Epitome of Government Control

This week, Obama pushes more loans to Citigroup, more control of Chrysler, seats on the board, more government control of free enterprise and economic components. Progressively, every week government control grows. But since there is no government accountability, this “change” is imprudent at best. Government gave the economy affordable mortgages, but government is unaccountable for the tragic result, for example.

Barney Fwanks still to this day maintains that government should decree 4%, 30 year mortgages for EVERY American, with the banking industry picking up the tab. “For every” is a code word meaning “for those who cannot pay.” A bubble in housing demand will be created. We know this because it happened 4 years ago, but Barney Fwanks doesn’t recall that far back. The defaults in bad loans insisted on by government and Obama exploded that bubble, which is the singular cause of the most spectacular economic disaster in the history of man. However, the spectacular economic disaster is already forgotten, or blamed on the convenient, suddenly abundant supply of greedy CEOs, most of whom are only guilty of meeting government dictates for their quota of “affordable” mortgages without regard for risk. Time to make a new bubble, thinks Barney.

Economic genius Fwanks enlightens us (H/T: Barney Frank in 2005: What Housing Bubble? SVBOR)

The spectacular economic disaster we now endeavor to endure is the epitome of government controlled economics.

America’s Second Wake-Up Call!

[…]Do you know the real cause of the out-of-control subprime loan mess that’s creating so much fear and hurting every American? It’s not something the media or a certain political party wants you to find out. A picture is worth a thousand words, however, and we’ve made notes of key events on the chart above that you can follow as we give you some key facts.

In 1995, President Clinton mandated new regulations that coerced banks to make significantly more subprime loans to inner-city residents previously viewed as unqualified buyers in high-risk areas. Banks were rated on how well they complied and faced big fines if they didn’t do what government regulators wanted.

The government’s worst decision was allowing and encouraging banks, for the first time, to bundle these subprime loans in giant packages with prime loans. These packages were then sold to other investors as safe because they were government-sponsored by Fannie Mae and Freddie Mac.

The first of these government-encouraged packages came to market in 1997. For the banks, they were profitable because they could be sold quickly and thereby absolve the banks of any risk in the loans they made. Many subprimes were variable-rate loans made without down payments or documentation of borrowers’ incomes.

The banks could then use the money to make even more of these lower-quality, government-required loans, and Fannie Mae and Freddie Mac bought them with virtual abandon.

It evolved into a Big Government pyramid scheme with Democrats in charge of Fannie and Freddie making large political donations to Barney Frank, Chris Dodd, Barack Obama and other politicians who continually defended the anything-goes lending of the two agencies.

In short, this was yet another well-intended, Democrat-supported,government-designed and run program that failed miserably and had the usual unintended consequences.

A few more facts:

• April 2001: The Bush administration’s fiscal budget stated that the size of Fannie and Freddie was “potential problem because financial trouble of a large Government-Sponsored Enterprise could cause repercussions in financial markets, affecting federally insured entities and economic activity.”

• May 2002: The Office of Management and Budget wanted disclosure and governance principles in Bush’s 10-point plan for corporate responsibility to apply to Fannie and Freddie.

• February 2003: A federal housing oversight report warned that unexpected problems at Fannie Mae could immediately spread into financial sectors.

• September 2003: Treasury Secretary John Snow, in testimony to the House Financial Services Committee, recommended that Congress enact legislation to create new agency to regulate and supervise financial activities of housing-related government entities to set prudent and appropriate minimum capital requirements.

Rep. Frank, the committee’s ranking member, strongly disagreed, saying: “Fannie Mae and Freddie Mac are not facing any kind of financial crisis . . . . The more people exaggerate these problems, the more pressure there is on these companies, the less we’ll see in terms of affordable housing.”

• February 2004: The president’s new budget again highlighted risks of the explosive growth of these government enterprises and the then-low levels of required capital. It also called for the creation of a world class regulator. The administration determined that housing regulators of government agencies lacked the power and stature to meet their responsibilities and should be replaced with a strong new third regulator.

• February 2004: Greg Mankiw, chairman of Bush’s Council of Economic Advisers, cautioned Congress against taking the strength of financial markets for granted. He too called for reducing the risk by ensuring that housing GSEs are overseen by an effective regulator.

• April 2004: Rep. Frank ignored warnings, accusing the administration of creating an “artificial issue.” “People pay their mortgages,” he told a group of mortgage bankers. “I don’t think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren’t there.”

From 2004 to 2008 the Bush administration made 12 more attempts to get Congress to pass legislation to have safer, sounder regulatory oversight of Fannie and Freddie and capital rules. You can see them for yourself on the White House Web site. But here are a couple of examples that show how Democrats resisted:

• July 2005: Senate Majority Leader Harry Reid rejected legislation on reforming Fannie and Freddie. “While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that would limit Americans from owning homes and harm our economy in the process,” he said.

• August 2007: Sen. Dodd, another Democrat, ignored President Bush’s emphatic calls for Congress to pass Fannie and Freddie reform legislation and called for him to immediately reconsider his ill-advised position.

Democrats have become a far-left propaganda party with the lowest-ranked Congress in history. For six years, they have consistently refused to rein in the monumentally risky subprime loans that Clinton Democrats gave birth to.[…]

Obama now insists on dictated government control of banking, manufacturing, energy, medicine (health care), and communications (localization). Seems a very poor idea, given particularly the most recent demonstration of government unconsciousness and utter lack of accountability, personified by “Who, me?” Barney Fwanks.


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