Democrats are to blame for financial meltdown

Discussion in 'Economy' started by jreeves, Sep 25, 2008.

  1. jreeves
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    jreeves Senior Member

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    Bloomberg.com: News

    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 Comiission'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.


    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.
    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.

    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.



    S.190
    Title: A bill to address the regulation of secondary mortgage market enterprises, and for other purposes.
    Sponsor: Sen Hagel, Chuck [NE] (introduced 1/26/2005) Cosponsors (3)
    Latest Major Action: 7/28/2005 Senate committee/subcommittee actions. Status: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
    --------------------------------------------------------------------------------
    COSPONSORS(3), ALPHABETICAL [followed by Cosponsors withdrawn]: (Sort: by date)


    Hmmm....makes you think.
    Sen Dole, Elizabeth [NC] - 1/26/2005 Sen McCain, John [AZ] - 5/25/2006
    Sen Sununu, John E. [NH] - 1/26/2005


    Search Results - THOMAS (Library of Congress)
     
  2. editec
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    editec Mr. Forgot-it-All

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    You're an idiot if you think the blame for this mess falls solely on one party, dude.
     
  3. sealybobo
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    sealybobo Diamond Member

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    The gas prices went up because America is addicted to oil. (bush) t or f


    The economy is not good because Americans are a bunch of whiners. (Phil Gramm McCain’s advisor, the one that caused this banking crisis) t or f


    The housing market crashed because people took out bad loans, not because of predatory lending. (The Republicans) t or f


    Companies hire illegal’s and outsource to China/India because the American worker sucks. They don’t work hard and they want too much money. (Karen Smith & Mike Ferguson) t or f
     
  4. Care4all
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    Care4all Warrior Princess Supporting Member

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    The republicans were in the majority and had the majority votes in this committee...WHY DIDN'T IT MAKE IT TO THE FLOOR FOR A VOTE? Democrats in the minority in committee could not stop it????????? Not without republicans voting with them to stop it....?????

    And it made it to the floor of the senate, chuck hagel introduced it...WHY DIDN'T the Republican Majority bring it up for a vote on the floor of the senate? Why? Hagel introduced it, OUT of committee on to the floor, right?

    looks like neither side wanted it to be voted on....especially the republicans, who were in charge of bringing it up for a vote...?
     
  5. Care4all
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    Care4all Warrior Princess Supporting Member

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    also, the office of the president is in charge of the regulatory agencies governing the banks and markets and picking the presidents of fannie mae and freddie mac....he could have kicked the suckers out as of day one of his presidency, from what i have read...

    the regulatory agencies should have put a stop to this mess or made the committees in congress and the senate aware of it many years back....instead, these committee members, both republican and democratic, are saying all they were told by these agencies overseeing the market and banks, is that everything was a okay, until it was too late....

    maybe they are making excuses now....these committee members, but both sides of the aisle are saying it...?
     
  6. jreeves
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    jreeves Senior Member

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    I said Democrats are to blame, I didn't say solely. There is a lot of blame to go around. This specific piece of legislation would have adverted this crisis we find ourselves in today.
     
  7. jreeves
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    jreeves Senior Member

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    The Republicans in the Senate enjoyed a slim majority in 2005. Democrats stonewalled the bill in the committee process. I think we all know that minority parties can still create havoc for the majority. Hagel and others knew that if S190 would have been voted on, it would have been defeated due to the fierce opposition in the committee process by the Democrats. This bill is very similar to what both Mccain and Obama are calling for now, of course it's minus the 700 billion dollars.:eusa_whistle:
     
  8. jreeves
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    jreeves Senior Member

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    Care with all due respect, there was red flag, after red flag being raised.

    Here's Greenspan's comments on Freddie and Fannie from the article in the OP;
    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.''
     
  9. Luissa
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    Luissa Annoying Customer Supporting Member

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    WHy don't we stop playing the blame game and solve the problem!Or come up with a solution!
     
  10. jreeves
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    jreeves Senior Member

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    LOL...It's not the blame game. If we don't learn as a country from our mistakes we are doomed to repeat history.
     

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