The Truth Behind the “Wall Street Crisis”

 Barack Obama calls the “Wall Street crisis” a direct result of failed Bush policies and claims that John McCain will continue those same policies. However a simple look at the time lines and facts prove otherwise. The New York Post had an article today, that can be read here, that sheds a little light on the subject.

Back in 1999, Congress opened the door to the subprime mortgage crisis when it repealed the Glass-Steagall Act, the 66-year firewall between commercial banks and investment houses.

Though sponsored by two Republicans and supported by the GOP majority in Congress, it was signed into law by then-President Clinton and enthusiastically endorsed by both his Treasury secretary, Robert Rubin, and then-Federal Reserve Chairman Alan Greenspan.

 I bipartisan bill signed by Bill Clinton was the beginning of the end. Sure the bill was sponsored by Republicans but many prominent Democrats loved this bill also.

New York’s Democratic Sen. Charles Schumer hailed passage of the bill as “a historic day,” and its promoters included Sen. Christopher Dodd

 The problem started because lending restrictions were loosened and people who had no business qualifying for mortgages were suddenly being approved for them.

the repeal also encouraged banks to make intemperate high-risk loans and to create exotic new financial products.

When more and more individuals who took loans they could not afford suddenly couldn’t make their monthly payments, the mortgage holders looked to Fannie Mae and Freddie Mac, which guaranteed the mortgages.

 All the way up until the recent failure Charlie Schumer was trying to make loans even easier for low income families to get. President Bush was against this idea.

Yet even as both agencies were feeling the strain, Democrats like Schumer were pushing – over the Bush White House’s objections – to increase available mortgage funding and increase the size of mortgages Fannie and Freddie could purchase in high-risk areas. And they did so right up until the recent government bailout.

And, all along, Democrats have been particularly supportive of the Community Reinvestment Act, which pushed banks into making more home loans to those with low and moderate incomes – and disproportionately risky credit.

 So the problem doesn’t reflect failed Bush policies after all, it reflects more failed liberal policies. As for Barack Obama trying to tie John McCain into the Frannie Mae, Freddie Mac failure, John McCain tried to stop this before it ever became a problem.

“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,” McCain said on the floor of the Senate in 2005, speaking in favor of the Federal Housing Enterprise Regulatory Reform Act of 2005.

 So what happened?

The bill passed the House but was never brought up for a vote in the Senate, largely because of Democratic opposition to change in the Fannie Mae and Freddie Mac regulatory structure that remained in place until the Treasury takeover two weeks ago.

 But wait, there’s more.

As evidenced by the failure to pass the Federal Housing Enterprise Regulatory Reform Act of 2005, the Democrats in Congress have repeatedly fought back Republican Party efforts to reform the two mortgage banking giants.

 Why have the Democrats been against it? A look at the top three people to receive political donations from the companies might provide a few answers.

Dodd, Christopher J  S  CT  D  $165,400  $48,500  $116,900 
Obama, Barack  S  IL  D  $126,349  $6,000  $120,349 
Kerry, John  S  MA  D  $111,000  $2,000  $109,000 

 But Barack Obama’s involvement goes even deeper as he is now employing three former Fanny Mae/Freddie Mac employees on his campaign staff. They are Franklin Raines, James Johnson, and Jamie Gorelick.

 Here is what we know about these three.

Johnson earned $21 million in just his last year serving as Fannie Mae CEO from 1991 to 1998; Raines earned $90 million in his five years as Fannie Mae CEO, from 1999 to 2004; and Gorelick earned an estimated $26 million serving as vice chair of Fannie Mae from 1998 to 2003, according to author David Frum, a fellow at the American Enterprise Institute.

All three have been involved in mortgage-related financial scandals.

In 1998, according to the Washington Post, Gorelick, as Fannie Mae vice chairman, received a bonus of $779,625, despite a scandal in which employees falsified signatures on accounting transactions to manipulate books to meet 1998 earning targets. The moves, in turn, triggered multi-million-dollar bonuses for top executives.

According to the Associated Press, Raines and several other Fannie Mae top executives were ordered in a civil lawsuit to pay nearly $31.4 million for manipulating Fannie Mae earnings over a period of six years to trigger their massive bonuses.

Raines was also forced in the settlement to give up Fannie Mae stock options valued at $15.6 million.

 We also know that Frank Raines is Barack Obama’s economic adviser. Once again I call in question Barack Obama’s judgement. While he tries to throw the blame solely on George Bush there is much more blame to go around. And the last person Obama should be trying to blame is McCain who tried to do something about it three years ago only to be denied action by Democrats who were in bed with Fannie Mae and Freddie Mac. 

 Barack Obama likes to call himself the agent of change but he is no different. He is in bed with the lobbyists also. While his latest commercial attacks John McCain for having lobbyists on his staff, Barack Obama does also. This man is a fraud.