I thought I’d never live to see my bank go bust. Wamu? Boo Hoo! Barack Obama’s fortunes have been boosted by those who accept that it’s just more of the “Failed Policies of Bush”.
But you don’t have to search far to find a different story than the evening news. In 1999, Fannie Mae introduced rules for sub-prime loans to increase minority homeownership and boost profits. The corporation was founded as part of the New Deal in 1938 before it was spun off to shareholders, but it retained huge government advantages in the 1960s. It still has about half the market of reselling mortgages backed with guarantees of payment. As a mere footnote, some warned that relaxed lending rules might lead to a giant failure that would have to be bailed out by the government if the real estate market cooled like it did in the 1980s.
As we all know, that just happened as Uncle Sam took Fannie Mae back. Talk about obscene executive pay, over $100 million was spent on the paychecks of just three Democrats. James Johnson, who was briefly on Obama’s V.P. committee, earned $21 million in just one year as Fannie Mae’s CEO. Obama’s housing policy advisor Franklin Raines earned $90 million in his five years as CEO, and Jamie Gorelick earned $26 million as vice chairman, even as Raines and other top executives were caught using accounting tricks to trigger massive bonuses and understate their pay.
In Obama’s brief senate career, he racked up the second highest amount of Fannie and Freddie contributions. John McCain stated, “Senator Obama may be taking their advice and he may be taking their money but I want to tell you in a McCain/Palin administration, there will be no seat for these people at the policy making table.”
It was left wing meddling inspired by affirmative action that led to politically correct credit decisions. As Ann Coulter put it, “They gave your mortgage to a less qualified minority.” The Clinton administration pushed investigations of Fannie Mae for discrimination and “redlining” of minority neighborhoods, even if factors such as credit histories, job stability, loan-to-value ratios and income levels were completely different between communities. It was urged that half of Fannie Mae and Freddie Mac’s portfolio be made up of low / moderate income borrowers by 2001.
Old criteria such as credit history and down payment ability would become less important, as welfare and unemployment payments would be counted, and “stated income” allowed borrowers to make up their own income, whether it was backed up by a cash business or nothing but thin air. People were rewarded for signing up loans, not for making sure they would be repaid.
When G.W. Bush entered office, his economist warned that loans to under-qualified borrowers created a risk for the entire financial system. In 2003, Treasury Secretary John Snow proposed oversight with strict controls over risk and capital reserves. When McCain joined the fight in proposing legislation to reform and stave off corruption, the effort was stopped by Democrats like Barney Frank, who stated there was no financial crisis at Fannie / Freddie, and affordable housing was the priority.
Affirmative action might have affected a few thousand overachieving Asian kids, but race-focused lending has put everybody’s financial system, homes and savings at risk. When Obama was asked what he might give up to pay for the cleanup, his response was raising “other people’s taxes” and spending whatever it takes to replace imported oil with something even more expensive, put everybody into a hybrid car, infinite medical coverage, college, early education, and high test scores for all. Only McCain immediately responded that we must control spending, which threatens the entire American economy.
Which of these strategies is the one that will keep America from imploding so badly that no one will be able to will bail out Uncle Sam?
Here’s one of the many videos of this scenario:
Burning Down The House: What Caused Our Economic Crisis?
Democrats defend Fannie against bad Republicans:
1999 New York Times this piece was based on:
Obama / Pelosi’s explanation of crisis:
Fox News summary: