Friday, September 19, 2008

Democrats and the Housing Mess

If you follow politics at all, you've probably seen the clips of Obama attacking McCain and the Republicans over the problems at Fannie Mae and Freddie Mac. But he's not being very honest with these attacks. The truth is, Bush tried to reform these agencies in 2003, and McCain cosponsored a bill to provide more oversight in 2005. Democrats in Congress killed both attempts.

Ace of Spades has a GREAT post explaining what the Republicans have tried to do about this crisis over the past 5 years, and how the Democrats prevented any meaningful reforms. And don't miss the fact that at least 4 key players in the subprime mortgage industry are now top Obama advisors:

Penny Pritzker, "the Michael Milken of subprime mortgages," is Obama's Finance Chair.

Jim Johnson, disgraced former CEO of Fannie, was Obama's vice presidential search chairman, at least until he resigned under fire due to his role in providing subsidized sweetheart loans to Democratic Senators during his stint at CountryWide.

Franklin Raines, who participated in the accounting scandals to fix Fannie's books and deliver unwarranted bonuses to its top executives, is a top Obama adviser.

Obama Economics Adviser Austan Goolsbee continued defending and lobbying on behalf of the mortgage industry's no-money-down-no-credit-check policies at least until September of 2007.

Finally, Ace mentions that the Democratic Congress plans to adjourn for the season without doing anything to address the issue:

Congress Adjourning! Harry Reid admits he has no idea what to do. So he's packing it up, leaving yet another crisis on the table for more responsible people to figure out.

Actually, Harry Reid and the Democrats always knew what to do. They knew the problem was this trillion dollar giveaway to credit-poor homebuyers. They further knew that by making money for homes so cheap and so artificially plentiful, they were driving up the cost of homes to astronomical levels. That's the way it works -- the more cheap, devalued dollars chasing after goods, the more the good rise in price.

Ultimately people who were simply not credit-worthy enough to buy houses at all were not merely buying houses -- they were buying houses that were well beyond their means to purchase even in a normal market, but furthermore, were inflated in price to double their fair value. So ultimately these legions of bad-credit-risks found themselves paying mortgages valued at 150% or 200% or even more of what their actual homes were worth.

So what did they do? They did what anyone would do: They walked away from the mortgages.

They both hyperinflated the housing market and created the bubble, and put the American taxpayer on the hook for all the excesses they created. And would not check -- because they were too busy appeasing ACORN and taking money from Fannie, Freddie, Lehman Brothers, AIG, and Raines, Johnson, and Pritzker.

They created the housing bubble. They created the financial meltdown -- which occurred, inevitably, when the bubble burst.

And now they want to go home.

For more background on this crisis, check out Investor's Business Daily editorials here and here. In my opinion, IBD is a great source for economic news that doesn't get reported in the mainstream media. If you want to learn more about economic issues--including housing, oil, financial markets, government regulation of the economy--it's a great place to start.

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