Posts Tagged ‘mortgages’

US Is in Even Worse Shape Financially Than Greece. And Why Is That In The Age Of Obama???

June 14, 2011

Thanks for “fundamentally transforming” our economy, Barry Hussein!

We’re constantly being told that Obama has done a great deal to make our economy stronger.  Because who wouldn’t rather have 9.1% unemployment than that 7.6% that Obama started out with.

The thing that most killed the US economy in 2008 was the sheer weight of godawful subprime mortgages that Democrats imposed on Fannie Mae, Freddie Mac and all the other mortgage lenders in order to create more “fairness” and allow everyone (especially racial minorities) to have “the right” to own a home whether they could actually afford to do so or not.  Fannie Mae and Freddie Mac were “Government Sponsored Enterprises,” all the investors knew.  So even as Fannie and Freddie began bundling together thousands of riskier and ever riskier mortgages into giant mortgage backed securities to advance Democrat-enacted policies, large investment houses continued to gobble them up.  After all, this was an arm of the United States Government – and the United States Government ALWAYS pays its debts.

Like all scams, it worked for a while.  But as soon as there was a correction in the dramatically overvalued housing market, the whole boondoggle began to implode.  And since Fannie and Freddie had bundled all kinds of bad mortgages in with the good ones, there was absolutely no way for anyone to know how much risk was contained in any of these giant investment vehicles all these giant private banking houses found themselves holding.

And suddenly the perception that Government Sponsored Enterprises Fannie Mae and Freddie Mac were “safe investments” turned into a “misperception.”  And the fecal matter began to hit the rotary oscillator bigtime.

Fannie and Freddie were the first to collapse.  The big private players who had played ball with them shortly followed.

President George Bush tried SEVENTEEN TIMES to reform Fannie and Freddie when there was actually a chance to do something.  Go back to what the New York Times stated in 2003:

WASHINGTON, Sept. 10—  The Bush  administration today recommended the most significant  regulatory  overhaul in the housing finance industry since the savings  and loan  crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new   agency would be created within the Treasury Department to assume   supervision of Fannie Mae and Freddie Mac, the government-sponsored   companies that are the two largest players in the mortgage lending   industry.

The new agency would have the authority, which now rests with   Congress, to set one of the two capital-reserve requirements for the   companies. It would exercise authority over any new lines of business.   And it would determine whether the two are adequately managing the risks   of their ballooning portfolios.

Republicans were demonized for “deregulation” by the dishonest Democrat Party machine.  But they TRIED to regulate what needed to be regulated.  Democrats stopped them.

Many Republicans like John McCain literally begged Democrats to do something before it was too late.  But Democrats threatened to filibuster any bill that in any way prevented Fannie and Freddie from continuing the reckless economy-killing policies.  Conservative economists such as Peter Wallison had been predicting the Fannie and Freddie boondoggles would cause an economic collapse since at least 1999.  Wallison had warned back then:

 In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

But rigid opposition from Democrats – especially Democrats like Senator Barack Obamawho took more campaign money from Fannie and Freddie and dirty crony capitalism outfits like corrupt Lehman Bros. than ANYONE in his short Senate stint – prevented any “hope and change” of necessary reform from saving the US economy.

The timeline is clear: Fannie Mae and Freddie Mac were giant behemoths that began to stagger under their own corrupt weight, as even the New York Times pointed out:

Fannie Mae and Freddie Mac are so big — they own or guarantee roughly half of the nation’s $12 trillion mortgage market — that the thought that they might falter once seemed unimaginable. But now a trickle of worries about the companies, which has been slowly building for years, has suddenly become a torrent.

And it was FANNIE and FREDDIE that collapsed FIRST before ANY of the private investment banks, which collapsed as a result of having purchased the very mortgaged backed securities that the Government Sponsored Enterprises SOLD THEM.  It wasn’t until Fannie and Freddie collapsed that investors began to look with horror at all the junk that these GSE boondoggles had been pimping.

The man who predicted the collapse in 1999 wrote a follow-up article titled, “Blame Fannie Mae and Congress For the Credit Mess.”  It really should have read, “Blame DEMOCRATS.”  Because they were crawling all over these GSEs that they had themselves created like the cockroaches they are.  But Wallison is nonpartisan.

That same New York Times article that said President Bush was trying to reform Fannie Mae and Freddie Mac ended with this demonstration of Democrats standing against necessary reform:

These two entities — Fannie Mae and Freddie Mac —  are not  facing any kind of financial crisis,” said Representative  Barney Frank of Massachusetts, the ranking Democrat on the Financial Services  Committee. ”The  more people exaggerate these problems, the more  pressure there is on  these companies, the less we will see in terms of  affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving   something from one agency to another and in the process weakening the   bargaining power of poorer families and their ability to get affordable   housing,” Mr. Watt said.

Why was Barney Frank deceitfully claiming that Fannie and Freddie weren’t facing “any kind of financial crisis”?  BECAUSE REPUBLICANS WERE RIGHTLY WARNING THAT THEY WERE.

Only about a month before the whole Fannie and Freddie boondoggles Democrats had fiercely protected collapsed – taking the entire US economy with it – Democrat Barney Frank was on the record saying THIS:

REP. BARNEY FRANK, D-MASS.: “I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.”

So we blew up nearly COMPLETELY BECAUSE OF DEMOCRAT POLICIES.  But Democrats along with an ideological mainstream media that is the worse since Joseph Goebbels was the Nazi Minister of Propaganda were ready.  They ran on a platform that it happened while Bush was president, and that therefore Bush was entirely responsible for the thing he tried over and over again to fix while Democrats used their power to block those efforts.

Let me just say “Franklin Raines.”  Raines as Fannie CEO presided over Enron-style accounting policies and got $90 million in his account because of those corrupt policies.  But Raines was the first BLACK CEO of Fannie Mae.  And even though he was a Democrat and a Clinton guy, President Bush lacked the courage to push the “first black Fannie Mae CEO” out.  Which of course is the same reason that the “first black Fannie Mae CEO” didn’t do hard time in prison where he belonged.  “Political correctness” is a demonic device by which liberals protect themselves – usually from going to prison where they ought to go.  He got a sweetheart deal basically so Republicans wouldn’t be accused of being racists by
Democrats who of course call them racists no matter what they do.  My main point is simply that it was Democrats, Democrats, DEMOCRATS who did this to us.

Fannie Mae was well politically-connected Democrats went to make millions as they bounced back and forth between “public” employment where they developed contacts and “private” crony capitalism to get rich.

Here’s the conclusion of New York Times financial markets writer Gretchen Morgenson about DEMOCRAT Jim Johnson:

Morgenson focuses on the managers of Fannie Mae, the government-supported mortgage giant. She writes that CEO James Johnson built Fannie Mae “into the largest and most powerful financial institution in the world.”

But in the process, Morgenson says, the company fudged accounting rules, generated big salaries and bonuses for its executives, used lobby and campaign contributions to bully regulators, and encouraged the risky financial practices that led to the crisis.

And of course DEMOCRAT Jim Johnson who got rich plundering Americans was an OBAMA Democrat.

Morgenson – again a New York Times writer and not someone from Fox News – said of Fannie Mae on Larry Kudlow’s CNBC program on Monday, June 13: “Whatever Fannie Mae did, everybody else followed.”  And of course they all followed right into an economic Armageddon created by Democrats for Democrats.

But who got blamed?  Republicans, of course.  George Bush and Republicans were to Obama and the Democrats what Emmanual Goldstein was to Big Brother in 1984.  George Bush and Republicans were what the Jews were to Adolf Hitler.  Fascists always need a bogeyman.  And so the people who were truly to blame turned the people who tried futilely to stop them into the scapegoats.  All with the mainstream media’s complicity.

The analogy would be holding the police officer who tried but failed to catch the rapist for the rape of the woman rather than holding the actual rapist who raped her responsible.  But it was easier to say “This is the result of President Bush’s failed Republican policies” than it was to actually explain the facts to an enraged Attention Deficit Disorder-ridden ignorant pop culture – particularly when virtually no one in the biased mainstream media had any intention whatsoever of telling the truth.

Barack Obama – the ACORN community organizer who pushed these very America-killing policies – ran a demagoguing campaign promising to fix everything.

But has he?

How about a great big giant “NOT”???

What has Zero Obama done to fix that housing market that he helped collapse?  How about NOTHING???  After nearly three years of Obama, housing isn’t the worst since 2008; it’s gotten WAY WORSE than 2008 and is the worse since the Great Depression!!!  Obama started out with a terrible plan.  And we have terrible results to show for his terrible plan.  And yet this disgraceful fool actually keeps claiming he’s made things better!!!

Before you read this article, check out the “current account balance” compiled by the CIA.  Ours is a negative figure that dwarfs everyone else’s by so much it’s a joke.  Which is to say that Gross’s assessment is 1000% correct.

US Is in Even Worse Shape Financially Than Greece: Gross
Published: Monday, 13 Jun 2011 | 10:33 AM ET
By: Jeff Cox
CNBC.com Staff Writer

When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries, Pimco’s Bill Gross told CNBC Monday.

Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at “nearly $100 trillion,” that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

“To think that we can reduce that within the space of a year or two is not a realistic assumption,” Gross said in a live interview. “That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly.”

Gross spoke following a report that US banks were likely to scale back on their use of Treasurys as collateral against derivatives and other transactions. Bank heads say that move is likely to happen in August as Congress dithers over whether to raise the nation’s debt ceiling, according to a report in the Financial Times.

The move reflects increasing concern from the financial community over whether the US is capable of a political solution to its burgeoning debt and deficit problems.

“We’ve always wondered who will buy Treasurys” after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. “It’s certainly not Pimco and it’s probably not the bond funds of the world.”

Pimco, based in Newport Beach, Calif., manages more than $1.2 trillion in assets and runs the largest bond fund in the world.

Gross confirmed a report Friday that Pimco has marginally increased its Treasurys allotment—from 4 percent to 5 percent—but still has little interest in US debt and its low yields that are in place despite an ugly national balance sheet.

“Why wouldn’t an investor buy Canada with a better balance sheet or Australia with a better balance sheet with interest rates at 1 or 2 or 3 percent higher?” he said. “It simply doesn’t make any sense.”

Should the debt problem in Greece explode into a full-blown crisis—an International Monetary Fund bailout has prevented a full-scale meltdown so far—Gross predicted that German debt, not that of the US, would be the safe-haven of choice for global investors.

America is going down because her stupid citizens wickedly voted for corrupt dishonest Democrat fools – the very fools who imploded our economy – to have complete power.  Nancy Pelosi took over dictatorial control in the House of Representatives, and Harry Reid took over the US Senate, in 2006.

Thanks to Obama, America is now worse off than Greece.  But that didn’t stop Obama from offering to bail out Greece.  Maybe it’s because George Soros is Greek; maybe because the American left has always adored the European-style socialism in spite of Thomas Jefferson’s warning that “the comparison of our governments with those of Europe is like a comparison of heaven and hell.”  Maybe because Obama simply WANTS hell for America.  But there you have it.

Republicans acknowledged they failed to live up to their values and spent too much.  But the last Republican budget (Fiscal Year 2007) passed in 2006 had only a $161 billion deficit.  The very next Democrat budget for FY 2008 had a deficit of $459 billion – nearly three times larger than the one they’d demonized Republicans for.  Then their FY-2009 budget dwarfed that deficit with a black hold of red ink deficit of $1.4 TRILLION.  That was more money than any government in the history of the world had ever contemplated.  But Democrats dwarfed that the very next year with a FY-2010 budget with a $1.6 trillion deficit.  And as for FY-2011, the Democrat Congress simply refused to perform its most basic duty of governance and didn’t even bother to pass a budget.  Republicans are now forced to do the last disgraced Democrat-controlled Congress’ job for them – and Democrats are demonizing them for it.

That’s how this game is played.  Democrats are fascist demagogues who shrilly launch into Republicans as they try to save the American people from unparalleled future suffering.  They are people who ROUTINELY demonize, demonize, demonize until THEY are the ones forced to call for the very things they demonized and tried to prevent from happening.  But by the time they react this time, just as before, it will be too late.

Try this on for size: our actual debt isn’t the $14 trillion we constantly hear about; it’s more like $200 trillion.  And even THAT gargantuan number doesn’t take into account the massive debts that all the liberal labor unions have amassed in state pensions (e.g., California’s public pension system has unfunded liabilities of $500 billion).  We cannot possibly hope to pay this – and yet Democrats demand more and more and more, and demagogue Republicans for even trying to cut millions when we need to cut TENS OF TRILLIONS or collapse.

Democrats run ads showing a look-a-like of Republican Rep. Paul Ryan pushing an old lady off a cliff; but they want every single senior citizen to die terribly as the Medicare system completely collapses while they refuse to do anything to fix it – as even Bill Clinton openly acknowledged.

We are going to end like the PIIGS – Portugal, Ireland, Italy, Greece and Spain- because we elected Democrat swine to ensure we perished like pigs.

Greece just got downgraded to the point where they are the lowest-rated currency in the history of the planet.  And it happened yesterday.

When that happens to us it will be the worst nightmare in history.  300 million Americans are going to go into an insanity of panic – and of course the violence will begin with the left.  If you don’t have an arsenal, someone will kick down your door and murder your whole family just to eat the food in your house.  And that hell on earth will be entirely because you trusted Democrats like Anthony Weiner to run your health care, your pension, your economy, your life.

I hope you vote in 2012 like your very LIFE was at stake in these elections.  Because this time it truly is.

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More Proof Democrats Destroyed The Economy In 2008: The Ongoing Fannie Mae/Freddie Mac Disaster

November 8, 2010

Who destroyed the economy in 2008?  Democrats say it was Bush.  Why?  Well, because he was president, that’s why.

Why – when applying the same logic – Barack Obama STILL isn’t responsible for any of his economic mess fully two years after George W. Bush left office is anybody’s guess.

But stop and think.  The primary cause for the 2008 economic meltdown was a downturn in the housing market and the underlying mortgage market.

At the core of that meltdown was GSEs (that’s “Government Sponsored Enterprises” to you) Fannie Mae and Freddie Mac.

The problem with Fannie Mae and Freddie Mac has always been that it was – and remains – a social welfare institution masquerading as a financial institution.  And they have made beyond-godawful “financial” decisions because their true loyalty has always been with socialist policies rather than financial ones.

Let’s look at Fannie and Freddie’s current picture:

Fannie, Freddie’s $685B fix
Bloomberg
Last Updated: 11:54 PM, November 4, 2010
Posted: 11:54 PM, November 4, 2010

Fannie Mae and Freddie Mac, the mortgage firms operating under federal conservatorship, may cost taxpayers as much as $685 billion as the US covers losses and overhauls the housing-finance system, Standard & Poor’s said.

Costs for resolving the two government-sponsored entities could reach $280 billion, including $148 billion already delivered under a US Treasury Department promise of unlimited support, New York-based S&P said yesterday in a research report. The government may spend an additional $405 billion to capitalize a replacement for the two companies, which own or insure more than half the US mortgage market.

“It appears unlikely in our view that housing and mortgage markets will be able to operate normally without continuing and substantial government involvement,” S&P said, citing the GSEs’ growing portfolio of unsold homes, a sluggish economy, high unemployment, the prospect of rising foreclosures and billions in legacy losses.

Treasury Secretary Timothy F. Geithner, who has said there is a strong case to be made for continued US involvement, has promised to deliver the Obama administration’s plan to overhaul the housing-finance system by the end of January. Republican lawmakers, who will take control of the House of Representatives in January, have called for the government to end its support for Washington-based Fannie Mae and Freddie Mac, of McLean, Va.

“Although federal authorities have taken no concrete public steps toward sponsoring a GSE alternative, Standard & Poor’s believes that it’s a useful exercise to consider how much such a recapitalization might cost taxpayers,” the report said.

$685 BILLION.  That’s quite a mess.

Did it just happen?  Hardly.  This was going on for years.  This was what caused the subprime crisis that destroyed our economy in 2008.

Let’s survey the record.  According to record provided by The New York Times, Fannie and Freddie were in huge trouble PRIOR TO the economic collapse.  And their holdings were so massive that there is simply no reasonable way that one can maintain that their crisis didn’t directly contribute to the greater crisis to be revealed.  Read the article dated July 11, 2008:

Fannie Mae and Freddie Mac are so big — they own or guarantee roughly half of the nation’s $12 trillion mortgage market — that the thought that they might falter once seemed unimaginable. But now a trickle of worries about the companies, which has been slowly building for years, has suddenly become a torrent.

A timeline of the subprime loan crisis of 2008 clearly reveals that it was Fannie Mae’s collapse that started the entire mess rolling downhill.  From Wikipedia:

September 2008

    • September 7: Federal takeover of Fannie Mae and Freddie Mac, which at that point owned or guaranteed about half of the U.S.’s $12 trillion mortgage market, effectively nationalizing them. This causes panic because almost every home mortgage lender and Wall Street bank relied on them to facilitate the mortgage market and investors worldwide owned $5.2 trillion of debt securities backed by them.[151][152]
    • September 14: Merrill Lynch is sold to Bank of America amidst fears of a liquidity crisis and Lehman Brothers collapse[153]
    • September 15: Lehman Brothers files for bankruptcy protection[154]
    • September 16: Moody’s and Standard and Poor’s downgrade ratings on AIG‘s credit on concerns over continuing losses to mortgage-backed securities, sending the company into fears of insolvency.[155][156] In addition, the Reserve Primary Fund “breaks the buck” leading to a run on the money market funds. Over $140 billion is withdrawn vs. $7 billion the week prior. This leads to problems for the commercial paper market, a key source of funding for corporations, which suddenly could not get funds or had to pay much higher interest rates.[157]
    • September 17: The US Federal Reserve lends $85 billion to American International Group (AIG) to avoid bankruptcy.
    • September 18: Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke meet with key legislators to propose a $700 billion emergency bailout through the purchase of toxic assets. Bernanke tells them: “If we don’t do this, we may not have an economy on Monday.”[158]
    • September 19: Paulson financial rescue plan is unveiled after a volatile week in stock and debt markets.

Democrats who bother to offer any reason at all why “Republicans got us into this mess” claim that the Republicans refused to regulate and reform the economic sector.

Well, let’s dig a little further.  Was it George Bush who refused to regulate or reform?

Hardly.

From US News & World Report:

Seventeen. That’s how many times, according to this White House statement (hat tip Gateway Pundit), that the Bush administration has called for tighter regulation of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

That’s right.  George Bush tried SEVENTEEN TIMES to reform and regulate Fannie Mae and Freddie Mac, the agencies at the epicenter of the economic crisis.

When did this thing start?  Under Bush?  Not according to The New York Times, as I have pointed out before in a previous article.

From the New York Times, September 30, 1999:

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 and felt pressure from stock holders to maintain its phenomenal growth in profits.

More.  Again from the New York Times, September 30, 1999:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

What do we have, even in the pages of the New York Times?  A prediction that as soon as the economy cooled off, the mortgage market would explode like a depth charge and the government would have to step in to prevent a catastrophe.  And from a Clinton program, at that.

The same man – Peter Wallison – who had predicted the disaster from 1999 wrote a September 23, 2008 article in the Wall Street Journal entitled “Blame Fannie Mae and Congress For the Credit Mess.”

So this disaster began under Bill Clinton.  Specifically, it began in the very final years of the Clinton administration.  Interestingly, at the same time that the Dot-com bubble was getting ready to explode on Clinton’s watch.  Clinton got all the credit for a great economy, and Bush got to watch 78% of the value of Nasdaq destroyed just as he was taking office.  $7.1 TRILLION in wealth was vaporized (43% of the the Market Capitalization of the Dow Jones Wilshire 5000 Full Cap between 2000 Q1 and Q1 2003).  Bill Clinton handed George Bush a massive economic disaster (made even worse by the shocking 9/11 attacks), and Bush turned economic calamity into the longest consecutive period of job growth (52 straight months) in history.  In diametrical contradiction to all the lies that you have  heard from Democrats and from a mainstream media propaganda machine that often puts Joseph Goebbels to shame

What did George W. Bush do to deal with the necessary regulation and reform of these government-subsidized behemoths Fannie and Freddie?

Read what the New York Times said back in September 11, 2003:

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

So Bush WANTED to regulate and reform the industry that would destroy the economy five years later, again, in contradiction to a blatantly dishonest and ideologically liberal and biased media.  Bush didn’t “refuse to regulate.”  Bush TRIED to provide the necessary regulatory steps that could have averted disaster.

And who blocked those regulations and reforms that Bush tried to provide?  None other than Barney Frank and his Democrat buddies:

These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Democrats blocked reform and regulation of Fannie and Freddie.  They threatened to filibuster any attempt at regulation and reform.  Meanwhile John McCain wrote a letter in 2006 urging reform and regulation of the GSEs.  He said:

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

And it came to pass exactly as John McCain warned.

Because of Democrats.  Who were virtually entirely to blame for the disaster that ensued as a result of their blocking of reform and regulation.

What did Democrats do with the mainstream media’s culpability?  They falsely dropped the crisis at the feet of “greedy” Wall Street.  But while examples of Wall Street greed abound, the liberal intelligentsia deliberately overlooked the central and preceding role of Democrat-dominated Fannie Mae and Freddie Mac.

Here’s how the mess actually happened:

The New York Times acknowledged that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac “buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.”

And the Los Angeles Times on May 31, 1999 describes how this process turned into a bubble, as more begat more, and then more and more begat more and more and more:

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . .

In a nutshell, Fannie and Freddie, in their role as Government Sponsored Enterprises, bought tens of millions of mortgages, and then repackaged them into huge mortgage-backed securities that giant private entities such as Bear Stearns, AIG and Lehman Brothers purchased.  What made these securities particularly attractive to the private banking entities was that these securities were essentially being sold – and had the backing – of the United States government.  Fannie Mae and Freddie Mac, again, are Government Sponsored Enterprises.

Here’s the process:

The Role of the GSEs is to provide liquidity and stability to the U.S. housing and mortgage markets. Step 1 Banks lend money to Households to purchase and refinance home mortgages Step 2 The GSEs purchase these mortgage from the banks Step 3 GSEs bundle the mortgages into mortgage-backed securities Step 4 GSEs sell mortgage-backed and debt securities to domestic and international capital investors Step 5 Investors pay GSEs for purchase of debt and securities Step 6 GSEs return funds to banks to lend out again for the issuance of new mortgage loans.

Now, any intelligent observer should note a primary conflict that amounts to a fundamental hypocritical contradiction: the GSE’s role was to “provide stability,” and yet at the same time they were taking on “significantly more risk” in the final year of the Clinton presidency.  What’s wrong with this picture?

The GSEs Fannie Mae and Freddie Mac were designed to bundle up the mortgages into mortgage backed securities and then sell them to the private market.

Fannie Mae is exempt from SEC [Securities and Exchange Commission] regulation. Which screams why Bush wanted to regulate them.  This allowed Fannie Mae to bundle up mortgages, which were then rated AAA with no requirement to make clear what is in the bundle.  Which screams why Bush wanted to regulate them.

This is what allowed the toxic instruments that have been sold across the world to proliferate.  And then to explode.  It also created a situation where money institutions did not know and could not find out whether potential inter-bank business partners were holding these “boiled babies on their books, complete with a golden stamp on the wrapping,” rather than safe instruments.  This then inclined banks to a natural caution, to be wary of lending good money to other banks against these ‘assets’.  And thus banks refused to lend to one another.

And it was Democrats, not Bush, and not Republicans, who were all over this disaster that destroyed our economy in 2008.

We were led by a pathologically dishonest media to believe that Republicans had created this mess, when it fact it had been Democrats.  And so we gave the very fools who destroyed our economy total power.

And what have they done in the two years since?

They made bad far, far worse.

Scared Democrats Admit Bush Was Right On Tax Cutting Policy

September 5, 2010

More and more Democrats are admitting that increasing taxes on the rich people who actually create jobs would be a foolhardy thing to do.

That pours a big giant can of water on the fire Democrats started in the whole blame-Bush-for-the-economic-meltdown thing.  Bush’s tax cuts were the biggest straw man for Democrats.  And now some of the most prominent Democrats are saying we need to keep those same tax cuts that Democrats were universally demonizing only months ago.

More Dems buck plan to let taxes increase for rich
By STEPHEN OHLEMACHER (AP) – 1 day ago

WASHINGTON — Congress seems increasingly reluctant to let taxes go up, even on wealthier Americans.

Worried about the fragile economy and their own upcoming elections, a growing number of Democrats are joining the rock-solid Republican opposition to President Barack Obama’s plans to let some of the Bush administration’s tax cuts expire.

Democratic leaders in Congress still back Obama, but the willingness to raise taxes is waning among the rank and file as the stagnant economy threatens the party’s majority in the House and Senate.

“In my view this is no time to do anything that could be jarring to a fragile recovery,” said Rep. Gerry Connolly of Virginia, a first-term Democrat. […]

“It’s going to be hard to resist a one-year extension for everybody, given the state of the economy,” said Clint Stretch, a tax expert at the consulting firm Deloitte Tax LLP. “That’s where I think the ball is moving.”

The tax cuts were enacted in 2001 and 2003 under President George W. Bush. They provided help for both rich and poor, reducing the lowest marginal rates as well as the top ones and several in between. They also provided a wide range of income tax breaks for education, families with children and married couples.

Taxes on capital gains and dividends were reduced, while the federal estate tax was gradually repealed, though only through this year. […]

Another freshman Democrat, Rep. Bobby Bright of Alabama, said he would like to see all the tax cuts extended for two or three years, if lawmakers cannot agree on a more permanent plan.

“Party leaders are not my directors or my boss,” Bright said. “My boss is my constituents, and I’ve heard from a vast majority of my constituents that they don’t believe in tax increases on anybody at this point in time.”

Bright is high on the re-election endangered list, one of roughly four dozen Democrats in districts won by Republican presidential nominee John McCain in 2008.

In the Senate, where Democrats need unity and at least one Republican vote to overcome filibusters, at least three Democrats and independent Joe Lieberman of Connecticut have said they want to extend all the tax cuts temporarily.

Several Democratic candidates for Senate have also come out in favor of extending them all, including Robin Carnahan in Missouri and Jack Conway in Kentucky.

“Jack Conway was in favor of the Bush tax cuts when they first passed (in 2001 and 2003), and he’s in favor of extending the Bush tax cuts now,” said spokeswoman Allison Haley.

An article in McClatchey Newspapers points out that if Democrats try to hike taxes on the rich, it will be Democrats who stood in the way:

Democrats unlikely to repeal tax cuts for the rich
By David Lightman | McClatchy Newspapers

WASHINGTON — Democrats in Congress are poised to play a leading role this month in thwarting their party’s effort to raise income tax rates on the wealthy.

Tax cuts enacted in 2001 and 2003 expire at the end of this year. President Barack Obama and Democratic congressional leaders have been eager to extend the breaks for individuals who earn less than $200,000 annually and joint filers who make less than $250,000. Those who earn more would pay higher, pre-2001 rates starting next year.

However, a small but growing number of moderate Democrats are balking at boosting taxes on the rich. Many face electorates that recoil at the mention of any tax increase. Some represent areas that are loaded with wealthier taxpayers. Further, some incumbent senators who don’t face voters this fall are reluctant to increase taxes on anyone while the economy remains sluggish.

Without their support, the push to raise rates on the rich probably will fail. […]

Many Democrats and Republicans are eager for a tax cut battle, seeing it as emblematic of each party’s economic principles.

“Now the administration is calling for a massive tax hike on small businesses in the middle of a recession,” said Senate Republican leader Mitch McConnell of Kentucky, who maintains that higher rates on the wealthy would hit small business hard, a point the Obama administration disputes.

“So it’s no surprise,” McConnell added, “that most Americans think the country is on the wrong track and that Democrat policies have failed to do anything to fix their top concern, the economy.”

Democratic leaders are convinced that voters won’t buy that argument. Not only will the public back higher taxes for the rich, but “we have an opportunity to generate $700 billion that could go to deficit reduction and badly needed programs,” said Rep. Raul Grijalva, D-Ariz., a co-chairman of the House Progressive Caucus.

The middle class-only extension is thought to have strong support in the House, where Democrats have a huge majority, but some Democrats are reluctant.

Rep. Gerald Connolly, D-Va
., represents the northern Virginia suburbs of Washington, one of the nation’s wealthiest districts. Median family income there in 2008 was $117,892, well above the national average of $63,211. He said that repealing the top rates would have political consequences.

“Sometimes we forget how we became the majority. We did it by winning some affluent districts,” he said.

The bigger problem for Democrats looms in the Senate, where Majority Leader Reid’s immediate problem is getting the 60 votes needed to cut off debate on the measure. Democrats control 59 seats, and at least three of them — Bayh, Ben Nelson of Nebraska and Kent Conrad of North Dakota — have signaled that they won’t back a permanent repeal of the tax cuts for the wealthy.

They suggest a way out of a stalemate — temporarily extending all the expiring tax rates — but so far the leadership isn’t going along.

Sean Neary, a spokesman for Senate Budget Committee Chairman Conrad, said the senator backed such an extension “for now.”

“The general rule of thumb is that you do not raise taxes or cut spending during an economic downturn. That would be counterproductive,” Conrad said.

Nelson also offered what’s become the centrist Democratic mantra. He, too, said he’d back extending the tax breaks for the wealthy “for at least a period of time because raising taxes in a weak economy could impair recovery.”

That stand could be even more popular with Democratic candidates for the Senate who aren’t incumbents
. The hottest races are in conservative states, such as Kentucky, where Republican Rand Paul and Democrat Jack Conway are battling for the seat now held by Republican Sen. Jim Bunning.

Of the expiring tax cuts for the wealthy, Conway spokeswoman Allison Haley said that he “believes we should extend them now, especially when so many Kentucky families and small businesses are struggling under this recession.”

In Missouri, Republican U.S. Rep. Roy Blunt and Democrat Robin Carnahan are in a tight race. Despite a welcoming embrace with Obama at a Kansas City fundraiser in July, Carnahan said last week that she wanted to extend the Bush tax cuts for everyone.

“Now is not the time to raise taxes,” she said.

In Indiana, U.S. Rep. Brad Ellsworth, D-Ind., who’s seeking to replace Bayh, told the Evansville Courier & Press this summer that all the Bush-era tax cuts should become permanent
.

That position makes sense, said Brian Vargus, a professor of political science at Indiana University-Purdue University Indianapolis, because Indiana is “an overwhelmingly Republican state … and there is never support for taxes or public goods.”

So from this article we see the term “moderate.”  And the moderates are those Democrats who see a compromise to the looming war over tax cuts: keep them all for now.  Don’t hike taxes on the only economic class of Americans who have the wherewithal to actually create jobs.  Keep the the tax cuts for at least a year, if not 2-3 years.  But the hard-liner Democrats are willing to see the tax cuts end for EVERYONE in order to maintain their Marxist class warfare principle of punishing the rich for being successful.

Democrats offered two reasons in their unrelenting demagoguery of George Bush: 1) they said the tax cuts caused the economic disaster; and 2) they said Bush’s refusal to regulate caused the economic disaster.

But 1) is now blown apart, given DEMOCRATS’ current acknowledgment that the Bush tax cuts – yes, even for the rich – weren’t the bogey man Democrats have been saying.

And 2) suffers from the flaw that Bush DID try to regulate the entity most responsible for the meltdown that befell the economy in 2008, and the ONLY reason that entity was not reformed and regulated was because DEMOCRATS blocked Bush at every turn.

That entity was the Government Sponsored Enterprise, or GSE, commonly known by the brand names of Fannie Mae and Freddie Mac.

It was Fannie and Freddie that expanded and ultimately exploded using dangerous subprime loans (see also here).  It was also Fannie Mae and Freddie Mac who bundled thousands of bad and good mortgages together into instruments called “mortgage backed securities” and sold them to the private sector.  And when no one could separate the good from the bad, uncertainty paralyzed the banking system and led to the crash.

A brief history of the mortgage meltdown reveals how it was the GSEs acting under Democrat policies that created the housing bubble – (and even Obama economic shill Christina Romer admits “the popping of the housing bubble had serious consequences” which “destroyed $13 trillion of wealth in 2008”) – and the corresponding mortgage crisis which imploded our economy:

In 1999, under pressure from the Clinton administration, Fannie Mae, the nation’s largest home mortgage underwriter, relaxed credit requirements on the loans it would purchase from other banks and lenders, hoping that easing these restrictions would result in increased loan availability for minority and low-income buyers. Putting pressure on the GSE’s (Government Sponsored Enterprise) Fannie Mae and Freddie Mac, the Clinton administration looked to increase their sub-prime portfolios, including the Department of Housing and Urban Development expressing its interest in the GSE’s maintaining a 50% portion of their portfolios in loans to low and moderate-income borrowers.[10]

As noted, subprime mortgages sky-rocketed during the initial era of loosening of terms throughout the 1990’s. From a low of 5% of mortgages in 1994, to 14% in 1997, to 23% in 2005, subprime mortgages continued to boom in the early 2000’s. Following the 2004 initiative policy change spearheaded by a U.S. Securities and Exchange Commission (SEC) decision to allow the largest brokerage firms to borrow upwards of 30 times their capital, subprimes became an even greater investment vehicle for investment banks and institutions in the U.S. and around the world. Since 1994, the securitization rate of subprime loans has increased from approximately 32 percent to nearly 78 percent of total subprime originations.[11] This further exposed the financial community to the effects of the coming housing bubble.

Democrat policies created the housing bubble that Christina Romer acknowledges was the cause of the destruction of the US economy.

And the refusal of Democrats to reform and regulate Fannie and Freddie exploded that bubble.

Bush warned SEVENTEEN TIMES that we needed to reform Freddie Mac and Fannie Mae or have an economic disaster on our hands.  John McCain urged action to avert an economic disaster.  And Democrats refused to budge to deal with the monster they created.

Again, Bush was right.  Democrats were profoundly wrong.

The mainstream media propagandists refused to report the truth.  They kept broadcasting a lie, and naive and frankly stupid Americans rewarded the Democrats who created the economic disaster with total power.

And we’ve been paying for that stupidity for the last two years.

As of today, Obama is at a dismal 42% approval, and in danger of plunging into the 30s.  45% of Americans now strongly disapprove of Obama, versus only 24% who still strongly approve of the job he’s doing “fundamentally transforming” our economy into a pre-industrial barter system.

Obama is in full meltdown mode as all of his campaign rhetoric is being revealed for the lies it always was:

And Democrats are deservedly going to meltdown right along with him.

Barney Frank And Democrat Party Most Responsible For 2008 Economic Collapse

August 10, 2010

I don’t want to ridicule Barney Frank on account of his weight.  Suffice it to say he is easily able to pull off the two faces he routinely wears, and the two sides he routinely takes.

Here’s the recent side of Barney Frank:

Frank: “well one of my biggest differences with the Bush administration, even with the Clinton administration, was that they overdid that. I have always been critical of this effort to equate a decent home with home ownership. I think we should have been doing more to provide rental housing, my efforts have been to try and get affordable rental housing I was very much in disagreement with this push into home ownership and I think the federal government should not be artificially doing that. The goal is for people to have decent housing and I think beginning in the Clinton administration, exacerbated by Bush, we pushed people too much into home ownership…”
– Barney Frank, May 20, ‘2010 on CNBC.

And here’s Frank from 2005 documenting the fact that Barney Frank in 2010 is a rank liar:

“This is a very important resolution, particularly at this time, because we have, I think, an excessive degree of concern right now about home ownership and its role in the economy.
Obviously, speculation is never a good thing. But those who argue that housing prices are now at the point of a bubble seem to be missing a very important point. Unlike previous examples, where substantial excessive inflation of prices later caused some problems, we are talking here about an entity, home ownership, homes, where there is not the degree of leverage that we have seen elsewhere.

This is not the dot-com situation. We had problems with people having invested in business plans for which there was no reality and people building fiber-optic cable for which there was no need. Homes that are occupied may see an ebb and flow in the price at a certain percentage level, but you will not see the collapse that you see when people talk about a bubble.

So those of us on our committee in particular will continue to push for home ownership.
– Barney Frank, 2005

link
Video Link

[I found these quotes at US Politics Online].

You’re right, Barney.  It wasn’t the Dot-com situation.  It was a hundred times WORSE than the Dot-com situation, even given as bad as the Dot-com bubble was.  And yeah, you sure were right when you said there wouldn’t be a collapse, weren’t you?

So first of all, we have Barney Frank – liberal Democrat par excellence – acknowledging that the bad policy that led to the mortgage market meltdown was actually a CLINTON policy that Bush merely continued (most likely because he knew he’d be called a “racist” the moment he ended a program that gave billions of dollars to minorities to buy homes they couldn’t afford).

From the New York Times, September 30, 1999:

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 and felt pressure from stock holders to maintain its phenomenal growth in profits.

It’s beyond asinine that Democrats blame Bush for ruining the economy, and praise Clinton as having the mostest wonderfulest economy ever, when it was a Clinton program that ruined the Bush economy.  But that’s the mainstream media narrative for you.

It’s ironic that Frank in hindsight so laughably compared the housing mortgage bubble that brought down the economy in 2008 to the Dot-com bubble that brought down the economy just as Clinton was leaving office.  Because that’s TWO giant economy-killers that “Mister Wonderful Clinton” inflicted on George Bush.  The Clinton-era Dot-com crash ultimately destroyed 78% of the Nasdaq composite.  Clinton benefited with a huge market surge, and Bush paid with a huge market collapse that began taking place while the handprint on the Bible from Bush’s oath of office was still warm.

So Barney Frank reminds us that the destruction of the Bush economy was bookended by massive Clinton failures – the Dot-com bubble collapse in 2001 and the housing market bubble collapse in 2008.  And Clinton was never blamed for either of them by the propagandist mainstream media.

The second thing you can notice is that Democrats like Barney Frank – who were so quick to pounce all over the mortgage meltdown and blame Bush for it – were not only the ones who created the problem, but were the ones who defended the problem.

What’s the Democrat-mainstream media-created narrative for why we had the 2008 collapse?  Republicans refusing to regulate?  Read what the New York Times said back in September 11, 2003:

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

So Bush WANTED to regulate, in contradiction to all the lies that you heard.

And who blocked those regulations?  Omigosh, it was Barney Frank and his Democrats.

These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

You would find if you bothered to look at the facts that Bush demanded reform and regulation of Fannie Mae and Freddie Mac SEVENTEEN TIMES during his presidency.  And that Democrats refused to regulate the GSEs and even threatened filibusters against regulation.  Not that the mainstream media is honest enough to report the truth.

You would find if you bothered to look at the facts that financial experts literally predicted that the Clinton-birthed Fannie and Freddie expansion would ultimately explode.

Again from the New York Times, September 30, 1999:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

What do we have, even in the pages of the New York Slimes?  A prediction that as soon as the economy cooled off, the mortgage market wold explode like a depth charge and the government would have to step in to prevent a catastrophe?  From a Clinton program?

The same man – Peter Wallison – who had predicted the disaster from 1999 wrote a September 23, 2008 article in the Wall Street Journal entitled “Blame Fannie Mae and Congress For the Credit Mess.”

The New York Times acknowledged that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac “buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.”

And the Los Angeles Times on May 31, 1999 describes how this process turned into a bubble, as more begat more, and then more and more begat more and more and more:

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . .

In a nutshell, Fannie and Freddie, acting as Government sponsored enterprises, bought tens of millions of mortgages, and then repackaged them into huge mortgage-backed securities that giant private entities such as Bear Stearns, AIG and Lehman Brothers purchased.  What made these securities particularly attractive to the private banking entities was that these securities were essentially being sold – and had the backing – of the United States government.

Here’s the process:

The Role of the GSEs is to provide liquidity and stability to the U.S. housing and mortgage markets. Step 1 Banks lend money to Households to purchase and refinance home mortgages Step 2 The GSEs purchase these mortgage from the banks Step 3 GSEs bundle the mortgages into mortgage-backed securities Step 4 GSEs sell mortgage-backed and debt securities to domestic and international capital investors Step 5 Investors pay GSEs for purchase of debt and securities Step 6 GSEs return funds to banks to lend out again for the issuance of new mortgage loans.

Now, an intelligent observer would note a conflict: the GSE’s role was to “provide stability,” and yet they were taking on “significantly more risk” in the final year of the Clinton presidency.  What’s wrong with this picture?

The GSEs Fannie Mae and Freddie Mac were designed to bundle up the mortgages into mortgage backed securities and then sell them to the private market.

Fannie Mae is exempt from SEC [Securities and Exchange Commission] regulation. Which screams why Bush wanted to regulate them.  This allowed Fannie Mae to bundle up mortgages, which were then rated AAA with no requirement to make clear what is in the bundle.  Which screams why Bush wanted to regulate them.

This is what has allowed toxic instruments that have been sold across the world.  It also created a situation where money institutions did not know and could not find out whether potential inter-bank business partners were holding these “boiled babies on their books, complete with a golden stamp on the wrapping,” rather than safe instruments.  This then inclined banks to a natural caution, to be wary of lending good money to other banks against these ‘assets’.  And thus banks refused to lend to one another.

John McCain wrote a letter in 2006 urging reform and regulation of the GSEs.  He said:

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

An of course, they could not pay their debts.  Fannie and Freddie basically went bankrupt and were taken over.  And they took a whopping share of the biggest financial institutions down with them.  Fannie is in the process of devouring nearly 400 billion dollars of bailout money from the American taxpayer.  And now – GREAT GOOGLEY MOOGLEYObama is planning to funnel yet another $800 BILLION through the same Fannie and Freddie who already destroyed us once.

And thus you had a financial disaster created by one William Jefferson Clinton and one Democrat Party.  And now a second act of economic destruction is being planned by Barack Obama.

The 2008 economic collapse that Democrats were elected to fix was itself created by Democrats who will now continue the very policies that created the disaster in the first place.

Democrats then demonized Bush for merely being there when the disaster happened.  When they had created the mess, and when they had refused to allow Bush to do anything to prevent a Democrat-created disaster that he and other Republicans saw coming, but ultimately lacked the courage to stop.

Critical Failure Overload: Which Obama Failure Should We Focus On?

June 30, 2010

There seems to be a genius to Obama’s incompetence.  He is failing on so many levels, in so many ways, all at the same time, that nobody can possibly keep track of them all.

Which means, paradoxically, that the more failures Obama accumulates, the better he looks, as coverage of all the failure is dissipated such that nothing receives the focus it needs to penetrate the American culture of distraction.

A few days ago, the media hailed Obama’s firing of Gen. Stanley McChrystal and replacement by Gen. David Petraeus as a magnificent act of presidential leadership and decision-making.  Let’s not mention that the same figures on the left who were hailing Petraeus yesterday were demonizing him when Bush appointed him to take control over the Iraq War and the surge strategy that won that war.

Obama is turning to Bush’s general and Bush’s Secretary of Defense in order to overcome the failure created by utterly failed Democrat Party ideas.

Chief among those utterly failed Democrat ideas is the timetable for cut-and-run.  Democrats wanted to impose this guaranteed-to-fail strategy for Iraq, but Bush prevailed and won the war.  Now they want to make sure we lose in Afghanistan, as Afghans who want to stay alive realize who will still be there a year from now (i.e., the Taliban), and who won’t (i.e., the United States), and that they’d better not ally themselves with their “timetable for withdrawal” all-too-temporary American allies.

We find that the July 2011 timetable for withdrawal was a purely political decision that had no military justification or support whatsoever.

Of course, the failure in Afghanistan comes as a welcome relief to day 72 of the even bigger failure in the Gulf of Mexico.

The leftwing media is essentially shouting, “Hey, take your eye off that total failure over there on the Gulf Coast.  Look over here!!!  Obama fired a guy that pricked his thin-skin and appointed Bush’s general to save his liberal ass.  And he gave a speech!!!  Don’t waste your time thinking about the fact that BP took the cap off the leaking hole so that 104,000 gallons of oil per hour could pour out of the sea floor.  Don’t look at the possibility that as much as 4.2 million gallons of oil are pouring out of that damn hole Obama can’t plug every single day!!!

Come on!  Obama’s got Bush’s general now!!!  The one whom Obama and every other Democrat demonized three years ago while he was winning in Iraq!!!”

Well, go ahead and take a look at how terribly Obama is failing in Afghanistan.  Look at how Obama doubled Bush’s last body count in 2009, and how he is now on pace to double his own doubling of Bush’s body count this year.  Look at how terrible a job Obama is doing mismanaging the various top-level civilian and military personnel who are clearly not on the same page with one another as personal fiefdoms rather than the mission dominate (see also here).  The divisions – which underscore that Obama’s entire Afghanistan plan is in freefall – aren’t pretty.  And don’t forget to look at the fact that “Those divisions are of Obama’s own making, stemming from his lack of leadership and failure to make a firm commitment to victory in Afghanistan.”

While you’re at it, take a look at the fact that, by the standards Democrats used to attack Bush in 2004, Barack Hussein is the worst president in American history bar none.

The Obama-failure in Afghanistan is a distraction for the Obama-failure in the Gulf of Mexico.  And the Obama-failure in the Gulf of Mexico is a distraction for the Obama-failure in the economy.

Look at the fact that a full year and a half later, jobless claims continue to go up “sharply.” Look at the fact that new home sales have plunged to the lowest level ever recorded.   Look at the fact that that disaster followed the news that Obama’s mortgage modification program had officially imploded.  And look at the fact that bank foreclosures have doubled under Obama’s “wreckovery.”

One in four homeowners are underwater in their mortgages, and are increasingly just bailing out and walking away from their responsibilities in Obama’s God-damn-America.  Consumer confidence is down dramatically.    And oil prices are way down for the very bad reason that our economy is in such bad shape no one can afford to go anywhere.  And, of course, our stock market just took a very cold bath yesterday.

Where are we supposed to look to see an area in which Obama HASN’T failed?

Look at everything, if you have time to contemplate all the failure that Obama has brought.  But don’t be distracted from taking time to watch the spill cam footage every day, or following the latest tracking of Obama’s oil spill and its contamination of the Gulf Coast, or following the Obama-regime-caused inability to clean up the mess.

As you watch the daily disaster unfolding, don’t forget to remember that Obama is the guy running the show.  Or that the show looks like a chicken running around after its head has been cut off

Hypocrite-in-Chief Seeks Line Item Veto He Blocked Bush From Getting

May 25, 2010

This is pretty massive hypocrisy even coming from a world-class hypocrite:

Tuesday, May 25, 2010
Obama asks Hill for line-item veto he once opposed
Stephen Dinan

When President George W. Bush called for a kind of line-item veto four years ago, the top Senate Democrat said it was like getting a “bad sore throat,” and the No. 2 House Democrat called it “a sham.” On Monday, President Obama asked them to reconsider and pass something very similar, for his sake.

With fears of a Greek-style debt collapse roiling a Congress already balking at new spending, the White House on Monday proposed a modified line-item veto that would give the administration another crack at forcing Congress to vote on spending cuts.

But the proposal will have to pass a Congress wary of giving up power over the purse, and would require a reversal by many Democrats who voted against a similar proposal from Mr. Bush.

One who’s already reversed himself is Mr. Obama, who as a senator in 2007 voted along with Sen. Joseph R. Biden Jr., now the vice president, and almost all of the rest of Senate Democrats to filibuster Mr. Bush’s proposal.

The White House said Mr. Obama embraced line-item powers by the time he won the White House, and that times are bad enough that Congress may now be ready to follow his lead.

“The fiscal context has changed as it became necessary to combat a severe economic downturn and as ongoing deficits have become a growing concern,” Peter R. Orszag, Mr. Obama’s budget director, told reporters. “We are hopeful the Congress will enact this legislation because it will help everyone to reduce unnecessary spending.”

He said the new presidential powers could encourage Congress to scrutinize spending bills more carefully, because lawmakers wouldn’t want to be shamed by having their projects singled out.

What is really amazing is the argument that Obama is giving to justify giving him a line-item veto: we’ve got a growing crisis, and the president needs this tool to avert it.

By Obama’s very own reasoning, he and the Democrat Party are fundamentally responsible for the 2008 economic collapse.  Because had they given Bush this power, he could have averted the disaster – but they refused to give him the necessary power he needed.

A couple of quotes from US News & World Report must suffice to illustrate:

Seventeen. That’s how many times, according to this White House statement (hat tip Gateway Pundit), that the Bush administration has called for tighter regulation of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. […]

But it didn’t prevent them from spewing a huge amount of toxic waste, in the form of subprime and Alt-A mortgages, into our financial institutions from 2004 to 2007. As Stephen Spruiell points out in The Corner on National Review Online, Fannie and Freddie spewed out $1 trillion worth (face value) of subprime mortgages between 2005 and 2007. That’s a whole lot of toxic waste. For more detail, consult the items referred to in my previous blogpost on this subject (most of the comments seem to have been disputes about the plot line of the movie It’s a Wonderful Life, which I should think could be settled by consulting a reference work).

Much if not all of that could have been prevented by a bill cosponsored by John McCain and supported by all the Republicans and opposed by all the Democrats in the Senate Banking Committee in 2005. That bill, which the Democrats stopped from passing, would have prohibited the GSEs from speculating on the mortgage-based securities they packaged. The GSEs’ mission allegedly justifying their quasi-governmental status was to package or securitize such mortgages, but the lion’s share of their profits—which determined top executives’ bonuses—came from speculation.

And there’s your 2008 mortgage meltdown, in a nutshell.  Bush warned and warned and warned about the impending crisis, to no avail.  Because the same Democrats who refused to give Bush the power Obama now says he needs to avert disaster refused to heed Bush’s warnings, and kept pushing us closer and closer and closer to the implosion point.  And then we imploded just as Bush had said we would.

I have always believed that the president should have a line-item veto – with the proviso that every line item veto be made a matter of public record so the American people could know what items the president was removing and who had installed those items in the first place.

This is just another of many, many proofs regarding what a gargantuan hypocrite slimeball the current occupant of the White House truly is.

But, for what it’s worth, it is probably unfair to single out Barack Obama as a slimeball, when so many of his fellow Democrats are also slimeballs.  Near the conclusion of the Washington Times article, we have this:

House Budget Committee Chairman John M. Spratt Jr., South Carolina Democrat, said he will take the lead in introducing Mr. Obama’s proposal in Congress, calling it “a step forward on the path to fiscal responsibility.”

Mr. Spratt led opposition to the 2006 Bush proposal.

At some point they should just call themselves the Demagogue Party and dispense with the pretenses as to what they truly are.

Headed In The Right Direction? Mortgage Delinquencies, Unemployment UP; Market, Leading Economic Indicators DOWN

May 21, 2010

Nothing was more responsible for the economic implosion of 2008 than the mortgage industry.  So it is somewhat illuminating that – to go along with the European Union government spending crises and yesterday’s corresponding bloodbath in the Dow (down 376 points) which officially put Wall Street into “correction territory” – we now see that, if anything, our mortgage woes under Obama are actually worse than ever.

Mortgage delinquencies hit 10%
By Les Christie, staff writerMay 19, 2010: 1:20 PM ET

NEW YORK (CNNMoney.com) — A dubious distinction was reached during the first three months of 2010: More than 10% of all mortgage borrowers are now behind on their payments.

The delinquency rate hit a record of 10.06% in the first quarter, according to the Mortgage Bankers Association. The seasonally adjusted rate accounts for all mortgages on properties that have up to four units and that are at least one payment late.

The rate has been inching steadily toward this record. In the previous quarter, 9.47% of borrowers were behind on payments; and one year ago, 9.12% were late. […]

Nearly all varieties of loans suffered increased delinquencies compared with 12 months earlierPrime fixed-rate loans hit 6.17%; prime adjustable-rate mortgages (ARMs) tipped 13.52%. Subprime fixed-rates jumped to 25.69%; and subprime ARMs are a whopping 29.09%.

So, to put it bluntly, a full year and a half later, Barry Hussein hasn’t done anything to fix the biggest component that created the economic collapse of 2008.  Not a damn thing.

The problem is actually worse than ever.

A significant factor contributing to this crisis is unemployment.  But, again, Obama hasn’t done a damn thing (all failed predictions and promises aside) to create jobs:

Jobless claims rise by largest amount in 3 months
By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer   – Thu May 20, 4:29 pm ET

WASHINGTON – The number of people filing new claims for unemployment benefits unexpectedly rose last week by the largest amount in three months. The surge is evidence of how volatile the job market remains, even as the economy grows.

Applications for unemployment benefits rose to 471,000 last week, up by 25,000 from the previous week, the Labor Department said Thursday.  It was the first increase in five weeks and the biggest jump since a gain of 40,000 in February.

The total was the highest since new claims reached 480,000 on April 10. It also pushed the average for the last four weeks to 453,500.

“Although no one expects this volatile series to go in one direction every single week, this is clearly a disappointment,” said Jennifer Lee, senior economist at BMO Capital Markets.

Stocks slid as investors’ already bleak view of the world economy worsened with another drop in the euro and the disappointing U.S. employment news. The Dow Jones industrial average fell more than 250 points in early afternoon trading.

“Unexpectedly.”  The propagandists adverb of choice.

After a newspaper or news station has used the word a thousand times, you’d think they’d grow tired of making excuses for the numerous failures of the White House.  But, noooooo.  They never weary of describing bad news as “unexpected” as a device to imply that it was really nobody’s fault.

Now, mind you, they liked to use the word “unexpected” a lot when Bush was president, too.  But then it was to reduce the credit that Bush should have received for successful policies.  Take the result of his tax cut, which boosted revenue.  The New York Times wrote:

“For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.”

When a Democrat is president, bad news is always “unexpected” to the mainstream media.  When a Republican is president, it’s always GOOD news that’s “unexpected.”

What is the Obama message that continually keeps being falsified by “unexpected” actual results?

“We can say beyond a shadow of a doubt today we are headed in the right direction,” Mr. Obama told an audience of about 230 workers and local business leaders. “All those tough steps we took, they’re working, despite all the naysayers who were predicting failure a year ago.” ….

“Last month we had the strongest job growth we had seen in year, and by the way, almost all of it was in the private sector, and a bunch of it was manufacturing,” the president said, referring to last week’s report that found that the economy added 290,000 jobs in April. “So this month was better than last month. Next month is going to be stronger than this month. And next year is going to be better than this year.”

Only it’s a load of crap from a pathological liar.

The AP article cited above continues with this paragraph:

In a separate report, a private research group said its index of leading economic indicators dipped slightly in April. It was the first decline in more than a year.  Six of the 10 components on the Conference Board’s index deteriorated. Among them: U.S. residents filed fewer applications to build homes; vendors were slower in delivering supplies to companies; the unemployed filed more claims for jobless aid; and consumers’ confidence dropped.

Ah, but I have absolutely no doubt whatsoever that the drop was “unexpected.”

May 20 (Bloomberg) — The index of U.S. leading economic indicators unexpectedly declined in April, a sign the economic expansion may slow in the second half of the year.

NEW YORK (Associated Press) — A private research group’s index of leading economic indicators unexpectedly slipped in April, its first drop in more than a year and a sign that growth could slow this summer.

I knew it!!!  You clearly can’t blame Obama for any of that.  I mean, duh, who could possibly have “expected” it???

Why don’t we just keep believing more of Obama’s constant stream of lies, instead???

Let’s see.  Month of May.  Major market correction, with the Dow down 900 points this month.  Check.  Mortgage delinquencies up.  Check. Unemployment up.  Check.  Leading economic indicators down.  Check.

Famed market analyst Meredith Whitney says that Obama’s moronic financial “reform” that passed the Senate yesterday will succeed in creating tragic levels of unemployment for extended periods of time.

Just remember: Barack Obama is telling you the truth.  It’s reality that’s lying to you.

Everything is hunky dory.  And anything to the contrary has to be “unexpected.”

Why ObamaCare Passage Marks A Day That Shall Live In Infamy

March 22, 2010

The pundits have rightly compared the gigantic ObamaCare bill with the Roosevelt administration – if nothing else than because we haven’t seen any government program so gigantic since then.

In a way that is very fitting.  Because we can bookend December 7, 1941 and March 21, 2010 with the same prediction: a day that shall live in infamy.

December 7th was a disaster because FDR utterly failed to see a clear and present danger building on opposite sides of both oceans.  We failed to take precautions.  We failed to arm ourselves.  We even failed to protect ourselves.  What made it so criminal was that we had years of ample warning, but simply chose to ignore it.

March 21 was hardly a surprise, either.  Just as with December 7, a lot of Americans saw it coming, but lacked the power to do anything but point and shout about the coming disaster.  The major difference is that on December 7, 1941, our government failed to protect our way of life, whereas on March 21, 2010, our government actively attacked our way of life.

And now it is here.  And now that it is here, it will grow like a cancer.  Slowly at first – it doesn’t fully kick in until 2014 – and then it will erupt like a big poisonous mushroom.

Charles Krauthammer described what the passage of ObamaCare means with his usual brilliance:

“Nonetheless, it will be the law of the land as of tonight and we’re going to be a different country.  We are on our way, there is absolutely no chance we are not going to end up with national health care.   This is nationalizing health care, the insurance companies are now utilities, they are contractors. the government makes all of these decisions, only a matter of time and will probably happen after the Obama administration.  But he will be remembered as the father of national health care as they have in Canada or Britain and it starts tonight.”

Krauthammer is in no way exaggerating or politicizing the regulatory takeover of private insurance companies by the government under ObamaCare.  That can be demonstrated merely by examine what Dennis Kucinich said about ObamaCare and about the role of private insurance companies before he went ahead and voted for it anyway:

  • “I don’t know what there is for my constituents”
  • It’s “a license to just steal money from people”
  • ObamaCare is a “giveaway to the insurance industry”
  • This bill is “not going to protect consumers from these rapid premium increases
  • It provides “no guarantees of any control over premiums”
  • It is “forcing people to buy private insurance”
  • It’s going to result in “five consecutive years of double-digit premium increases”
  • “I just don`t see that this bill is the solution”
  • “The insurance companies are the problem and we`re giving them a version of a bailout”
  • “This bill doesn`t change the fact that the insurance companies are going to keep socking it to the consumer”
  • It results in a “giveaway to the insurance industry”
  • “You`re building on sand. There`s no structure here”
  • If we pass this bill, “all we`re going to have is more poverty in this country”
  • If we pass this bill, “people aren`t going to get the care that they need”

This remaking of private insurance companies as utilities, as contractors for the government, is fascism, pure and simple.  The government didn’t nationalize them, as it would do under communism, but it created a massive new set of regulations, and bureaucracies, and mandates, and taxes that quintessentially takes them over as agents of the state.  And that is what fascism is all about:

The entry under “Fascism” in The Concise Encyclopedia of Economics reads in part:

Where socialism [i.e., communism] sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”–that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities.

And that is exactly what is happening.  Liberals may not like my term, but it couldn’t be more applicable here.  Obama demonized the insurance companies, and he will now regulate and control and dominate them “in the national interest.”

ObamaCare amounts to a regulatory takeover of the private health insurance companies.  They will be told what to do, how to do it, and how much to charge (although you might see them massively raise rates in preparation to protect themselves for the onslaught that is coming their way).  The government under Obama already owns General Motors and Chrysler.  His administration already essentially owns many banking institutions.  The government under Fannie Mae and Freddie Mac controls more than 90 percent of the nation’s secondary mortgage market.  And Paul Volcker acknowledged that “the federal government was responsible for up to 95 percent of all new home mortgages in the fourth quarter of 2009.”

Even the student loan industry was effectively nationalized under ObamaCare.

It’s naked fascism.  And that fascism which was slowly trickling onto us during the Bush years has now become an massive avalanche under Obama.

Fascism is bad, of course.  But the economic consequences of this fascist takeover of our health care system may be even worse than the political ones.

As for that, consider what Weekly Standard journalist Steve Hayes said (link includes video of the following):

I think that if you take a step back from this the real story here is is the deficit and that story.  Everybody’s familiar with the debt clock; we’ve all seen how fast it moves.  This is going to put it on double time or triple time because when you go back and you look at the history of entitlements in the country, that’s the patternThere are promises that this is going to cut deficits or debt, and it never does.  You look back at at what FDR said when he signed Social Security into law in July 1935. He said it would act as a protection for future administrations against the necessity of going deeply into debt to furnish relief to the needy. He also said this is a law that will take care of human needs and at the same time provide the United States and economic structure of vastly greater soundness. Social Security today?  $43 Trillion dollar unfunded liability – that’s 400 thousand dollars per household in the United States today. And you go back to 1965.  LBJ did the same thing. You saw Nancy Pelosi carrying the gavel – it’s the same argument.  He said it would be $1.50 a month for the average worker.  $1.50 a month.  Three dollars per month after you’re 65.  Today, Medicare has a $57 trillion dollar unfunded liability.  $500,000 dollars per American household.  This will bankrupt the country.”

FDR said in 1935 when he signed Social Security into law:

It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.

$43 TRILLION dollars of unfunded liability.  That is $400,000 for every household in the country.  That is $184,000 for every single man, woman, and child in the country.  Please pay up now.

Does that sound like something that lessened the force of possible future ANYTHING? A protection to future administrations against the necessity of going deeply in debt???  Something that provides the United States with an economic structure of vastly greater soundness???  We’re doomed.

Maybe you don’t care that this giant boondoggle is going to crash and burn your country, and that your children or grandchildren will literally die as a result of your greed and selfishness.  But I do.

They promised us a bogus Utopia, and that Utopia is about to collapse into the fiery pit of hell.

What was it that Lyndon Johnson promised us when he sold his load of Medicare malarkey?

Now here is how the plan will affect you.

During your working years, the people of America–you–will contribute through the social security program a small amount each payday for hospital insurance protection. For example, the average worker in 1966 will contribute about $1.50 per month. The employer will contribute a similar amount. And this will provide the funds to pay up to 90 days of hospital care for each illness, plus diagnostic care, and up to 100 home health visits after you are 65. And beginning in 1967, you will also be covered for up to 100 days of care in a skilled nursing home after a period of hospital care.

And under a separate plan, when you are 65–that the Congress originated itself, in its own good judgment–you may be covered for medical and surgical fees whether you are in or out of the hospital. You will pay $3 per month after you are 65 and your Government will contribute an equal amount.

Let me tell you how Medicare affects me: It affects me with a $57 trillion unfunded liability.  It affects me with a bill of $500,000 for every single household in America.  It affects me with an individual bill (that every single man, woman, and child in this country owes) of $230,000.

The forerunner of the CBO underestimated the actual cost of Medicare by a whopping factor of 10.  If they repeat their little boo-boo, ObamaCare will cost $10 trillion dollars over ten years, and the United States will completely collapse as an independent nation-state.

And that’s $230,ooo on top of the $184,000 I owe for Medicare.  I owe $414,000.  And my household owns $900,000.  And great googly moogly, we don’t got it.  We’re on a speeding train that is going to keep hurtling along until it flies off a cliff and crashes.

Hey, I got an idea: let’s double that.  Hell, let’s triple it.

If you believe that the government is going to create a trillion dollar entitlement that ensures 47 million more people – (John Larson, chairman of the Democratic caucus, used the “47 million” figure on ABCs “This Week” just yesterday; he used it again on CNNs “State of the Union”) and spends less money than is spent now, you are an abject fool.

And that “47 million” clearly includes 17 million illegal immigrants.  The Democrats’ incredibly cynical plan is to take health resources from you and from your children and grandchildren and give those resources to illegal immigrants so they can capture the Hispanic vote.

The metaphor is a dozen people rushing into your house to eat your food and consume your resources while your own kids go hungry.  No one would do this.  But your government is doing it under Democrat Party tyranny.

The real cost of this bill is over $6 TRILLIONThe Democrats filled their legislation with gimmicks, such as assuming they would cut doctors’ Medicare reimbursements by 21% when they know they won’t, then putting that “Doctor fix” in another bill.  That will add $208 billion to the real cost of their plan.  Then they falsely start the bill’s ten-year score in 2010, when the benefits don’t start getting paid out until 2014.  That accounting deceit masks the fact that the REAL cost of the bill is $2.3 trillion.

The $6 trillion (PLUS!!!) figure comes from the biggest and most despicable shenanigan of all: all the money from American citizens who will be unconstitutionally forced to purchase health insurance isn’t counted in the CBO score.  At all.  Not one penny.

In other words, your ObamaCare – which really isn’t even deficit neutral at all – was sold as “deficit neutral” because it doesn’t count the trillions and trillions of dollars that American citizens will be compelled by their government to pay for health insurance.

ObamaCare amounted to the slitting of the national wrists.  And we’re going to start bleeding out until we either abandon it or die.

The Republicans have a few more tactics to fight this bill, but they amount to starting backfires to try to temporarily contain a massive hungry forest fire.  It won’t be enough, and it probably won’t ultimately succeed.

Thirty-eight states and counting are now working to preempt the ObamaCare disaster by protecting their citizens from this disgraceful and unconstitutional boondoggle.

Having this monster 2,700-page government takeover of health care may be the only chance this nation has of avoiding a very-near term financial implosion.

If this bill isn’t stopped, one day Americans will look back at the late great former United States of America and realize that that was the anvil that broke the camel’s back.

AEI Article: How Fannie And Freddie Blew Up The Economy

January 23, 2010

Below is a very good article that everyone should read to better understand why the economy imploded in 2008: it was as a result of literally decades of risky and in frankly socialist decisions implemented primarily by GSEs Fannie Mae and Freddie Mac.

But allow me to say a few words before getting to the full article.

I compiled the following to respond to the typical liberal charge that “the economic collapse in 2008 was Bush’s fault”:

The Democrat Party/lamestream media narrative is that Bush was responsible for the economic meltdown because it “happened during his watch.” There was never once a mention that it happened during Nancy Pelosi’s and Harry Reid’s watch. Because that particular narrative doesn’t fit their leftist agenda.

I can very easily explain why Democrats were the primary cause of the 2008 collapse.

I can even give you the story in video, namely an 11 minute video titled “Burning Down the House: What Caused Our Economic Crisis?”

Or how about watching John Stossel explain what happened in a 5 1/2 minute ABC 20/20 piece?

Do you really want to know the true origins of the financial collapse? Then please do a little reading and start learning. The mortgage market collapsed in 2008 because of its biggest player: Fannie Mae, which held some 60% of the mortgages. And Democrats were entirely behind the policies that led to the collapse of Fannie Mae and the private mortgage industry that bought Fannie’s mortgage-backed securities. Investors were falsely led to believe that the bonds they were buying were guaranteed implicitly by the federal government.

Here are the words of Mortimer Zuckerman – a liberal, an Obama supporter, a billionaire, a trustee of the Council on Foreign Relations, and the owner of a couple major news sources:

What about Fannie Mae and Freddie Mac that got there with the support of the Democrats in Congress. That’s what kicked off the great housing bubble; that’s what started this whole thing rolling down the hill. Did they ever talk about that kind of excess in the congress? No…..this isn’t something that is just due to the “Wall Street community”.

George Bush called for reform of the housing finance market 17 times in 2008 alone — and Democrats ignored him. They had been blocking his every effort to prevent disaster ever since Bush first tried to do so beginning in 2003. At that time, Democrat Barney Frank led the effort to block reform, saying:

These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

George Bush and John McCain repeatedly warned that if we didn’t address the situation, we would suffer a financial collapse.

John McCain wrote an urgent letter in 2006 that read:

These are entities that have demonstrated over and over again that they are deeply in need of reform. For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac—known as Government-sponsored entities or GSEs—and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns.

In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay. I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

John McCain signed another letter that ended with these words:

With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

Substantial testimony calling for improved regulation of the GSEs has been provided to the Senate by the Treasury, Federal Reserve, HUD, GAO, CBO, and others. Congress has the opportunity to recommit itself to the housing mission of the GSEs while at the same time making sure the GSEs operate in a manner that does not expose our financial system, or taxpayers, to unnecessary risk. It is vitally important that Congress take the necessary steps to ensure that these institutions benefit from strong and independent regulatory supervision, operate in a safe and sound manner, and are primarily focused on their statutory mission. More importantly, Congress must ensure that the American taxpayer is protected in the event either GSE should fail. We strongly support an effort to schedule floor time this year to debate GSE regulatory reform.

And they DID fail. They massively, massively failed.

Only about a month before the whole system crashed, Barney Frank went on the record and said this:

REP. BARNEY FRANK, D-MASS.: “I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.”

They sure were, you fat, miserable, loathsome, obscene, disgusting, slobbering, lying toad.

The top three headlines under the Google search “Fannie Mae collapse”:

Freddie, Fannie Scam Hidden in Broad Daylight

Financial Markets Reeling from Fannie & Freddie Collapse and Evitable Government Bailout

Fannie Mae and Freddie Mac: Too big not to fail

But as our economy exploded along with the boondoggle housing finance market artificially sustained by Fannie and Freddie, the Democrats demagogued the Republicans. And the lamestream media duly reported it as though it were all the liberal’s-god-socialist-big-government’s truth.

So to answer your question, it was DEMOCRATS who led us into this mess. Just as it is DEMOCRATS who are now making the mess far worse.

I would point out in addition that Republicans deserve condemnation because they lacked the political courage and the political will to oppose enormously risky Democrat policies rather than face the demagoguery that they were “racist” for not allowing low-income minorities to own their own homes.  So they allowed the Democrats to keep expanding the Community Reinvestment Act, and allowed them to keep expanding the portfolio of Government Supported Enterprises Fannie Mae and Freddie Mac.

The following AEI article from Peter Wallison and Charles Calomiris is also available as a PDF file.

The Last Trillion-Dollar Commitment
The Destruction of Fannie Mae and Freddie Mac

By Peter J. Wallison, Charles W. Calomiris  |  AEI Online
(September 2008)

The government takeover of Fannie and Freddie was necessary because of their massive losses on more than $1 trillion of subprime and Alt-A investments.

The government takeover of Fannie Mae and Freddie Mac was necessary because of their massive losses on more than $1 trillion of subprime and Alt-A investments, almost all of which were added to their single-family book of business between 2005 and 2007. The most plausible explanation for the sudden adoption of this disastrous course–disastrous for them and for the U.S. financial markets–is their desire to continue to retain the support of Congress after their accounting scandals in 2003 and 2004 and the challenges to their business model that ensued. Although the strategy worked–Congress did not adopt strong government-sponsored enterprise (GSE) reform legislation until the Republicans demanded it as the price for Senate passage of a housing bill in July 2008–it led inevitably to the government takeover and the enormous junk loan losses still to come.

Now that the federal government has been required to take effective control of Fannie and Freddie and to decide their fate, it is important to understand the reasons for their financial collapse–what went wrong and why. In his statement on September 7 announcing the appointment of a conservator for the two enterprises, Treasury Secretary Henry M. Paulson pointed to their failed business models as the reason for their collapse. This was certainly a contributing element, but not the direct cause. The central problem was their dependence on Congress for continued political support in the wake of their accounting scandals in 2003 and 2004. To curry favor with Congress, they sought substantial increases in their support of affordable housing, primarily by investing in risky and substandard mortgages between 2005 and 2007.

As GSEs, Fannie and Freddie were serving two masters in two different ways. The first was an inherent conflict between their government mission and their private ownership. The government mission required them to keep mortgage interest rates low and to increase their support for affordable housing. Their shareholder ownership, however, required them to fight increases in their capital requirements and regulation that would raise their costs and reduce their risk-taking and profitability. But there were two other parties–Congress and the taxpayers–that also had a stake in the choices that Fannie and Freddie made. Congress got some benefits in the form of political support from the GSEs’ ability to hold down mortgage rates, but it garnered even more political benefits from GSE support for affordable housing. The taxpayers got highly attenuated benefits from both affordable housing and lower mortgage rates but ultimately faced enormous liabilities associated with GSE risk-taking. This Outlook tells the disheartening story of how the GSEs sold out the taxpayers by taking huge risks on substandard mortgages, primarily to retain congressional support for the weak regulation and special benefits that fueled their high profits and profligate executive compensation. As if that were not enough, in the process, the GSEs’ operations promoted a risky subprime mortgage binge in the United States that has caused a worldwide financial crisis.

The special relationship with Congress was the GSEs’ undoing because it allowed them to escape the market discipline–the wariness of lenders–that keeps corporate managements from taking unacceptable risks.

The peculiar structure of the GSEs–shareholder-owned companies with a public mission–reflected a serious confusion of purpose on the part of the Lyndon Johnson administration and the members of Congress who created this flawed structure in 1968. In seeking to reduce the budget deficits associated with the Vietnam War and Great Society programs, the administration hit upon the idea of “privatizing” Fannie Mae by allowing the company to sell shares to the public. This, according to the budget theories of the time, would take Fannie’s expenditures off-budget, while allowing it to continue its activities with funds borrowed in the public credit markets. But turning Fannie into a wholly private company was not acceptable either. Various special provisions were placed in Fannie’s congressional charter that intentionally blurred the line between a public instrumentality and a private corporation. Among these provisions: Fannie was given a line of credit at the Treasury; the president could appoint five members of its board of directors; and its debt could be used, like Treasury debt, to collateralize government deposits in private banks.

Fannie’s congressional charter and its unusual ties to the government ensured that the market would recognize its status as a government instrumentality: that despite its private ownership, the company was performing a government mission. Because it was highly unlikely that the U.S. government would allow one of its instrumentalities to default on its obligations, Fannie was perceived in the capital markets to have at least an implicit government backing and was thus able to borrow funds at rates that were only slightly higher than those paid by the U.S. Treasury on its own debt offerings. In 1970, the Federal Home Loan Bank Board created Freddie Mac to assist federal savings and loan associations in marketing their mortgages; Freddie was also allowed to sell shares to the public in 1989 and became a competitor of Fannie Mae under a congressional charter that established an identical special relationship with the government.

The special relationship, codified by these unique charters, required the GSEs to pursue another inherently conflicted mission that pitted their shareholders against the taxpayers. To the extent that their government backing allowed the GSEs to take excessive financial risks, it was the taxpayers and not the shareholders who would ultimately bear the costs. That result–the privatization of profit and the socialization of risk–has now come to pass. U.S. taxpayers are now called upon to fill in the hole that reckless and improvident investment activity–fueled by inexpensive and easily accessible funds–has created in the GSEs’ balance sheets. The special relationship was also the GSEs’ undoing, because it allowed them to escape the market discipline–the wariness of lenders–that keeps corporate managements from taking unacceptable risks. Normally, when a privately held company is backed by the government (for example, in the case of commercial banks covered by the Federal Deposit Insurance Corporation), regulation is the way that the government protects the taxpayers against the loss of market discipline. When Fannie Mae was privatized in 1968, however, no special regulatory structure was created to limit the taxpayers’ exposure to loss. The Johnson administration officials who structured the privatization may not have realized that they were creating what we recognize today as a huge moral hazard, but when Fannie became insolvent (the first time) in the high-interest-rate environment of the early 1980s, policymakers recognized that the company represented a potential risk to taxpayers.

In 1991, as Congress finally began the process of developing a regulatory regime for the GSEs, congressional interest in supporting affordable housing was growing. At this point, Fannie Mae initiated its first foray into affordable housing–a relatively small $10 billion program, probably intended to show Congress that the GSEs would support affordable housing without a statutory mandate. Nevertheless, Congress added an affordable housing “mission” to the GSE charters when it created their first full-time regulator, the Office of Federal Housing Enterprise Oversight (OFHEO). The new agency had only limited regulatory authority. It was also housed in the Department of Housing and Urban Development (HUD), which had no regulatory experience, and it was funded by congressional appropriations, allowing the GSEs to control their regulator through the key lawmakers who held OFHEO’s purse strings.

The new affordable housing mission further increased the congressional policy stake in the GSEs, but it also initiated a destructive mutual dependency: Congress began to rely on Fannie and Freddie for political and financial support, and the two GSEs relied on Congress to protect their profitable special privileges. In later years, attention to the political interests of Congress became known at the GSEs as “management of political risk.” In a speech to an investor conference in 1999, Franklin Raines, then Fannie’s chairman, assured them that “[w]e manage our political risk with the same intensity that we manage our credit and interest rate risks.”[1]

Benefits to Congress

Managing their political risk required the GSEs to offer Congress a generous benefits package. Campaign contributions were certainly one element. Between the 2000 and 2008 election cycles, the GSEs and their employees contributed more than $14.6 million to the campaign funds of dozens of senators and representatives, most of them on committees that were important to preserving the GSEs’ privileges.[2] And Fannie knew how to “leverage” its giving, not just its assets; often it enlisted other groups that profited from the GSEs’ activities–the securities industry, homebuilders, and realtors–to sponsor their own fundraising events for the GSEs’ key congressional friends. In addition to campaign funds, the GSEs–Fannie Mae in particular–enhanced their power in Congress by setting up “partnership offices” in the districts and states of important lawmakers, often hiring the relatives of these lawmakers to staff the local offices. Their lobbying activities were legendary. Between 1998 and 2008, Fannie spent $79.5 million and Freddie spent $94.9 million on lobbying Congress, making them the twentieth and thirteenth biggest spenders, respectively, on lobbying fees during that period.[3] Not all of these expenditures were necessary to contact members of Congress; the GSEs routinely hired lobbyists simply to deprive their opponents of lobbying help. Since lobbyists are frequently part of lawmakers’ networks–and are often former staffers for the same lawmakers–these lobbying expenditures also encouraged members of Congress to support Fannie and Freddie as a means of supplementing the income of their friends.

The failure to adopt meaningful GSE reform in 2005 was a crucial missed opportunity.

In the same vein, Fannie and Freddie hired dozens of Washington’s movers and shakers–at spectacular levels of compensation–to sit on their boards, lobby Congress, and in general help them to manage their political risk. (An early account of this effort was an article entitled “Crony Capitalism: American Style” that appeared in The International Economy in 1999.[4] A later version of the same point was made in Investor’s Business Daily nine years later.[5]) The GSEs also paid for academic research to assure the public that the GSE mission was worthwhile and that the GSEs posed minimal risks to taxpayers. For example, Nobel laureate Joseph Stiglitz coauthored an article in 2002 purporting to show that the risk of GSE default producing taxpayer loss was “effectively zero.”[6]

One of the most successful efforts to influence lawmakers came through community groups. Both Fannie and Freddie made “charitable” or other gifts to community groups, which could then be called upon to contact the GSEs’ opponents in Congress and protest any proposed restrictions on the activities or privileges of the GSEs. GSE supporters in Congress could also count on these groups to back them in their reelection efforts.

But these activities, as important as they were in managing the GSEs’ political risks, paled when compared to the billions of dollars the GSEs made available for spending on projects in the congressional districts and states of their supporters. Many of these projects involved affordable housing. In 1994, Fannie Mae replaced its initial $10 billion program with a $1 trillion affordable housing initiative, and both Fannie and Freddie announced new $2 trillion initiatives in 2001.[7] It is not clear to what extent the investments made in support of these commitments were losers–the GSEs’ profitability over many years could cover a multitude of sins–but it is now certain that the enormous losses associated with the risky housing investments appearing on Fannie and Freddie’s balance sheet today reflect major and imprudent investments in support of affordable housing between 2005 and 2007–investments that ultimately brought about the collapse of Fannie and Freddie.

Even if the earlier affordable housing projects were not losers, however, they represented a new and extra-constitutional way for Congress to dispense funds that should otherwise have flowed through the appropriations process. In one sense, the expenditures were a new form of earmark, but this earmarking evaded the constitutional appropriations process entirely. An illustration is provided by a press release from the office of Senator Charles E. Schumer (D-N.Y.), one of the most ardent supporters of the GSEs in Congress. The headline on the release, dated November 20, 2006–right in the middle of the GSEs’ affordable housing spending spree–was “Schumer Announces up to $100 Million Freddie Mac Commitment to Address Fort Drum and Watertown Housing Crunch.” The subheading continued: “Schumer Unveils New Freddie Mac Plan with HSBC That Includes Low-Interest Low-Downpayment Loans. In June, Schumer Urged Freddie Mac and Fannie Mae Step Up to the Plate and Deliver Concrete Plans–Today Freddie Mac Is Following Through.”[8] If this project had been economically profitable for Fannie or Freddie, Schumer would not have had to “urge” them to “step up.” Instead, using his authority as a powerful member of the Senate Banking Committee–and a supporter of Fannie and Freddie–he appears to have induced Freddie Mac to make a financial commitment that was very much in his political interests but for which the taxpayers of the United States would ultimately be responsible.

Of course, Schumer was only one of many members of Congress who used his political leverage to further his own agenda at taxpayer expense and outside the appropriations process. The list of friends of Fannie and Freddie changed over time; while the GSEs enjoyed broad bipartisan support in the 1990s, over the past decade, they have become increasingly aligned with the Democrats. This shift in the political equilibrium was especially clear in the congressional reaction to the GSEs’ accounting scandals of 2003 and 2004.

The Accounting Scandals

Fannie and Freddie reaped significant benefits from the careful management of their political risk. In June 2003, in the wake of the failures of Enron and WorldCom, Freddie’s board of directors suddenly dismissed its three top officers and announced that the company’s accountants had found serious problems in Freddie’s financial reports. In 2004, after a forensic audit by OFHEO, even more serious accounting manipulation was found at Fannie, and Raines, its chairman, and Timothy Howard, its chief financial officer, were compelled to resign.

It is eloquent testimony to the power of Fannie and Freddie in Congress that even after these extraordinary events there was no significant effort to improve or enhance the powers of their regulator. The House Financial Services Committee developed a bill that was so badly weakened by GSE lobbying that the Bush administration refused to support it. The Senate Banking Committee, then under Republican control, adopted much stronger legislation in 2005, but unanimous Democratic opposition to the bill in the committee doomed it when it reached the floor. Without any significant Democratic support, debate could not be ended in the Senate, and the bill was never brought up for a vote. This was a crucial missed opportunity. The bill prohibited the GSEs from holding portfolios of mortgages and mortgage-backed securities (MBS); that measure alone would have prevented the disastrous investment activities of the GSEs in the years that followed. GSE immunity to accounting scandal is especially remarkable when it is recalled that after accounting fraud was found at Enron (and later at WorldCom), Congress adopted the punitive Sarbanes-Oxley Act, which imposed substantial costs on every public company in the United States. The GSEs’ investment in controlling their political risk–at least among the Democrats–was apparently money well spent.

Nevertheless, the GSEs’ problems were mounting quickly. The accounting scandal, although contained well below the level of the Enron story, gave ammunition to GSE critics inside and outside of Congress. Alan Greenspan, who in his earlier years as Federal Reserve chairman had avoided direct criticism of the GSEs, began to cite the risks associated with their activities in his congressional testimony. In a hearing before the Senate Banking Committee in February 2004, Greenspan noted for the first time that they could have serious adverse consequences for the economy. Referring to the management of interest rate risk–a key risk associated with holding portfolios of mortgages or MBS–he said:

To manage this risk with little capital requires a conceptually sophisticated hedging framework. In essence, the current system depends on the risk managers at Fannie and Freddie to do everything just right, rather than depending on a market-based system supported by the risk assessments and management capabilities of many participants with different views and different strategies for hedging risks.[9]

Then, and again for the first time, Greenspan proposed placing some limit on the size of the GSEs’ portfolios. Greenspan’s initial idea, later followed by more explicit proposals for numerical limits, was to restrict the GSEs’ issuance of debt. Although he did not call for an outright reduction in the size of the portfolios, limiting the issuance of debt amounts to the same thing. If the GSEs could not issue debt beyond a certain amount, they also could not accumulate portfolios. Greenspan noted:

Most of the concerns associated with systemic risks flow from the size of the balance sheets that these GSEs maintain. One way Congress could constrain the size of these balance sheets is to alter the composition of Fannie and Freddie’s mortgage financing by limiting the dollar amount of their debt relative to the dollar amount of mortgages securitized and held by other investors. . . . [T]his approach would continue to expand the depth and liquidity of mortgage markets through mortgage securitization but would remove most of the potential systemic risks associated with these GSEs.[10]

This statement must have caused considerable concern to Fannie and Freddie. Most of their profits came from issuing debt at low rates of interest and holding portfolios of mortgages and MBS with high yields. This was a highly lucrative arrangement; limiting their debt issuance would have had a significant adverse effect on their profitability.

In addition, in January 2005, only a few months after the adverse OFHEO report on Fannie’s accounting manipu-lation, three Federal Reserve economists published a study that cast doubt on whether the GSEs’ activities had any significant effect on mortgage interest rates and concluded further that holding portfolios–a far risker activity than issuing MBS–did not have any greater effect on interest rates than securitization: “We find that both portfolio purchases and MBS issuance have negligible effects on mortgage rate spreads and that purchases are not any more effective than securitization at reducing mortgage interest rate spreads.”[11] Thus, the taxpayer risks cited by Greenspan could not be justified by citing lower mortgage rates, and, worse, there was a strong case for limiting the GSEs to securitization activities alone–a much less profitable activity than holding MBS.

The events in 2003 and 2004 had undermined the legitimacy of the GSEs. They could no longer claim to be competently–or even honestly–managed. An important and respected figure, Alan Greenspan, was raising questions about whether they might be creating excessive risk for taxpayers and systemic risk for the economy as a whole. Greenspan had suggested that their most profitable activity–holding portfolios of mortgages and MBS–was the activity that created the greatest risk, and three Federal Reserve economists had concluded that the GSEs’ activities did not actually reduce mortgage interest rates. It was easy to see at this point that their political risk was rising quickly. The case for continuing their privileged status had been severely weakened. The only element of their activities that had not come under criticism was their affordable housing mission, and it appears that the GSEs determined at this point to play that card as a way of shoring up their political support in Congress.

From the perspective of their 2008 collapse, this may seem to have been unwise, but in the context of the time, it was a shrewd decision. It provided the GSEs with the potential for continuing their growth and delivered enormous short-term profits. Those profits were transferred to stockholders in huge dividend payments over the past three years (Fannie and Freddie paid a combined $4.1 billion in dividends last year alone) and to managers in lucrative salaries and bonuses. Indeed, if it had not been for the Democrats’ desire to adopt a housing relief bill before leaving for the 2008 August recess, no new regulatory regime for the GSEs would have been adopted at all. Only the Senate Republicans’ position–that there would be no housing bill without GSE reform–overcame the opposition of Senators Christopher Dodd (D-Conn.), the banking committee chairman, and Schumer.

The GSEs’ confidence in the affordable housing idea was bolstered by what appears to be a tacit understanding. Occasionally, this understanding found direct expression. For example, in his opening statement at a hearing in 2003, Representative Barney Frank (D-Mass.), now the chairman of the House Financial Services Committee, referred to an “arrangement” between Congress and the GSEs that tracks rather explicitly what actually happened: “Fannie and Freddie have played a very useful role in helping to make housing more affordable, both in general through leveraging the mortgage market, and in particular, they have a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing.”[12] So here the arrangement is laid out: if the GSEs focus on affordable housing, their position is secure.

Increased Support for Affordable Housing

Affordable housing loans and subprime loans are not synonymous. Affordable housing loans can be traditional prime loans with adequate down payments, fixed rates, and an established and adequate borrower credit history. In trying to increase their commitment to affordable housing, however, the GSEs abandoned these standards. In 1995, HUD, the cabinet-level agency responsible for issuing regulations on the GSEs’ affordable housing obligations, had ruled that the GSEs could get affordable housing credit for purchasing subprime loans. Unfortunately, the agency failed to require that these loans conform to good lending practices, and OFHEO did not have the staff or the authority to monitor their purchases. The assistant HUD secretary at the time, William Apgar, later told the Washington Post that “[i]t was a mistake. In hindsight, I would have done it differently.” Allen Fishbein, his adviser, noted that Fannie and Freddie “chose not to put the brakes on this dangerous lending when they should have.”[13] Far from it. In 1998, Fannie Mae announced a 97 percent loan-to-value mortgage, and, in 2001, it offered a program that involved mortgages with no down payment at all. As a result, in 2004, when Fannie and Freddie began to increase significantly their commitment to affordable housing loans, they found it easy to stimulate production in the private sector by letting it be known in the market that they would gladly accept loans that would otherwise be considered subprime.

Although Fannie and Freddie were building huge exposures to subprime mortgages from 2005 to 2007, they adopted accounting practices that made it difficult to detect the size of those exposures. Even an economist as seemingly sophisticated as Paul Krugman was misled. He wrote in his July 14, 2008, New York Times column that

Fannie and Freddie had nothing to do with the explosion of high-risk lending. . . . In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble. . . . Partly that’s because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn’t do any subprime lending, because they can’t . . . by law. . . . So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works.[14]

Here Krugman demonstrates confusion about the law (which did not prohibit subprime lending by the GSEs), misunderstands the regulatory regime under which they operated (which did not have the capacity to control their risk-taking), and mismeasures their actual subprime exposures (which he wrongly states were zero). There is probably more to this than lazy reporting by Krugman; the GSE propaganda machine purposefully misled people into believing that it was keeping risk low and operating under an adequate prudential regulatory regime.

One of the sources of Krugman’s confusion may have been Fannie and Freddie’s strange accounting conventions relating to subprime loans. There are many defi-nitions of a subprime loan, but the definition used by U.S. bank regulators is any loan to a borrower with damaged credit, including such objective criteria as a FICO credit score lower than 660.[15] In their public reports, the GSEs use their own definitions, which purposely and significantly understate their commitment to subprime loans–the mortgages with the most political freight. For example, they disclose the principal amount of loans with FICO scores of less than 620, leaving the reader to guess how many loans fall into the category of subprime because they have FICO scores of less than 660. In these reports, too, Alt-A loans–which include loans with little or no income or other documentation and other deficiencies–are differentiated from subprime loans, again reducing the size of the apparent GSE commitment to the subprime category. These distinctions, however, are not very important from the perspective of realized losses in the subprime and Alt-A categories; loss rates are quite similar for both, even though they are labeled differently. In its June 30, 2008, Investor Summary report, Fannie notes that credit losses on its Alt-A portfolio were 49.6 percent of all the credit losses on its $2.7 trillion single-family loan book of business.[16] Fannie’s disclosures indicate that when all subprime loans (including Alt-A) are aggregated, at least 85 percent of its losses are related to its holdings of both subprime and Alt-A loans. They are all properly characterized as “junk loans.”

Beginning in 2004, after the GSEs’ accounting scandals, the junk loan share of all mortgages in the United States began to rise, going from 8 percent in 2003 to about 18 percent in 2004 and peaking at about 22 percent in the third quarter of 2006. It is likely that this huge increase in commitments to junk lending was largely the result of signals from Fannie and Freddie that they were ready to buy these loans in bulk. For example, in speeches to the Mortgage Bankers Association in 2004, both Raines and Richard Syron–the chairmen, respectively, of Fannie and Freddie–“made no bones about their interest in buying loans made to borrowers formerly considered the province of nonprime and other niche lenders.”[17] Raines is quoted as saying, “We have to push products and opportunities to people who have lesser credit quality.”

There are few data available publicly on the dollar amount of junk loans held by the GSEs in 2004, but according to their own reports, GSE purchases of these mortgages and MBS increased substantially between 2005 and 2007. Subprime and Alt-A purchases during this period were a higher share of total purchases than in previous years. For example, Fannie reported that mortgages and MBS of all types originated in 2005–2007 comprised 49.8 percent of its overall book of single-family mortgages, which includes both mortgages and MBS retained in their portfolio as well as mortgages they securitized and guaranteed. But the percentage of mortgages with subprime characteristics purchased during this period consistently exceeded 49.8 percent, demonstrating that Fannie was substantially increasing its reliance on junk loans between 2005 and 2007. For example, in its 10-Q Investor Summary report for the quarter ended June 30, 2008, Fannie reported that mortgages with subprime characteristics comprised substantial percentages of all 2005–2007 mortgages the company acquired, as shown in table 1. Based on these figures, it is likely that as much as 40 percent of the mortgages that Fannie Mae added to its single-family book of business during 2005–2007 were junk loans.

If we add up all these categories and eliminate double counting, it appears that on June 30, 2008, Fannie held or had guaranteed subprime and Alt-A loans with an unpaid principal balance of $553 billion. In addition, according to the same Fannie report, the company also held $29.5 billion of Alt-A loans and $36.3 billion of subprime loans that it had purchased as private label securities (non-GSE or Ginnie Mae securities).[18] These figures amount to a grand total of $619 billion–approximately 23 percent of Fannie’s book of single-family business on June 30, 2008–and reflect a huge commitment to the purchase of mortgages of questionable quality between 2005 and 2007.

Freddie Mac also published a report on its subprime and Alt-A mortgage exposures as of August 2008. Freddie’s numbers were not as detailed as Fannie’s, but the company reported that 52 percent of its entire single-family credit guarantee portfolio was from book years 2005–2007 (slightly more than Fannie) and that these mortgages had subprime characteristics, as shown in table 2. Based on these figures, it appears that as much as 40 percent of the loans that Freddie Mac added to its book of single-family mortgage business during 2005–2007 also consisted of junk loans.

Freddie’s disclosures did not contain enough detail to eliminate all of the double counting, so it is not possible to estimate the total amount of its subprime loans from the information it reported. Nevertheless, we can calculate the minimum amount of Freddie’s exposure. In the same report, Freddie disclosed that $190 billion of its loans were categorized as Alt-A and $68 billion had FICO credit scores of less than 620, so that they would clearly be categorized as subprime. Based on the limited information Freddie supplied, double counting of $7.6 billion can be eliminated, so that as of August 2008, Freddie held or had guaranteed at least $258 billion of junk loans. To this must be added $134 billion of subprime and Alt-A loans that Freddie purchased from private label issuers,[19] for a grand total of $392 billion–20 percent of Freddie’s single-family portfolio of $1.8 trillion.

A New Trillion-Dollar Commitment

Between 2005 and 2007, Fannie and Freddie acquired so many junk mortgages that, as of August 2008, they held or had guaranteed more than $1.011 trillion in unpaid principal balance exposures on these loans. The losses already recognized on these exposures were responsible for the collapse of Fannie and Freddie and their takeover by the federal government, and there are undoubtedly many more losses to come. In congressional testimony on September 23, James Lockhart, the director of their new regulator, the Federal Housing Finance Agency, cited these loans as the source of the GSEs’ ultimate collapse, as reported in the Washington Post:

Fannie Mae and Freddie Mac purchased and guaranteed “many more low-documentation, low-verification and non-standard” mortgages in 2006 and 2007 “than they had in the past.” He said the companies increased their exposure to risks in 2006 and 2007 despite the regulator’s warnings.

Roughly 33 percent of the companies’ business involved buying or guaranteeing these risky mortgages, compared with 14 percent in 2005. Those bad debts on mortgages led to billions of dollars in losses at the firms. “The capacity to raise capital to absorb further losses without Treasury Department support vanished,” Lockhart said.[20]

Although a large share of the subprime loans now causing a crisis in the international financial markets are so-called private label securities–issued by banks and securitizers other than Fannie Mae and Freddie Mac–the two GSEs became the biggest buyers of the AAA tranches of these subprime pools in 2005-07.[21] Without their commitment to purchase the AAA tranches of these securitizations, it is unlikely that the pools could have been formed and marketed around the world. Accordingly, not only did the GSEs destroy their own financial condition with their excessive purchases of subprime loans in the three-year period from 2005 to 2007, but they also played a major role in weakening or destroying the solvency and stability of other financial institutions and investors in the United States and abroad.

Why Did They Do It?

Why did the GSEs follow this disastrous course? One explanation–advanced by Lockhart–is that Fannie and Freddie were competing for market share with the private label securitizers and had to purchase substantial amounts of subprime mortgages in order to retain their position in a growing market. Fannie and Freddie’s explanation is that they were the victims of excessively stringent HUD affordable housing goals. Neither of these explanations is plausible. For many years before 2004, Fannie and Freddie had followed relatively prudent investment strategies, even with respect to affordable housing, but they suddenly changed their approach in 2005. Freddie Mac’s report, for example, shows that the percentage of mortgages in its portfolio with subprime characteristics rose rapidly after 2004. Tables 1 and 2 show that for each category of mortgages with subprime characteristics, most of the portfolio of loans with those characteristics was acquired from 2005 to 2007. For example, 83.8 percent of Fannie’s and 90 percent of Freddie’s interest-only loans as of June 2008 were acquired from 2005 to 2007, and 57.5 percent of Fannie’s and 61 percent of Freddie’s loans with FICO scores of less than 620 as of June 2008 were acquired from 2005 to 2007. It seems unlikely that competing for market share or complying with HUD regulations–which contained no enforcement mechanism other than disclosure and delay in approving requests for mission expansions–could be the reason for such an obviously destructive course.

Instead, it seems likely that the event responsible for the GSEs’ change in direction and culture was the accounting scandal that each of them encountered in 2003 and 2004. In both cases, they lost their reputation as well-managed companies and began to encounter questions about their contribution to reducing mortgage rates and their safety and soundness. Serious observers questioned whether they should be allowed to continue to hold mortgages and MBS in their portfolios–by far their most profitable activity–and Senate Republicans moved a bill out of committee that would have prohibited this activity.

Under these circumstances, the need to manage their political risk became paramount, and this required them to prove to their supporters in Congress that they still served a useful purpose. In 2003, as noted above, Frank had cited an arrangement in which the GSEs’ congressional benefits were linked to their investments in affordable housing. In this context, substantially increasing their support for affordable housing–through the purchase of the subprime loans permitted by HUD–seems a logical and even necessary tactic.

Unfortunately, the sad saga of Fannie and Freddie is not over. Some of their supporters in Congress prefer to blame the Fannie and Freddie mess on deregulation or private market failure, perhaps hoping to use such false diagnoses to lay the groundwork for reviving the GSEs for extra constitutional expenditure and political benefit in the future. As the future of the GSEs is debated over the coming months and years, it will be important to remember how and why Fannie and Freddie failed. The primary policy objective should be to prevent a repeat of this disaster by preventing the restoration of the GSE model.

Peter J. Wallison (pwallison@aei.org) is the Arthur F. Burns Fellow in Financial Policy Studies at AEI. Charles W. Calomiris (cc374@columbia.edu) is a visiting scholar at AEI and the Henry Kaufman Professor of Financial Institutions at Columbia Business School.

Messrs. Wallison and Calomiris wish to thank Edward Pinto, a former chief credit officer of Fannie Mae, for his assistance in deciphering the GSEs’ descriptions of their mortgage exposures. AEI research assistant Karen Dubas worked with the authors to produce this Financial Services Outlook.

Download file Click here to view this Outlook as an Adobe Acrobat PDF.

Notes

1. Quoted in Niles Steven Campbell, “Fannie Mae Officials Try to Assuage Worried Investors,” Real Estate Finance Today, May 10, 1999. See also Binyamin Appelbaum, Carol D. Leonnig, and David S. Hilzenrath, “How Washington Failed to Rein In Fannie, Freddie,” Washington Post, September 14, 2008.

2. Common Cause, “Ask Yourself Why . . . They Didn’t See This Coming,” September 24, 2008, available at www.commoncause.org/site/pp.asp?c=dkLNK1MQIwG&b=4542875 (accessed September 29, 2008).

3. Center for Responsive Politics, “Lobbying: Top Spenders,” 2008, available at www.opensecrets.org/lobby/top.php?indexType=s (accessed September 26, 2008).

4. Owen Ullmann, “Crony Capitalism: American Style,” The International Economy (July/August 1999): 6.

5. Terry Jones, “‘Crony’ Capitalism Is Root Cause of Fannie and Freddie Troubles,” Investor’s Business Daily, September 22, 2008.

6. Joseph E. Stiglitz, Jonathan M. Orszag, and Peter R. Orszag, “Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard,” Fannie Mae Papers 1, no. 2 (March 2002), available at www.sbgo.com/Papers/fmp-v1i2.pdf (accessed September 29, 2008). Interestingly, Stiglitz today is an outspoken critic of GSE risk-taking. According to Stiglitz, GSE risk-taking was a predictable consequence of the structure of the GSEs and their financial structure and compensation schedules. “We should not be worried about [GSE] shareholders losing their investments. In earlier years, they were amply rewarded. The management remuneration packages that they approved were designed to encourage excessive risk-taking. They got what they asked for. Nor should we be worried about creditors losing their money. Their lack of supervision fuelled the housing bubble and we are now all paying the price.” (Joseph Stiglitz, “Fannie’s and Freddie’s Free Lunch,” Financial Times, July 24, 2008.)

7. Funding Universe, “Fannie Mae–Company History,” available at www.fundinguniverse.com/company-histories/Fannie-Mae-Company-History.html (accessed September 29, 2008); Funding Universe, “Freddie Mac–Company History,” available at www.fundinguniverse.com/company-histories/Freddie-Mac-Company-History.html (accessed September 29, 2008); and Business Wire, “Fannie Mae’s $2 Trillion ‘American Dream Commitment’ on Course with Over $190 Billion in Targeted Lending,” news release, March 14, 2001, avail-able at http://findarticles.com/p/articles/mi_m0EIN/is_2001_March_14/ai_71707186/ (accessed September 29, 2008).

8. Office of Senator Charles E. Schumer, “Schumer Announces up to $100 Million Freddie Mac Commitment to Address Fort Drum and Watertown Housing Crunch,” news release, November 20, 2006, available at www.senate.gov/~schumer/SchumerWebsite/pressroom/record.cfm?id=266131 (accessed September 29, 2008).

9. Alan Greenspan, “Proposals for Improving the Regulation of the Housing Government Sponsored Enterprises” (testimony, Committee on Banking, Housing and Urban Affairs, U.S. Senate, 108th Cong., 1st sess., February 24, 2004), available at www.federalreserve.gov/boarddocs/testimony/2004/20040224/ default.htm (accessed September 29, 2008).

10. Ibid.

11. Andreas Lehnert, Wayne Passmore, and Shane M. Sherlund, “GSEs, Mortgage Rates and Secondary Market Activities” (Finance and Economic Discussion Series 2005-07, Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, Washington, DC, January 12, 2005), 1, available at www.federalreserve.gov/Pubs/feds/2005/200507/200507pap.pdf (accessed September 29, 2008).

12. Quoted in Gerald Prante, “Barney Frank on Fannie Mae and Freddie Mac in 2003,” Tax Policy Blog, September 17, 2008, available at www.taxfoundation.org/blog/show/23617.html (accessed September 29, 2008).

13. Carol D. Leonnig, “How HUD Mortgage Policy Fed the Crisis,” Washington Post, June 10, 2008.

14. Paul Krugman, “Fannie, Freddie and You,” New York Times, July 14, 2008.
15. Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, Office of Thrift Supervision, “Expanded Guidance for Subprime Lending Programs,” 2001, available at www.federalreserve.gov/Boarddocs/SRletters/2001/sr0104a1.pdf (accessed September 29, 2008).

16. Fannie Mae, “2008 Q2 10-Q Investor Summary,” August 8, 2008, available at www.fanniemae.com/media/pdf/newsreleases/2008_Q2_10Q_Investor_Summary.pdf (accessed September 29, 2008).

17. Neil Morse, “Looking for New Customers,” Mortgage Banking, December 1, 2004.

18. Fannie Mae, “2008 Q2 10-Q Investor Summary,” 20.

19. Freddie Mac, “Freddie Mac Update,” August 2008, 30, available at www.freddiemac.com/investors/pdffiles/investor-presentation.pdf (accessed September 29, 2008).

20. Zachary A. Goldfarb, “Affordable-Housing Goals Scaled Back,” Washington Post, September 24, 2008.

21. James Lockhart, “Reforming the Regulation of the Government Sponsored Enterprises” (testimony, Committee on Banking, Housing and Urban Affairs, U.S. Senate, 110th Cong., 2nd sess., February 7, 2008), 6, available at www.ofheo.gov/media/testimony/2708LockharttestimonyWeb.pdf (accessed September 29, 2008).

The economic implosion of our economy due to Fannie and Freddie’s losses continues.  From an AP article published Friday, January 22:

The two companies, which have been run by the government since they almost collapsed in September 2008, have required $111 billion in federal aid to stay afloat. Late last year the Obama administration pledged to cover unlimited losses through 2012 for both companies, lifting an earlier cap of $400 billion.

The “unlimited losses” amounts to an EXPANSION from the $800 BILLION that Congress was going to authorize.  Which is even more than the $787 billion stimulus, which was the largest government outlay in the history of the human race until the black hole of Fannie Mae and Freddie Mac beat it out.

It’s time to learn the truth.

With Eyes Finally Wide-Open, Reconsider Why The Economy Collapsed In The First Place

December 31, 2009

We are now able to see that from the very beginning of the Obama administration, the Republican Party has again and again demonstrated that they were completely right and Democrats were completely wrong.  Whether you look at the stimulus, cap-and-trade, bogus climate change claims, health care, or terrorism, Americans now solidly agree that Republicans were represent the people; and that Democrats do NOT represent the people.

Right now, a solid plurality of Americans thinks the stimulus (that 99% of Republicans voted against) harmed the economy.  And the people are starting to realize what an ideological partisan slush fund the stimulus was (also predicted by Republicans).

When Obama was elected, unemployment was at 6.6%.  He promised that his stimulus would prevent unemployment from reaching 8%.  And now it’s at 10%, and it’s going to get higher.

Obama demagogued Bush’s spending.  But Bush deficits -bad as they were – were only 2-3% of GDP.  Obama’s deficits are 12.8% of GDP – which is five to six times higher.

Now that your eyes are finally beginning to open wide and see Obama and the Democrats for who and what they truly are, let me point out a few things about the past collapse.

What Americans – and particularly Americans who actually vote – need to realize is that Democrats were trying to do this kind of crap and play these kind of games all along.  They were trying to do it throughout the Bush years, when George Bush tried 17 times to regulate the out of control and Fannie-Mac-and-Freddie-Mae-dominated housing mortgage markets – and Democrats thwarted him over and over again.

Why do I mention the Government Supported Enterprises (GSEs) Fannie Mae and Freddie Mac?  Because they were at the very heart of the mortgage meltdown.

The LA Times writes on May 31, 1999 that:

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . .

LaVaughn M. Henry, Ph.D. Director, U.S. Economic Analysis The PMI Group, Inc. December 9, 2008, pointed out:

The Role of the GSEs is to provide liquidity and stability to the U.S. housing and mortgage markets. Step 1 Banks lend money to Households to purchase and refinance home mortgages Step 2 The GSEs purchase these mortgage from the banks Step 3 GSEs bundle the mortgages into mortgage-backed securities Step 4 GSEs sell mortgage-backed and debt securities to domestic and international capital investors Step 5 Investors pay GSEs for purchase of debt and securities Step 6 GSEs return funds to banks to lend out again for the issuance of new mortgage loans.

It was steps 3-5 that messed us up.  Fannie and Freddie bought mortgages – including many mortgages that poor and minority homeowners couldn’t begin to afford under the mandate of the Community Reinvestment Act – bundled them such that no one could assess their risk, and then sold them to private companies such as Bear Stearns and Lehman Brothers.  Fannie and Freddie were exempt from SEC [Securities and Exchange Commission] regulations.   The GSEs could bundle up mortgages, which would then be rated AAA, with no requirement to make clear what was in the bundle.  Private companies believed that the bundled securities were guaranteed, since they were essentially being sold by the federal government.

But there were many who predicted that this system – created and maintained by Democrats – could explode.

From the New York Times in September 30, 1999:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.“

”From the perspective of many people, including me, this is another thrift industry growing up around us,”
said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.” . . .

And that is precisely what happened.  There was a downturn (and there will ALWAYS be downturns, won’t there?), and Fannie and Freddie were so leveraged that they collapsed and caused the collapse of the entire industry.  Financial experts anxiously pointed out that a decline of only 1.3% would bankrupt Fannie and Freddie because they were leveraged to the tune of 60%? to 78%.

Democrats were the priests and acolytes of the GSE system.  They protected it, and they were the ones who pressed all the buttons and pulled all the levers.

Keven Hasset concludes an article titled, “How the Democrats Created the Financial Crisis“, concludes by saying:

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons.  Fannie and Freddie provided mounds of materials defending their practices.  Perhaps some found their propaganda convincing.

Watch this video showing how Goerge Bush and John McCain repeatedly warned of the economic collapse (length=4 min):

Watch this video of Democrats protecting and covering for Fannie Mae (length=8 min):

Here’s a video entitled “Burning Down the House: What Caused Our Economic Crisis?” (length=11 min)

And then we find that Barack Obama was in bed with Fannie and Freddie and their shockingly risky policies:

Who really exploded the economy in 2008, liberals or conservatives? Who do you think?  The liberal mainstream media allowed Democrats to blame George Bush simply because he was president at the time, never mentioning that the Democrats who controlled both the House and the Senate relentlessly opposed everything Bush tried to do; and it allowed Democrats to not have to account for the fact that they’d been in complete control of both the House and the Senate.  But remember that the economy went from outstanding to collapsed during the two years (2006-2008) that the Congress was under Nancy Pelosi and Harry Reid.  The unemployment rate was 4.4% when Republicans last ran Congress.  What is it now, three years of Nancy Pelosi and Harry Reid later?

Few people understand how huge Fannie and Freddie are, or how deeply burrowed they are in the mortgage industry.  But let me put it to you this way: the federal government now underwrites 9 out of 10 residential mortgages.

John McCain tried to warn us in 2006:

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

But he was ignored.

When George Bush first tried to regulate an already out-of-control liberal bastion of Fannie and Freddie, Barney Frank led the united Democrat opposition and said:

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

And just before Fannie and Freddie collapsed and brought down the entire housing mortgage industry with it creating the economic meltdown, Barney Frank – continuing to stop any regulation of Fannie and Freddie – said this:

REP. BARNEY FRANK, D-MASS.: I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.

Fannie Mae and Freddie Mac went completely bankrupt, and had to be bailed out by the government.  It had been Fannie and Freddie which had the sole authority to buy mortgages, bundle them into the mortgage-backed securities which ultimately exploded, and sell those securities to private companies (as I have already shown).  Just as it was Fannie and Freddie which had been the seller of subprime loans.

Democrats demonized and demagogued Republicans by blaming them for a mess that DEMOCRATS created.  And Republicans were to blame primarily because they didn’t do enough to stand up and courageously oppose the disaster that Democrats had created

A couple weeks ago the New York Times reported that Fannie and Freddie would get a whopping $800 billion to cover losses incurred under the Obama administration (and see another article on this $800 billion fiasco here):

Fannie Mae and Freddie Mac, which buy and resell mortgages, have used $112 billion — including $15 billion for Fannie in November — of a total $400 billion pledge from the Treasury. Now, according to people close to the talks, officials are discussing the possibility of increasing that commitment, possibly to $400 billion for each company, by year-end, after which the Treasury would need Congressional approval to extend it. Company and government officials declined to comment.

But it turned out that that was wrong.  Fannie Mae and Freddie Mac weren’t going to get $800 billion.  That won’t be nearly enough.  They are going to get an unlimited amount of funding (potentially in the trillions):

From the Wall Street Journal, December 26, 2009:

The Obama administration’s decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie MaeFreddie Mac over the next three years and stirred controversy over the holiday.

A Newsbuster article, entitled, “Relief Without Limits,” provides an excellent resource of facts and commentary on this incredible and terrifying development.

Remember the righteous outrage of Democrats and the Obama administration over the compensation of CEOs of private banks?  The Democrats don’t seem to mind when Fannie and Freddie execs get huge compensation packages.

The monster rises yet again, and larger and uglier and more dangerous than it has ever been before.  And just like the first time it collapsed, Democrats are in total control of it.  Fannie and Freddie stock went up significantly as the news was announced.  Watch it dwindle back to zero by the end of 2010.

We’re facing another tsunami of foreclosures in 2010.  And three mortgages get worse for every single one that improves.

And even uber-liberal sources like the Huffington Post are acknowledging that Obama’s policies have utterly failed:

Anatomy of a Failed Foreclosure Program (dated 12-07-09)

Just how badly is President Obama’s $75 billion foreclosure program working out? Consider these newly-released numbers: Out of every 100 homeowners who came to JPMorgan Chase for help under the program, just 15 have or will likely receive a permanent payment reduction.

What happened to the other 85? For every 100 trial plans initiated from April through September 2009 under the Home Affordable Modification Program:

  • 29 borrowers did not make all required payments under their trial plan;
  • 20 borrowers did not submit all documents required for underwriting;
  • 31 borrowers submitted all required documents but the documents did not meet HAMP underwriting standards, due to such things as missing signatures or nonstandard formats;
  • 4 borrowers were or are likely to be rejected for undisclosed reasons;
  • 1 borrower will not or is not likely to get their payment lowered.

The data comes from the prepared remarks bank officials plan to make Tuesday before the House Financial Services Committee. The testimony was posted Monday on the committee’s website.

It adds up to a brutal illustration of just how the HAMP program, which is supposed to reduce troubled homeowners’ monthly payments to 31 percent of their income, is failing.

Failing.  As in “failing grade.”  As in failed Obama presidency.

You still don’t know the half of it.  Obama’s $75 billion mortgage modification bailout is costing taxpayers an average of $870,967 PER HOUSE when the average house is worth only $177,900.

Famed analyst Meredith Whitney predicted that unemployment would rise to 13% or higher primarily due to the failure to contain the failure to deal with the mortgage industry:

Unemployment is likely to rise to 13 percent or higher and will weigh on the economy for several years, countering government efforts to stabilize the banking industry, analyst Meredith Whitney told CNBC. […]

“We underestimate how much the whole economy is dependent on the mortgage industry, and that has to change,” Whitney said. “This is what happens when you delay the inevitable. We’re buying time here, but we’re not restructuring the economy.”

Under the radar, and against the objections of Republicans that was primarily covered only by C-SPAN, Democrats implemented and then fiercely protected policies that were almost guaranteed to doom our economy.  When the meltdown finally occurred, the same Democrats who created the black hole in the first place flooded the airwaves and blamed George Bush – whom they had already vilified and brought down through unrelenting attacks using the Iraq War as their main foil.

The propaganda worked, and Barack Hussein Obama – a politician who is more beholden to corrupt and frankly un-American entities like Fannie Mae and Freddie Mac, ACORN, and the SEIU than any president in history.

And now we’re truly paying for our stupidity.

Obama is taking the same policies that imploded our economy, and multiplied them by a factor of ten.  It’s only a matter of time before his policies create a rotten floor for our economy to plunge through all over again — only this time far, far worse than before.

Someone might say, “But look, Obama is rebuilding the economy.  He’s brought back the stock market, and things are getting better.”

First of all, they really aren’t getting better, and the Dow can drop a lot faster than it can rise (history lesson: there were several rises and crashes of the stock market during the Great Depression).  And second of all, if you loan me a few billion dollars to spread around, I can temporarily bring up the production of my local economy, too.

Just don’t expect either me or Barack Hussein to repay the loan when it comes due.

Obama has been compared – and has compared himself – to FDR.  We now know that for all of FDR’s popularity, his “reforms” during the Great Depression were massive failures which actually kept the United States in depression for seven years longer than if he’d done nothing at all.

Henry Morganthau, FDR’s Treasury Secretary, said in May 1939, after nearly seven years in office:

“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong… somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot!”

In believing the propaganda and lies of the Democrats and Barack Obama, Americans may have well placed the nation in a hole that it very may well not be able to climb out of.