Regulators had been created by Congress. These agencies included the SEC, CRTC, Controller of the Currency, Treasury, FRB and OFHEO, among others. They would poorly supervise what Clinton had now given birth to: a jungle of speculators, favor-seeking financial lobbyists, and Democrat-dominated Wall Street organizations who duly poured millions of dollars of contributions into Democrat coffers for the Congressional and Presidential elections.

By the time that "Securitization" of home loans (Fannie Mae began to convert its original business of making mortgages to creating packages of home loans that it could sell off as safe investments on Wall Street) began to grow, the Democrat Senators and Representatives cheered the wonders of the new-found ability of America's financial community to enable the poorest and least-qualified of their voters to finally be able to own their own homes.

U.S. home ownership, averaging around 65% for 50 years, suddenly jumped up to almost 70% -- and the housing construction sector took that cue to start building even more houses on spec, knowing that they would soon be bought using doggy loans.

Fixed rate mortgages gave way, under encouragement by the legislators, to so-called variable-rate ARMS and low-initial-entry-cost loans ("sharks").

In 1998, Senator Chuck Schumer of New York was elected. He now serves on both the Finance, and the Banking, Housing & Urban Affairs Committees, and is the Chairman of the powerful Housing, Transportation and Community Development Sub-committee. He also graduated from Harvard Law School.

After the sub-prime mortgage industry began its meltdown in March 2007, Schumer proposed a bailout by the Federal Government of sub-prime borrowers -- ostensively to prevent these poor-credit owners from losing their homes. Financial commentators immediately observed that such a "bailout" would primarily benefit Wall Street bankers and other lenders -- who had made large campaign contributions to congressmen. (Schumer's
nine biggest campaign donors are financial institutions -- who had contributed over $2.5 million to his re-election campaign.)

As the recent Indy-Bank collapse occurred, CNBC financial analyst Jerry Bowyer said that "Schumer was responsible for the second largest bank failure in US history."

The final invention of the new-world-order of funny money was the "Credit Default Swap", a derivative instrument which resembles an insurance policy but, in fact, can be used to magnify raw speculation profits -- and down side risks -- and was, ahem, generously exempt from regulation or even transparency.

The conditions had been set for a gigantic credit collapse and subsequent financial world meltdown which is continuing as we write. All from a simple idea to "help the little people" -- who would show their appreciation by re-electing the Democrat politicians who were the vocal cheerleaders (and recipients of gobs of doggy-lender re-election campaign funds).

So the pattern becomes clear. Harvard Law School attorneys -- noted for their lack of economic knowledge -- create an easy-money system which relies on flakey loans provided by fat-cat financial manipulators who are the primary contributors to the re-election campaigns of the legislators -- almost exclusively Democrats.


Anonymous said...

The Gramm-Leach-Bliley act of 1999 repealed those regulatory provisions of Glass-Steagal. It is called that after Phil Gramm, who spearheaded that repeal, and its two co-sponsors, both Republican. It was passed in the Senate along party lines. At the time, it was much heralded by cheered by the Republican establishment as deregulation.

By all means, shake a finger at Clinton for signing it. But play fair, and hold up Phil Gramm as one of the chief culprits for the recent financial crisis.

Logistics Monster said...

Don't forget Jimmy Carter's Community Reinvestment Act that Clinton amended so that ACORN could use to hammer the banks to give our ninja loans or face financial consequences. This is all part of the Cloward-Piven Strategy.

Want to bring American down? Collapse her economy.

Jake said...

All of this is true, but it doesn't change the fact that Obama inherited the problem. Let's hope he fixes it or we're all in trouble.

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