President Obama gave a speech in New York on September 14 to mark the one-year anniversary of the collapse of the investment bank Lehman Brothers. The speech urged more regulation of the financial services industry. Yet the existing regulations were ignored for years, mostly by rich and powerful Democrats who control much of the financial system.
In his speech, Obama said:
“It was one year ago today that we experienced just such a crisis. As investors and pension-holders watched with dread and dismay, and after a series of emergency meetings often conducted in the dead of the night, several of the world’s largest and oldest financial institutions had fallen, either bankrupt, bought, or bailed out: Lehman Brothers, Merrill Lynch, AIG, Washington Mutual, Wachovia. A week before this began, Fannie Mae and Freddie Mac had been taken over by the government.”
Well isn’t that interesting…
First, the insurance giant AIG collapsed because its founder Maurice Greenberg was driven out of his own company in 2005 by the left-wing Democrat attorney general of New York state Eliot Spitzer, who was on an anti-business crusade. The people who took over AIG did not know how to run the company. Greenberg ultimately was cleared of the false charges that Spitzer had leveled against him.
Now notice how casually Obama sneaked in the phrase “a week before this began, Fannie Mae and Freddie Mac had been taken over by the government”. The fact is that Fannie Mae and Freddie Mac are two quasi-government agencies, run by Democrats, that caused the collapse in the first place. Remember? It was called The Subprime Crisis.
Fannie Mae (the Federal National Mortgage Association) in particular, which was founded in 1938 as a government agency to remedy the great depression, was set up to buy loans from banks to increase liquidity in the financial system. Starting in 1977 many of those purchased loans were made to poor people after banks were forced by the government to make the loans under the Community Reinvestment Act of 1977. Then starting in 1999, Andrew Cuomo and the Clinton administration established a system under which Fannie and Freddie could buy NINJA loans, or No Income, No Job loans. In other words, poor people got money from private banks with no questions asked, and the taxpayers got saddled with the risk.
When Fannie securitized and sold the bad loans into the financial system, this bad paper caused much of the collapse, along with other risky practices by people at Fannie, Freddie, Lehman Brothers and other financial institutions. In other words, the whole system had been polluted by trillions in bad paper made under the Community Reinvestment Act. It wasn’t the “credit default swaps” and “mortgage-backed securities” that wrecked the system. It was the bad paper.
Here is how wikipedia.org summarized the operation of Fannie Mae, which is manned virtually exclusively by Democrats:
In late 2004, Fannie Mae was under investigation for its accounting practices. The Office of Federal Housing Enterprise Oversight released a report on September 20, 2004 alleging widespread accounting errors.
Fannie Mae was expected to spend more than $1 billion in 2006 alone to complete its internal audit and bring it closer to compliance. The necessary restatement was expected to cost $10.8 billion, but was completed at a total cost of $6.3 billion in restated earnings as listed in Fannie Mae’s Annual Report on Form 10-K.
Concerns with business and accounting practices at Fannie Mae predate the scandal itself. On June 15, 2000, the House Banking Subcommittee On Capital Markets, Securities And Government-Sponsored Enterprises held hearings on Fannie Mae.
On December 18, 2006, U.S. regulators filed 101 civil charges against chief executive Franklin Raines; chief financial officer J. Timothy Howard; and the former controller Leanne G. Spencer. The three are accused of manipulating Fannie Mae earnings to maximize their bonuses. The lawsuit sought to recoup more than $115 million in bonus payments, collectively accrued by the trio from 1998–2004, and about $100 million in penalties for their involvement in the accounting scandal.
So who is Franklin Raines? He was Bill Clinton’s director of the Office of Management and Budget, and a big-time liberal. Raines walked away from Fannie Mae with more than $90 million and never has been convicted of any wrongdoing. Because he is a Democrat.
Who else propped up Fannie Mae? Here is wikipedia.org:
In June 2008, the Wall Street Journal reported that two former CEOs of Fannie Mae, James A. Johnson and Franklin Raines had received loans below market rate from Countrywide Financial. Fannie Mae was the biggest buyer of Countrywide’s mortgages.
Fannie Mae and Freddie Mac have given contributions to lawmakers currently sitting on committees that primarily regulate their industry: The House Financial Services Committee; the Senate Banking, Housing & Urban Affairs Committee; or the Senate Finance Committee. The others have seats on the powerful Appropriations or Ways & Means committees, are members of the congressional leadership or have run for president.
Barney Frank has been a member of the House Financial Services Committee since 1991 (and is currently the chair). The HFSC is one of two government entities responsible for oversight of Fannie Mae. From 1991 to 1998, Barney Frank was in a romantic relationship with Herb Moses, who was an executive at Fannie Mae. While at Fannie Mae, Moses helped develop many of Fannie Mae’s affordable housing and home improvement lending programs. Other lawmakers have called this a “clear conflict of interest.”
Who is James Johnson with the sweetheart loan deal? He is a big-time Democrat operative and donor who also ran Fannie Mae for a period. He got more than $20 million out of Fannie Mae before its $250 billion collapse. Barney Frank? He is the Massachusetts Democrat congressman who said the following about Fannie Mae during a hearing of the House Financial Services Committee on Sept. 10, 2003:
“I worry, frankly, that there’s a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . . .”
Frank later said during a hearing of the committee on Sept. 25, 2003:
“I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . .”
Roll the dice??!! Do Americans understand what this guy was talking about? He was another corrupt Democrat who said we should take a gamble on subsidized housing even if it brings down the whole American economy. Which it did.
And who warned about Fannie Mae’s bad fiscal condition? Answer: George Bush and John McCain.
Here is far-left Democrat California congresswoman Maxine Waters:
“Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. . . .”
Obama continued in his New York speech:
“So what we’re calling for is for the financial industry to join us in a constructive effort to update the rules and regulatory structure to meet the challenges of this new century. That is what my administration seeks to do. We’ve sought ideas and input from industry leaders and policy experts, academics, consumer advocates, and the broader public… And taken together, we’re proposing the most ambitious overhaul of the financial regulatory system since the Great Depression. But I want to emphasize that these reforms are rooted in a simple principle: We ought to set clear rules of the road that promote transparency and accountability. That’s how we’ll make certain that markets foster responsibility, not recklessness. That’s how we’ll make certain that markets reward those who compete honestly and vigorously within the system, instead of those who are trying to game the system.
So let me outline specifically what we’re talking about. First, we’re proposing new rules to protect consumers and a new Consumer Financial Protection Agency to enforce those rules.”
Yet where was the oversight of the government itself in the name of Fannie Mae and Freddie Mac?
Answer: Democrats were busy looting it and using it as a social services piggybank.
Where was the Securities and Exchange Commission that was supposed to be monitoring people like swindler Bernie Madoff? Because after five separate entreaties by a suspicious whistle-blower named Harry Markopolos, the SEC did nothing.
Why? Because the SEC, like most Washington agencies, is manned largely by liberal Democrat functionaries. They do a poor job at everything, and get big paychecks. Bernie Madoff’s niece Shana even married an SEC official. And since Madoff is a huge, left-wing New York liberal, you know darned well that his niece is not going to marry a conservative Republican, that’s for sure.
The whole economic collapse was a result of “conservative lending practices” being banished from the banking system. After maligning the word “conservative” for decades, liberals have taken over much of the financial system such that bad loans, NINJA loans, corruption, profiteering and slack oversight by crooked civil servants are the result.
And Obama talks about “reform”…
How about reform of his own party?
Obama continued in his New York speech:
“And that’s why, when this crisis began, crucial decisions about what would happen to some of the world’s biggest companies — companies employing tens of thousands of people and holding trillions of dollars of assets — took place in hurried discussions in the middle of the night. That’s why we’ve had to rely on taxpayer dollars.”
Sorry, Mr. President. Just remember who was running these institutions. Richard Fuld, a big-time liberal ran Lehman Brothers into the ground. Robert Rubin, Bill Clinton’s treasury secretary and one of the most prominent Democrats of the last twenty years, destroyed Citigroup with risky practices then hastily retired in January 2009. Jamie Gorelick, a Clinton administration justice department official, took millions out of Fannie Mae as did Daniel Mudd, another big Dem.
Look at the party that caused the collapse, Mr. President. It is your party. The party of ACORN. It all could have been prevented by a “conservative” approach to banking, the approach that the Community Reinvestment Act, the corruption at Fannie Mae and the collapse of Lehamn Brothers clearly did not represent. It is time to get “conservatism” back into the banking and financial systems like our Founding Fathers recommended.
You know, the kind of capitalism that actually required a downpayment to get a mortgage to insure responsibility. That would have prevented this whole debacle from happening.
Let’s make credit harder to get, not easier. That would be the best reform. Because easy credit is the poison of the system, as is the easy money that Democrats see in every transaction that they can intervene in and profit from.
Please visit my website at www.nikitas3.com for more. You can print out for free my book, Right Is Right, which explains why only conservatism can maintain our freedom and prosperity.