Monday, October 6
The United States is facing a very serious financial crisis. While we need both sides of the aisle to put politics aside and work together to craft a way forward, it is also important to examine how we came to be in this mess in the first place.
If we are serious about a real and lasting fix to our economy, we must first be committed to separating facts and records from partisan spin. Otherwise, we are doomed to allowing the same people to make the same mistakes all over again at our considerable expense.
A popular theme in the media is that the financial meltdown was a failure of the "free market." A careful look at events, however, shows that this is not true. In fact, the origins of this crisis can be traced back to the exact opposite of free market principles: government meddling in which politics trumped sound business practices.
This started with The Community Reinvestment Act in 1977. Jimmy Carter signed this bill into law, caving in to grass-roots political pressure for more affordable housing in low-income communities, which sounds nice and is very politically correct. However, it ignored the staunch opposition of the banking community.
Far from jumping into the sub-prime market with dollar signs in their eyes and greed in their hearts, banks wanted nothing to do with this scheme. In fact, ACORN (Association of Community Organizations for Reform Now) liberal activist Martha Talbot noted proudly that
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her organization and political allies were "dragging banks kicking and screaming" into making these loans — hardly the free market at work. For voicing what turned out to be very legitimate concerns, banks were labeled "racist" by the same political opponents who are now blaming them as "greedy."
More government meddling occurred in 1999 under President Bill Clinton in regard to the Government Sponsored Enterprises (a concept antithetical to the free market), Fannie Mae and Freddie Mac. As The New York Times reported, "Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton administration to expand mortgage loans among low and moderate income people."
Again, this was government intervention and political motives prevailing over and distorting the free market. Just recently, Bill Clinton himself said the Democrats who opposed reform during his administration were at fault.
As for the charges that "deregulation" of the banking industry by Republicans led to this mess, the facts again do not back up the charge. President Bush raised red flags as early as April 2001, warning that the situation with Fannie and Freddie could "cause strong repercussions in financial markets."
In 2003, it was Bush who called for a new federal agency to regulate and supervise Fannie and Freddie. In 2005, Alan Greenspan testified, "Enabling these institutions to increase in size we are placing the total financial system of the future at a substantial risk."
It was Senator John McCain who co-sponsored S.190, the Housing Enterprise Regulatory Reform Act of 2005. Among other measures, this would have established a Federal Housing Enterprise Regulatory Agency. Had it passed, this organization could have stopped the current crisis in its tracks. But S.190 didn't pass.
Why? According to the records, Democrat opposition fueled by millions of dollars in lobbying and campaign contributions by Fannie and Freddie Mac, coupled with left-wing activist pressure from organizations like ACORN.
According to Open Secrets' review of FEC records, Barack Obama received more campaign contributions from Fannie Mae and Freddie Mac than any other politician except Connecticut Senator Christopher Dodd. However, Obama amassed his pile of cash in just three years, whereas Dodd accumulated his loot over two decades. Today, two of the Fannie/Freddie executives under investigation are advisors to the Obama campaign.
This crisis has elicited a massive political smokescreen to hide and protect some influential politicians. But, we as voters and citizens have a responsibility to cut through the rhetoric, look at the records, and reward those who showed insight, foresight, and took action to attempt to fix this problem before it became a problem.
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