Posted on 09/22/2008 8:15:50 AM PDT by reaganaut1
Barack Obama wants to tell a tale about turbulence in the financial markets, and like any good melodrama this story needs a villain. Sen. Obama believes he has found his mustache-twirling Snidely Whiplash in the person of Phil Gramm, the candid-to-a-fault former senator from Texas who presided over a major reform of American banking laws a decade ago. Obama here displays a signal failure to understand the convulsions in the markets. And he also fails to identify the guilty parties — which is odd, since some of them used to sign his paycheck back in his community-organizing days and others are among his most important political donors.
The Gramm-Leach-Bliley Act of 1999 passed the Senate with 90 votes (8 against, 1 absence: John McCain, who supported the legislation) and was signed into law by Bill Clinton. It had little to do with the issues at play in the current crisis: lending standards and the amount of debt banks can take on relative to their equity. The upshot of the Gramm legislation is that it allows financial services companies to diversify their lines of business: Commercial banks can engage in investment banking, banks can offer brokerage services, and you can have an IRA at the same place you have your checking account.
What we have here is a case of what economist Paul H. Rubin calls “folk economics” — value-laden myths that do not reflect financial realities.
(Excerpt) Read more at article.nationalreview.com ...
George Bush deserves more blame than Phil Gramm:
http://www.boston.com/business/articles/2004/10/05/zero_down_mortgage_initiative_by_bush_is_hit/
Zero-down mortgage initiative by Bush is hit Budget office says plan likely to spur more loan defaults By Chris Reidy, Globe Staff | October 5, 2004
President Bush's weekend campaign promise that he will push legislation allowing for no money down on some federally insured mortgages could cost taxpayers as much as $500 million over four years because of a higher rate of defaults, according to the Congressional Budget Office.
The election-year idea may appeal to those who can't save as fast as home prices are rising. But some financial planners warn that increasingly common no- and low-down-payment programs can be ruinous for some consumers -- especially if home values decline.
If housing prices fall, consumers with little or no money of their own invested in the home are more vulnerable to ending up with mortgages larger than the value of the house.
And those who can't afford large down payments usually don't have enough savings to serve as a cushion if someone in the household gets sick or is laid off.
"If you're really stretching, maybe you should back off and look at a less expensive house," said Joan Gray Anderson, a professor of family financial counseling at the University of Rhode Island.
Bush proposed zero-down-payment legislation earlier this year. The Congressional Budget Office has contended for months that the proposal would generate huge losses, an assessment that could be a stumbling block for the bill's passage. But the Department of Housing and Urban Development thinks the program could be run on a break-even basis.
Bush contends that reducing the required 3 percent down in the Federal Housing Administration mortgage program to zero down would help 150,000 first-time buyers in the first year. Homeownership rates are now about 69 percent nationwide, compared to about 64 percent 10 years ago. The FHA insures many private-lender home loans.
"To build an ownership society, we'll help even more Americans to buy homes," Bush said in an Ohio speech to home builders. "Some families are more than able to pay a mortgage but just don't have the savings to put money down."
Uhh, while you are paying a mortgage the bank "owns" the home.
But, but . . . . Clinton had sex in the oval office!
From the article: It is not at all clear what, if anything, Gramm’s legislation has to do with the current difficulties in the market, other than the fact that Democrats instinctively recoil when they hear the word “deregulation.”
That was another step into the mess we have now. The Gramm-Leach-Bliley Act allowed commercial and investment banks to consolidate. This was just part of a long (bi-partisan) march to deregulation. Now banks got to be paired up with promoters. Who is the loser on that deal? Now we know, again.
http://gatewaypundit.blogspot.com/2008/09/bush-called-for-reform-of-fannie-mae.html
Sunday, September 21, 2008
Bush Called For Reform of Fannie Mae & Freddie Mac 17 Times in 2008 Alone... Dems Ignored Warnings
For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted.
Unfortunately, these warnings went unheeded, as the President’s repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.
more....
Affirmative action lending got us into this mess.
Oh, I don’t think Barack Obama wants to pick a fight with Phil Gramm. Phil’s no longer in the Congress, so he can say anything he wants; not that it ever stopped him before, but he can defend himself. Actually, it might be fun to watch!
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