The Mortgage Meltdown – Why is McCain Afraid to Pin the Blame Where It Belongs?

For John McCain and the Republicans, there’s nowhere to go but up. Cut through all of the self-congratulatory talk about how foresighted and responsible they were in voting for the $700 billion mortgage bailout and the truth is that the GOP today is staring into a political abyss. The stock market has fallen, and the remarkable political bounce that Republicans had gained with Sarah Palin’s vice-presidential nomination is gone.

Obama has surged into the lead in the polls by depicting McCain as out of touch, aided by the Arizona senator’s erratic, muddled performance on the bailout. First, he temporarily suspended his campaign, and then reversed himself the following day. McCain joined Obama in voting for the bailout bill last Wednesday, then went on national television the following day to denounce the very legislation he had just voted for as “insanity” and an “obscenity, because it’s a waste of taxpayer dollars.” In the same interview, McCain added that Americans need a president who would veto pork-laden bills like the one he just voted for. After flailing about incoherently like this, McCain needs to understand that a substantial part of the Republican “base” (whose votes he desperately needs if he is to have any chance of defeating Obama) feels betrayed by his performance on the bailout issue. McCain appeared so cowed by Treasury Secretary Henry Paulson’s warnings of economic collapse that he embraced the very kind of pork-barrel legislation he had denounced hundreds of times on the campaign trail.

What’s frustrating about the timidity of McCain and the congressional Republican leadership is that they have moral high ground on this mortgage-bailout issue, and Obama and the Democrats have huge political liabilities if Republicans have the good sense to exploit them. McCain may be starting to understand this; on Monday, he blasted Obama and the Democrats for killing his legislative efforts to reform Fannie Mae and Freddie Mac (the federal government-sponsored housing agencies whose collapse helped trigger the current financial crisis) several years ago. These efforts were blocked in 2005 and 2006 up because of opposition from congressional Democrats, among them Sens. Chris Dodd and Barack Obama, who received hundreds of thousands of dollars between them in campaign contributions from supporters of Fannie and Freddie .But that is just the tip of the political iceberg when it comes to the Democrats’ responsibility for the collapse of these two companies, which cost taxpayer s close to $200 billion and helped trigger the larger meltdowns in mortgage and credit markets.

The fact is that Washington politicians, the overwhelming majority of them Democrats, had a very large role in creating the mortgage mess in the first place. For more than 30 years, the federal government has pursued policies (often in tandem with Left-wing community activist groups like Obama’s ACORN) in which credit requirements were systematically eroded in order to make loans to people with poor credit histories who were very unlikely to pay them back.

Responding to complaints that banks were refusing to make loans to persons, mostly racial minorities who lived in poor inner-city areas, Congress passed and President Carter signed into law in 1977 the Community Reinvestment Act (CRA), which decreed that these financial institutions have “an affirmative obligation” to meet the credit needs of the communities in which they operate, and that federal regulators need to take this into account when considering requests to merge or open branches. Yet enforcement of the law was sporadic until the early 1990s, when the Federal Reserve Bank of Boston laid the groundwork for the Clinton Administration’s efforts to breathe new life into the CRA. The study, released to great fanfare by the Boston Fed, supposedly proved that racial bias in mortgage lending (as opposed to creditworthiness) was to blame for nonwhites’ inability to get housing loans. That conclusion “comports with common sense, no more studies needed,” Boston Fed President Richard Syron declared.

But the study soon fell apart under close scrutiny. Alicia Munnell, the Boston Fed‘s vice president for research, admitted in an interview that appeared in the January 4, 1993, issue of Forbes, that the study mishandled statistics on minority default rates. When the errors were accounted for, the same study showed no evidence that minority applicants were being discriminated against. Months after the interview appeared, Munnell joined the Clinton Administration as assistant secretary of the treasury for economic policy. In 1995, Treasury announced a new series of regulations that would make it much more difficult for banks to get a satisfactory CRA rating which could be critical to their survival.

No longer would businesses be able to get by with good ratings based on effort. Instead they would have to meet specific performance goals, broken down by neighborhood, income group and race, Howard Husock wrote in the Winter 2000 issue of City Journal. The CRA regulations enabled Left-wing “community organizations” like ACORN and the Boston-based Neighborhood Assistance Corporation of America (NACA) to put pressure on banks to lower credit standards. The CRA also became an effective political club to force banks to subsidize groups like ACORN and NACA, who also conducted voter-registration and lobbying campaigns.

One activist with close ties to Obama was Madeline Talbott, longtime director of Chicago ACORN. Writing in the September 29th New York Post, Stanley Kurtz described at length how Talbott began a pressure campaign to drag banks in the area “kicking and screaming” into high-risk loans to people with troubled credit histories. Soon, thanks to the Clinton Administration, Fannie Mae and Freddie Mac took the plunge. In June 1995, President Clinton, Vice President Gore and HUD Secretary Henry Cisneros announced the administration’s strategy for increasing homeownership to an all-time high. ACORN activists were honored guests at the ceremony, where Clinton declared that the strategy could be implemented administratively and “will not cost the taxpayers one extra cent.”

Influential members of the mainstream media bought this line. Ronald Brownstein of the Los Angeles Times began a May 31, 1999, analysis piece this way: “It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded.” Brownstein expressed hope that (since-disgraced) Fannie Mae boss Franklin Raines and HUD Secretary Andrew Cuomo would reach an agreement “that provides more fuel for the extraordinary boom transforming millions of minority families from renters into owners.” In fact, we now know that the “boom” was in reality a con job – a cruel hoax created by political hustlers and that the “fuel” consisted of irresponsible loans that will cost taxpayers hundreds of billions of dollars at a minimum to clean up.

In September 1993, the Chicago Sun-Times reported on how Talbott led an initiative in which five Chicago-area institutions participated in a $55 million program with ACORN to provide mortgages to low- and moderate-income people with “troubled credit histories,” and Talbott persuaded Fannie and Freddie to buy up the loans. The pilot program “worked” (at so far as funneling money to the poor from the banks was concerned). That purported success also helped set the stage for today’s financial implosion by encouraging Fannie and Freddie to expand their efforts to make more loans to such people.

Obama returned to Chicago in the early 1990s, and Talbott got him to train her personal staff, and he also trained the ACORN organizers leading Talbott‘s assaults against Chicago banks. Soon, Obama was involved in subsidizing ACORN through the Woods Fund, where he substantially expanded support for such groups. Kurtz (who has probably spent more time investigating Obama’s “community organizing” background than any other journalist) makes clear that the future U.S. senator was not just involved in funding ACORN, but also helped conceal its radical nature from the American public.

A report issued by the Obama-supervised Woods Fund in the mid-1990s acknowledges the difficulty of getting foundations and donors to contribute to confrontational leftist groups like ACORN. The Woods Fund’s claim to be “non- ideological,” it said, has “enabled the Trustees to make grants to organizations that use confrontational tactics against the business and government ‘establishments’ without undue risk of being criticized for partisanship.” In addition, as the leader of another charity, the Chicago Annenberg Challenge, Obama provided support to ACORN, ostensibly for “education” projects,“ Kurtz adds. For her part, Talbott supported Obama‘s successful run for the Illinois Senate in 1996.

But the Democrats’ complicity in creating the mess goes well beyond this. After accounting scandals shook Fannie Mae in 2003-2004, agency chief Raines (President Clinton’s former OMB director) resigned. During his five years at the helm of Fannie, Raines made $90 million (he later was forced to return $24 million). He subsequently advised Obama’s presidential campaign on housing policy. In 2005 and 2006, McCain was one of a handful of lawmakers who introduced legislation to reform Fannie and Freddie. That legislation was blocked by Senate Democrats including Obama and Banking Committee Chairman Chris Dodd. Thanks to their efforts, GOP attempts to reform Fannie and Freddie’s financial practices were sabotaged until July 2008, when Republicans successfully demanded them as the price for passage of a housing bill. But by then, it was too late to stop the impending collapse.

While both firms were adding massive losses onto their investment portfolios between 2005 and 2007, House Democrats joined their Senate colleagues in blocking every effort by Republicans to pass reforms. Obama’s lower-key efforts complemented those of House liberals like Reps. Barney Frank, Maxine Waters and Gregory Meeks, who can be seen on YouTube praising Raines and haranguing federal regulator Armando Falcon for issuing a report that questioned the agency‘s financial practices. (Perhaps someone could send the McCain campaign the YouTube video of the 2004 House Financial Services Committee hearing at which this took place.)

McCain could also go back to 2004 and read the written testimony of Roger Barnes, a Fannie Mae accountant who questioned the bookkeeping practices occurring under Raines and Fannie Mae chief financial officer Timothy Howard in 2002. Barnes said his warnings were ignored because of a culture of “intimidation” in which employees were encouraged to give Raines and Howard information that would please the markets, rather telling the truth about Fannie’s worsening financial condition. McCain should also focus on Frank, who scurrilously suggests that Republican criticism of the CRA is motivated by racial prejudice. Fox News reported last week that during the early 1990s, when Frank pushed Fannie and the Clinton Administration to loosen regulations on mortgages, the congressman‘s live-in boyfriend, Herb Moses, was an executive working to develop Fannie‘s “affordable housing” programs. (The couple broke up in 1998, a few months after Moses left the company).

I fully understand that talking about these sorts of things is very uncomfortable for John McCain, who would rather be talking about “bipartisanship,” and how he collaborates with liberal Democrats on the mortgage bailout, campaign-finance “reform,” climate change, and amnesty for illegal aliens. The problem is that if McCain follows his natural instincts, the election is over and Barack Obama will take the oath as president on Jan. 20, 2009. But if McCain were to take the gloves off and force Obama to choose between defending the likes of Madeline Talbott, ACORN and Barney Frank, or throwing them under the proverbial bus, the old war hero may still have a fighting chance.

Note the years the purchasing ballooned. Who was in control of Congress and the White House?

Bush tried, many times, to get Congress to control Fannie Mae and other GSEs

Bush warned that Fannie Mae was getting too large.

Some Republicans tried to get reform in 2005-2006.

The Democrats had a stranglehold on Congress.

Remember the "obstructionists?"

Democrats controlled the Senate for MOST of the 107th Congress

(Remember Jim Jeffords' defection, which put TOM DASCHLE in charge of the Senate?)

The Democrats controlled both houses for all of the 110th Congress.

Why should any of us be surprised at McCain's behavior; this is who he is.

To his credit, he's never promised to be anything other than who he is now. As Rush said on the air the other day, we will have to drag him across the finish line, if that's even possible. It won't be following behind him, it will be dragging him.

No surprises to me, this is McCain at his finest.

Yes the Republicans participated in the “affordable housing” scam that kept a huge welfare program off the federal books until finally the bills came due. That doesn't mean Republicans can't blame Democrats or that Democrats don't deserve it.

Democrats voted to authorize the war in Iraq. That didn't stop them from blaming Bush for it when it went sour. People understood that Democrats were just along for the ride and that the real responsibility for the war rested with Republicans.

Similarly, the public understands that Republicans may have hitched a ride on the affordable housing bandwagon, but Democrats drove it. Republicans can also point out that they tried to stop the thing before it went over a cliff.

When the financial crisis struck the problem could have been characterized either as Wall Street scandal demonstrating the limitations of capitalism or as a Pennsylvania Avenue scandal demonstrating the dangers of socialism. Problems with capitalism help Democrats. Problems with socialism help Republicans.

So naturally McCain set out to make everyone understand that the enemy was Wall Street greed. He railed about CEO compensation and promised to fire Chris Cox, repeatedly shooting himself in the foot. Weeks went by before he so much as mentioned Fannie, Freddie, Barney Frank and Chris Dodd (maybe he just got his Chris's mixed up.)

McCain just punted on a powerful argument and not because anybody is afraid that it would backfire. McCain didn't make that argument when the time was ripe, for two reasons — He doesn't really understand it, and making it wouldn't be nice.

The man is a dolt.

"is that they have moral high ground on this mortgage-bailout issue, and Obama and the .."

That's very funny. Bush didn't veto one, single bill.

Republicans like Trent Lott, and fat Dennis "Coach" Hastert? Talk about go along to get along.

What political capital did Republicans spend to stop this? Answer, none. But, they did spend their capital, they did vote, deal on many things, just not on this..

Since the Republicans, as a party, didn't do anything, and or wouldn't do anything, what did it hurt them to say they were against these things? Nothing. Didn't hurt them a bit, and they got on the record that, of course, all very sad and all, we tried you know .....

Farm Republicans got ethanol and farm product support. Suburban Republicans got Real Estate, Developer, local Bank support. Everybody got Financial industry support.

And they all covered their arse with a few talking points that they could sell to Republican Bubbas.

The Democrats had a stranglehold on Congress.

They were in the minority. You can't have it both ways. You can't say the dems were able to block everything the republicans tried to do while the pubs were in the majority and then say now, while the dems are the majority, there is nothing the pubs can do to stop anything.

Unless you are saying the democrats are ALWAYS in control.

The Democrats controlled both houses for all of the 110th Congress.

That session started in 2007 after the spending binge. The 108th and 109th Congress were under Republican "leadership" such as it was.

More and more, it is apparent that illegals have played a significant role in the bad loan department. Had McCain spent as much time trying to fix the sub prime debacle as he spent blocking efforts to stop illegal immigrants and rid the country of those who are already here, and if he'd spent less time crossing the aisle, maybe he'd have made a dent. Now he's battling the very people he patronized as senator...his old friends. What a conundrum.

Bush tried, many times, to get Congress to control Fannie Mae and other GSEs

Then explain why Bush pushed for increasing purchasing of GSE's during his reelection campaign of 2004?

Cuomo's predecessor, Henry Cisneros, did that for the first time in December 1995, taking a cautious approach and moving the GSEs toward a requirement that 42 percent of their mortgages serve low- and moderate-income families. Cuomo raised that number to 50 percent and dramatically hiked GSE mandates to buy mortgages in underserved neighborhoods and for the "very-low-income."

Snip

That June Post story focused its critical reassessment of HUD's affordable-housing goals on the department's 2004 decision—during the Bush re-election campaign—to juice them up again, pushing the target to 56 percent by 2007.

From here.

“They were in the minority. You can't have it both ways. You can't say the dems were able to block everything the republicans tried to do while the pubs were in the majority and then say now, while the dems are the majority, there is nothing the pubs can do to stop anything.”

Exactly. Republicans were worthless. One can definitely say, however, that liberals control Republicans even when Republicans are in control.

O for a leader.

We know that the Democrats are trying to hide the fact that Democrats ran the Senate for almost half of Bush’s presidency. They obstructed the Republicans during the other half of Bush’s presidency.

This is the transcript of one of the FIRST press conferences given by the hateful man who was in charge of the Senate for most of 2001 and all of 2002.

He couldn’t wait to get to the microphone to belittle the intelligence of the folks who supported the missile defense program.

By the time he was through with the press conference, his own nasty streak had done him in.

Transcript from
TOM DASCHLE’S PRESS CONFERENCE, in 2001, on the NATIONAL MISSILE DEFENSE PROGRAM

Whether or not we want to violate the ABM treaty
especially with a concept [NMD program] that we may not know
...or...
that we do know now does not work
is something that also mystifies me.

I mean
Every aspect of the debate and the consideration
that is given this whole program
is... is troubling to me.
I... I mean... I...there’s a disconnect there.
I mean...It just seems common sense....
I mean...there’s no brain..
THIS ISN’T ROCKET SCIENCE HERE...

Yes it IS rocket science....

that’s the problem..
Hadn’t thought about that..
As I just think out loud ....
as I meander through here.

(laugh laugh laugh laugh laugh)

That’s the problem.

You can't have it both ways.

Of course I can have it both ways.

Everyone knows that, since Clinton's presidency, the Democrats have changed the way government (especially the senate) operates.

Candidates get placed on ballots, after deadlines have expired.

60 votes are necessary for almost any legislation to come to the floor.

Judges are used to decide elections.

Etc.

You are right about one thing. When the Republicans have been in charge they've been playing by the old rules.

They need to accept the fact that Democrats have turned politics into a contact sport.

Remember Obama pulling Lieberman into a corner in the Senate?

...during a Senate vote Wednesday, Obama dragged Lieberman by the hand to a far corner of the Senate chamber and engaged in what appeared to reporters in the gallery as an intense, three-minute conversation.
While it was unclear what the two were discussing, the body language suggested that Obama was trying to convince Lieberman of something and his stance appeared slightly intimidating.
Using forceful, but not angry, hand gestures, Obama literally backed up Lieberman against the wall, leaned in very close at times, and appeared to be trying to dominate the conversation, as the two talked over each other in a few instances.

I've just thought of a good nickname for Obama...The Intimidator

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