Posted on 09/16/2008 5:49:10 PM PDT by Wuli
It seems Pelosi and Obama, recipients both of bribes ("campaign contributions") from Freddie and Fannie have coordinated their lies (political talking points) about the "financial crisis", given stark notice lately in the bankruptcy filing of Lehman Brothers - a wall street investment house.
The Pelosi/Obama political talking point is that "Bush economic policies" or "Bush" failures in financial industry regulations, or policies "promoted by John McCain, are the source of the crisis in the financial sector, and therefor "Bush" or "McCain" lack of support for "regulation" are to blame.
The lie is that neither Bush, as President, nor McCain as a Senator who is not on a committee with financial industry oversight obligations have had much to do with "creating" the crisis.
Some try to lay the blame "easy money" (low interest rates) and a cheap dollar (movement of investment money from "fixed" assets - public and corporate bonds - to riskier investments.
However, both low interest rates and a "cheap dollar" cannot on their own move speculative money to create a speculative real estate bubble - in the United States. That requires willing buyers for the asset-inflated mortgages the real estate bubble needs, with enough buying power to help support the bubble. That requires three things: a lack of due diligence by the buyer(s) of the mortgages, individually and as securitized investments; an ability to assume an increased degree of risk; and sufficient institutional size.
The private mortgage industry in the U.S. did not have enough means (enough "capital", on their own), to either create the real estate bubble or support it to the point of imminent collapse. That was only possible by the sustained participation of Freddie Mac and Fannie Mae from the beginning. In the language of addictions, they were the enablers.
Freddie Mac and Fannie Mae are established as institutions once or twice removed from the initial point of due diligence needed in setting up mortgages yet they have been given insufficient reason or means to inspect the due diligence obtained on the mortgages delivered to them. Whose fault is that?
Freddie Mac and Fannie Mae represent the worst marriage of government and "business". Private investors could buy shares in Freddie Mac and Fannie Mae but, at the end of the day, as so many said was true - and as has now been delivered - it is the taxpayer who was legally holding the risk. Private profit at the taxpayers risk. It spells lack of moral hazard and those in charge not only failed to impose the taxpayers due diligence on the risk that was theirs, they allowed Freddie and Fannie to take advantage of the taxpayer's guarantee, in how they "marketed" themselves and in the level of risk they took on. Whose fault is that?
Lastly, only Freddie and Fannie had the institutional size, granted them by the low degree of restriction placed on them by their creator and overseer, to soak up the volume of mortgages needed to be placed in support of a real estate asset bubble. And, whose fault is that?
The President does appoint the directors of the independent agency that monitors and regulates the banking industry, the Federal Reserve - it's chairman and it's regional governors. However, in U.S. politics it is considered inappropriate for the President to seek politically favored Fed policies, and few have. And, wait a minute, the Fed is not given authority over Freddie Mac and Fannie Mae. Whose fault is that?
The President does appoint the directors of the independent agency that monitors and regulates the investment industry, the Security and Exchange Commission. However, in U.S. politics it is considered inappropriate for the President to seek politically favored SEC policies, and few have. Yet, again, wait a minute, the SEC is not given it's full authority over Freddie Mac and Fannie Mae. Whose fault is that?
The President's Treasury Secretary is given obligations regarding Freddie Mac and Fannie Mae; not to make them do what the Treasury wants, just to rescue them with federal taxpayers assistance. Whose fault is that?
So, we have Freddie Mac and Fannie Mae at the heart of the financial crisis and "economic policy" regarding them is not in the hands of the independent regulators responsible for "national economic policy" regarding banking and investment - not in the hands of agencies whose leaders are appointed by the President.
Why?
Because Freddie Mac and Fannie Mae are creatures of the United States Congress, run by policies set by the United States Congress, with "oversight" by an office created by and appointed by the United States Congress, who is supposed to receive due-diligent oversight by. . . . . . . . . . . . the United States Congress.
Freddie and Fannie were allowed by The United States Congress to run amok - to extend, without prudence, the distance between assets and liabilities, in favor of unsustainable liabilities; and by that risky extension of their mission they enabled the real estate bubble, and the problems that followed from it with the mortgage buying power that only they had.
The present Democrat leaders are out there selling a "Bush" lack of regulation, and a "McCain" lack of support for regulation as the cause of the present problems in the financial markets when the true heart of the problem can be found in Freddie Mac and Fannie Mae.
And, when you look at who has been trying to reign in the excessive risks taken on by Freddie Mac and Fannie Mae, and warning of the dire consequences of those risks, in recent years, you find those taking the lead were Alan Greenspan as early as 2003; the "Bush appointed" United States Treasurer's in 2003 and again in 2005 (in testimony to Congress); and Republican led committees in the House of Representatives in 2003 and 2005, in particular.
And, when you look at who was in charge at Freddie and Fannie, as the crisis developed in recent years, you find people like Jamie Gorelick, former Deputy Attorney General in the Clinton Administration; Frankin Raines, former Clinton budget director - who was forced out of his job as head of Fannie Mae in December 2004, due to major financial errors at Fannie, and who is currently an "economic adviser" to Barack Obama; Jim Johnson, another Democrat and former CEO of Fannie, who until very recently was officially working for the Obama campaign.
And you may ask with all their failures, how could Freddie and Fannie escape due diligent reforms that Congress should have enacted; they are creatures of Congress; Congress is both their parent and their primary source of regulation and oversight. All true, but private investors could buy shares in them and with that fiction of their private status (because ultimate risk still belonged to the taxpayers) they, Freddie and Fannie could behave as private, independent free enterprises, including spending millions in political donations to their parents - Congress. And, when you look at those bribes, you find Democrats in the lead, garnering 70% of the Freddie and Fannie bribe money (campaign donations!!!) in the top 25 recipients, with Mr. Obama one of the highest.
And, when you look at who was in the lead, objecting to or working against, or working to dilute more oversight and restrictions on Freddie and Fannie you find people like Democrat Barney Frank, currently head of the House Financial Services Committee, who, in 2000, dismissed the idea of reforming oversight of Freddie and Fannie, when it was offered in a bill by Representative Richard Baker (R-LA), saying the concerns were "overblown"; and two years later (2002) said "I do not regard Freddie and Fannie as problems"; and, in 2003 assured the public that "there is no federal guarantee" of Freddie and Fannie debt; and again in 2003 claimed that Fannie and Freddie posed no "threat to the U.S. Treasury"; and in 2004, when Fannie announced multi-billion dollar "misstatements" again claimed Freddie and Fannie posed no taxpayer risk; and finally, as he gained his present seat, in January 2007, as chairman of the House Financial Services Committee suddenly reinvented history and claimed he was always for reform and that those who has actually tried to get his support for reform were the real obstructionists.
So, at this time, we have seated in the most influential U.S. House of Representatives seat for oversight of Freddie and Fannie a person who as the crisis with Freddie and Fannie developed denied there was a crisis and obstructed reforms that others sought.
We have the entities, Freddie Mac and Fannie Mae, creatures of the U.S. Congress, whose "economic policies" and regulations are set by Congress and overseen by Congress, directly, not the President; entities at the center of the storm now mentioned as the crisis in our financial system and the very enablers of what has been wrong with Freddie and Fannie, leading Democrats in Congress, want to sidetrack everyone with the lie that "Bush economic policies" led to the crisis.
Is this only a matter of Congressional negligence, which it is at least that? No. It is not. The potential problems with Freddie and Fannie dwarf "Enron", "Worldcom", any previous federal bailout, the recent "bailouts" for "Wall Street" and the recent bankruptcy of Lehman Brothers all combined. So, why have people like Barney Frank and now Obama and Pelosi spoken as people with their heads in the sand? Because unlike "Enron", or "Worldcom" or any of the failing private enterprises, Freddie and Fannie are the property of the United States Congress; they are their babies; they created them and even when they, Congress, let them run amok they are off limits for criticism.
In truth, as when any parent fails to be a parent, the real problem here is not Freddie Mac and Fannie Mae; it's the United States Congress and if you are looking for the leaders of this failure you will find most of them in the Democrats and their congressional leaders.
If your looking for who Freddie and Fannie paid most of their protection money to, you will find members of both parties, but again, there you will find Democrats in the lead.
The Obama/Pelosi attacks on George Bush over the current financial crisis is a smokescreen to cover the central role of Freddie and Fannie in that crisis as well as the failures of the United States Congress - and the Democrats lead role - in aiding and abetting Freddie's and Fannie's failures.
High taxes and no drilling... These are the causes of our current economic crisis.
Where the hell are these ads!!?!?
Exactly!
Wuli, thank you for the great post. You seem to have put a lot of time into it. I hope many read this. Very well done!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.