Current Economic Woes - Who's to blame?
I have been reading tripe from democrats and republicans alike blaming the current administration for this country's financial woes. Allow me to set the record straight on some of it. 1977: Pres. Jimmy Carter signs the Community Reinvestment Act into Law. The law pressured financial institutions to extend home loans to those who would otherwise not qualify. The Premise: Home ownership would improve poor and crime-ridden communities and neighborhoods in terms of crime, investment, jobs, etc. Results: Statistics bear out that it did not help. Question: How did the government get so deeply involved in the housing market? Answer: See below to find out who is covering up their guilt ! 1992: Republican representative Jim Leach (IO) warned of the danger that Fannie and Freddie were changing from being agencies of the public at large to money machines for the principals and the stockholding few. 1993: Clinton extensively rewrote Fannie Mae and Freddie Mac's rules turning the quasi-private mortgage-funding firms into semi-nationalized monopolies dispensing cash and loans to large Democratic voting blocks and handing favors, jobs and contributions to political allies. This potent mix led inevitably to corruption and now the collapse of Freddie and Fannie. 1994: Despite warnings, Clinton unveiled his National Home-Ownership Strategy which broadened the CRA in ways congress never intended. 1995: Congress, about to change from a Democrat majority to Republican, Clinton orders Robert Rubin's Treasury Dept to rewrite the rules. Robt. Rubin's Treasury reworked rules, forcing banks to satisfy quotas for sub-prime and minority loans to get a satisfactory CRA rating. The rating was key to expansion or mergers for banks. Loans began to be made on the basis of race and little else. 1997 - 1999: Clinton, bypassing Republicans, enlisted Andrew Cuomo, then Secretary of Housing and Urban Development, allowing Freddie and Fannie to get into the sub-prime market in a BIG way. Led by Rep. Barney Frank and Sen. Chris Dodd, congress doubled down on the risk by easing capital limits and allowing them to hold just 2.5% of capital to back their investments vs 10% for banks. Since they could borrow at lower rates than banks their enterprises boomed. With incentives in place, banks poured billions in loans into poor communities, often 'no doc', 'no income', requiring no money down and no verification of income. Worse still was the cronyism: Fannie and Freddie became home to out-of work-politicians, mostly Clinton Democrats. 384 politicians got big campaign donations from Fannie and Freddie. Over $200 million had been spent on lobbying and political activities. During the 1990's Fannie and Freddie enjoyed a subsidy of as much as $182 Billion, most of it going to principals and shareholders, not poor borrowers as claimed. Did it work? Minorities made up 49% of the 12.5 million new homeowners but many of those loans have gone bad and the minority home ownership rates are shrinking fast. 1999: New Treasury Secretary, Lawrence Summers, became alarmed at Fannie and Freddie's excesses. Congress held hearings the ensuing year but nothing was done because Fannie and Freddie had donated millions to key congressmen and radical groups, ensuring no meaningful changes would take place 'We manage our political risk with the same intensity that we manage our credit and interest rate risks,' Fannie CEO Franklin Raines, a former Clinton official and current Barack Obama advisor, bragged to investors in 1999. 2000: Secretary Summers sent Undersecretary Gary Gensler to Congress seeking an end to the 'special status'. Democrats raised a ruckus as did Fannie and Freddie, headed by politically connected CEO's who knew how to reward and punish. 'We think that the statements evidence a contempt for the nation's housing and mortgage markets' Freddie spokesperson Sharon McHale said. It was the last chance during the Clinton era for reform. 2001: Republicans try repeatedly to bring fiscal sanity to Fannie and Freddie but Democrats blocked any attempt at reform; especially Rep. Barney Frank and Sen Chris Dodd who now run key banking committees and were huge beneficiaries of campaign contributions from the mortgage giants. 2003: Bush proposes what the NY Times called 'the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago'. Even after discovering a scheme by Fannie and Freddie to overstate earnings by $10.6 billion to boost their bonuses, the Democrats killed reform. 2005: Then Fed chairman Alan Greenspan warns Congress: 'We are placing the total financial system at substantial risk'. Sen. McCain, with two others, sponsored a Fannie/Freddie reform bill and said, 'If congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to th
Asked By: Jessica Rabbit - 11/7/2008
Best Answer - Chosen by Asker
both parties are responsible the only way we are going to fix this is if we look at the whole picture it doesn't matter who is perceived to be the most responsible for this mess because everybody made a mess of things trying to push their own agendas without looking at the whole picture now what we need is for... More
Answered By: Bridget M - 11/7/2008
Additional Answers (4)
Your rant illustrates the reason we are in an economic funk. Republicans will burn the midnight oil to find a way to shirk the blame, but won't lift a finger to address the actual problem. Bush did it.
Answered By: Brown9488 - 11/7/2008
Where on earth do you find this drivel? The brave Republicans tried to increase oversight and regulation but the bad Democrats, who BTW were seriously in the minority, blocked them??? w*f? You should consider a career in fiction writing, your talents are being wasted here
Answered By: marci_knows_best - 11/7/2008
The Republicans controlled Congress from 1994 - 2006, and the White House from 2000 - present. They could have fixed this if they really wanted to. It's the Republican's fault.
Answered By: Griggnax - 11/7/2008
A lot of people are to blame. You can not point the finger at one person. I just know that McCain admitted in a conference that he did not know much about the economy and that he needed to 'brush up' on it. Not that comforting. With Clinton, the economy, even the national debt, was improving at a great rate. With Bush... More
Answered By: Cherry Blossom - 11/7/2008
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