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| From the belly of the beast: Obama's Crooked Cronies in the Wall Street Meltdown |
| 2008-09-30 |
| Lending money to people who probably won't pay it back isn't good business. If you wrap crummy loans in a clever package, they're still crummy loans. Your typical Wal Mart shopper understands this. But the Masters of the Universe on Wall Street and in Washington evidently didn't. There are a lot of people to blame for the subprime mortgage crisis. The Federal Reserve Board under Chairman Alan Greenspan (1987-2006) pursued what seems in hindsight clearly to have been way too loose a monetary policy. Banks were awash with money to lend, and got careless in how they lent it. Ostensibly to aid the poor, the Clinton administration and Congress encouraged lenders to give mortgages to poor credit risks. The combination of easy money and the expansion of the number of borrowers by extending loans to poor credit risks sent housing prices through the roof, creating the bubble whose bursting has led to this crisis. Congress in 1999 repealed the law (the Glass-Steagall Act) that established a bright line between commercial and investment banks. This meant bad investments by banks could jeopardize depositors. Wall Street created "derivatives" which multiplied profits in good times, but which also multiplied risk if there were defaults. Most important was corruption and mismanagement at the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which together controlled 90 percent of the secondary mortgage market. Once your bank has lent you money to buy a house, it can't lend the money again until you pay it back. But if your bank sells your mortgage, it can make another loan right away. Without the secondary market, most of the funds for home mortgages would dry up. Fannie and Freddie went broke because they had bought billions of dollars worth of subprime mortgages, on which borrowers defaulted when the housing bubble popped. Fannie bought most of its bad mortgages from Countrywide Financial, whose CEO, Angelo Mozilo, gave sweetheart loans to senior executives of Fannie Mae. Fannie and Freddie cooked their books so senior executives would be paid millions of dollars in bonuses to which they were not entitled. Inadequate regulation kept the book-cooking from being discovered until the crisis had become a catastrophe. President Bush proposed regulatory reforms in 2003, but Congress took no action. In 2005, John McCain and three other GOP senators proposed a strong reform bill. It died when Democrats threatened a filibuster. When the bill was reintroduced in this Congress, Sen. Chris Dodd, the new Democratic chairman of Banking Committee, refused even to hold a hearing on it. Democrats opposed reform in part because they feared it would mean fewer loans to poor people. "Fannie Mae and Freddie Mac are not facing any kind of financial crisis," Rep. Barney Frank, D-Mass, told the New York Times when the Bush bill was introduced. "The more pressure there is on these companies, the less we will see in terms of affordable housing." Democrats and some Republicans opposed reform because Fannie and Freddie were very good at greasing palms. Fannie spent $170 million on lobbying since 1998, and $19.3 million on political contributions since 1990. The principal recipient of Fannie Mae's largesse was Sen. Dodd. Number two was Barack Hussein Obama. Sen. Dodd was also the second largest recipient in the Senate of contributions from Countrywide's PAC and its employees. The number one senator on Countrywide's list? Barack Hussein Obama. Fannie Mae CEO Franklin Raines was forced to resign in December, 2004, because of "accounting irregularities." The Washington Post reported July 16 the Obama campaign has called Mr. Raines "seeking his advice on mortgage and housing policy matters." Sen. Obama appointed Mr. Raines' predecessor, James Johnson, as head of his vice presidential search committee, until he was also implicated in "accounting irregularities," and it was revealed he'd received cut rate loans from Countrywide. Chicago billionaire Penny Pritzker, chairman of Sen. Obama's finance committee, cooked the books to conceal losses from subprime mortgages at her now defunct Superior bank. The holding company her family owned collected $200 million in dividends on phony profits. The trouble with crony capitalism isn't capitalism. It's the cronies. Jack Kelly is a former Marine and Green Beret and a former deputy assistant secretary of the Air Force in the Reagan administration. He is national security writer for the Pittsburgh Post-Gazette. |
| Posted by:GolfBravoUSMC |
| #1 Lending money to people who probably won't pay it back isn't good business. Unless it is about vote-buying and power rather than good business. |
| Posted by: JohnQC 2008-09-30 16:35 |