How The
Democratic Party Destroyed the World Economy In 2008, By Dan Perkins September 22, 2016
When you write about the Democratic Party you must
understand that Democrats want to be judged on their intentions and never want
to be held accountable for the outcome. Democrats don’t want to be held
accountable for the collapse of world economy, but as we shall see, they are.
Who are the four Horsemen plus one? Some of the readers of
this column may not be familiar with who the four Horsemen were. They appear in
the Bible in Revelation chapter 6 verses 2. According to Revelation the Four
Horsemen are Pestilence,
War, Death, and Famine. So who are the 4 horsemen plus one who
brought all this upon the world?
First Horseman is “Pestilence”, Bill Clinton. The Clinton
Administration changed GSEs’ (Government Sponsored Enterprise) mission to
become far more active, but did nothing to adapt the regulatory structure to
the new mission. Congress essentially controlled OFHEO, because Congress had
life or death control over OFHEO’s funding. Fannie Mae was one of the most
powerful Washington lobbyists– for OFHEO to take on Fannie Mae would have been
like an entry level employee openly accusing a senior executive.
The Second Horseman is “Death”, Maxine Waters,
Congresswoman from the 43rd District in California. She is the
ranking member on the House Financial Services Committee, and we will see later
why that was such an important position.
Our third Horseman is “War”, Barney Frank. Mr. Frank is the
former Congressman from the second District of Massachusetts where he served
for 16 terms and was also a member of the House Financial Services Committee.
Horseman number 4 “Famine”, is Christopher Dodd. He served
in Congress from 1974 until he retired from the Senate in 2010; he served at
Chairman of the Senate Committee on Banking an important position in our story.
The Plus Horseman is the Secretary of Housing and Urban
Development, Mr. Andrew M. Cuomo the current Governor of New York.
In 1977, Congress passed The Community Reinvestment Act,
which was in response to “Red Lining” and other problems in housing and
mortgages. Red Lining was a process whereby lenders could mark off sections of
a city and not make loans to individuals or businesses in the Red Lined area
because of the potential for default on loans. Most of the time these areas
were in the poor areas of a city and most of the residences or business owners
were black or other minorities.
Clinton offered, shouldn’t everybody own a home, isn’t that
the American dream? Let’s take the Community Reinvestment Act and suggest to
the lenders they need to be making more loans to poor people.
Our next player is a very important player in the scandal.
That player is Franklin Raines, Head of Fannie Mae. Raines was the CEO of
Fannie Mae. Raines made millions in bonuses when Fannie Mae manipulated
earnings to meet the highest profit and “affordable housing” targets.
He settled with the SEC in a sweetheart deal that cost him little or
nothing out of his own pocket, even though Fannie Mae was slapped with the
biggest fine in SEC history for overstating Fannie Mae’s profits by $6.3
billion over several years. Raines went through the standard litany of success such as
“providing $2 trillion for 18 million underserved families” but he did not
oppose modernizing GSE oversight.
Why it happened.
At the turn of the century, the Dot COM bubble burst and
the equity markets collapsed. Millions of investors, large and small, lost trillions
of dollars in this speculation. Chairman Greenspan, in trying to save the
economy, dropped interest rates to 1%. People and institutions that needed to
invest what they had left were looking at alternatives and decided that real
estate is safer than stocks and offered better.
For many decades banks have made mortgage loans for their
own portfolio. That means they loan the money and keep the loan and service it
in the bank. The GSE and the investment banks figured out that lower interest
rates and the demand for mortgages could accelerate. If a bank could sell its
loans instead of holding them then they could turn over their money many times
in the year and make a great deal more profit. If they held the loan for 45
days and the borrower made the first payment, they could sell the loan to an
investor. Who was the most interested investor Fannie Mae and Freddie Mac?
The GSE’s told Wall Street and the mortgage originators, we
will take all the loans you have. The banks sold all their loans and started
making more. The prices of real estate continued to rise and more and more
people wanted to get in on the action, but the banks were running out of the
best credits to lend money. In the drive to feed the appetite of the GSE,
riskier loans, or what became known as sun-prime loans, were made.
What happened, what did they do?
Credit standards were reduced and the juggernaut continued
to turn out riskier and riskier mortgages. Some in Congress and the Bush
Administration were becoming concerned about the financial risk of many of
these loans and the overall risk to the credit markets on a global basis,
because of the size of the mortgage market. We all know what happened and the
trillions of dollars lost all over the world. But when many on the Republican
side raised their concern as to the risk to world financial markets, this is
what the Horsemen said.
Horseman number 3, Barney Frank, said in September 10, 2003
at a hearing on the risk and further regulation of the mortgage giants, he
said, “I think it is clear that Fannie Mae and Freddie Mac are sufficiently
secure so they are in no great danger… Fannie Mae and Freddie Mac do very good
work, and they are not endangering the fiscal health of this country.”
Horseman 2, Waters, seemed particularly proud to say “since
the inception of goals from 1993 to 2002, loans to African-Americans increased
219 percent and loans to Hispanics increased 244 percent, while loans to
non-minorities increased 62 percent. Additionally, in 2001, 43.1 percent of
Fannie Mae’s single-family business served low-and moderate-income borrowers…”
She then said, “The GSEs are working” and reiterated her opposition to more
oversight.
Maxine Waters at the same hearing, said, “Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular
at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything
in the 1992 act has worked just fine. In fact, the GSEs have exceeded their
housing goals. What we need to do today is to focus on the regulator, and this
must be done in a manner so as not to impede their affordable housing mission,
a mission that has seen innovation flourish from desktop underwriting to 100
percent loans.
How about the Horseman number 4, Chris Dodd. On July 13,
2008 the Associated Press reported that Dodd said, Hoping to bolster
confidence, Senate Banking Committee Chairman Chris Dodd, a Connecticut Democrat,
told CNN on Sunday that Fannie and Freddie are financially sound.
“What’s important here are facts,” Dodd said. “And the
facts are that Fannie and Freddie are in sound situation. They have more than
adequate capital — in fact, more than the law requires. They have access to
capital markets. They’re in good shape. The chairman of the Federal Reserve has
said as much.” Six weeks later the government took control of Fannie and
Freddie.
The continued support was really about the money. From 1989
to 2008 Chris Dodd received more campaign contributions than anybody else in
the Congress from Fannie and Freddie. Barney Frank and Maxine Waters also
received money from Fannie and Freddie. Bill Clinton received $425,000 from
both mortgage operations for his election campaign.
Our plus 1 is Andrew Cuomo the current governor of the
State of New York; he was in charge of the Department of Housing and Urban
Development from 1997 to 2001. CNBC in a story of May 3, 2010 Dick Bove called
him the “Father of the Subprime Crisis.” Mr. Bove said, “one of the key reasons
why Fannie Mae and Freddie Mac are bankrupt today, and why the government is
spending hundreds of millions of dollars in supporting them, is because of the
edicts pushed through by Mr. Cuomo.”
Couldn’t admit they were wrong.
Democrats staved off numerous attempts by Republicans to
solve the problem and the greatest irony of this whole story is that the bill
that became law to fix the problem was named after the the people who were
instrumental in creating the problem, the legislation is called,
“The Dodd–Frank Wall Street Reform and Consumer Protection Act.”
This story is how the Democrats started off with good
intentions, that turned into a nightmare and then they created a new law to
clean up their mess. A terrible price to pay for ego, by the end of 2011 over
8.2 million homes were foreclosed on and people lost their homes. America lost
almost $17 Trillion of net worth and other nations also lost trillions more. It
has taken 10 years for the average price of a home to get back to its pre-crash
price. I think the title is a fair representation of the outcome of the Great
Recession. If you look at the events I and others have told in the story and I
think you will find that the 4 Horsemen of Pestilence, War, Death, and Famine
affected millions of people all over the world.
One has to ask, “What will be the cost to fix Obama Care?”
Is it the next good intention by the Democrats gone badly?
http://constitution.com/democratic-party-destroyed-world-economy-2008/
No comments:
Post a Comment