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The Road to the Ditch
President Obama loves his car-in-the-ditch analysis of our crashed economy. He repeats it constantly, and has added this: “We’re huffing and puffing trying to get the car out of the ditch, and the republicans are standing around watching sipping on a slurppy.”
That slurppy bit is supposed to connect him to middle America. Well, maybe.
But the real problem isn’t the slurppy gag: the problem is the road to the ditch. The financial collapse which led to our present enervating recession was the housing collapse and bank failures.Toxic mortgages, foreclosure crisis, Mr. Fix-It bailouts–the entire sorry tale is Democrat from way down the road to the crash site.
It starts with Jimmy Carter and his Community Re-Investment Act, by which the heavy hand of government “encouraged” banks to loan to marginal borrowers.
That push was ramped up under Bill Clinton.
Clinton’s HUD Secretary, Andrew Cuomo (yes, the same one) created regulations which forced the government sponsored mortgage entities Fannie Mae and Freddie Mac to step up loans to minorities under the logic of the affordable housing movement–every American should be a homeowner. It turns out affordable housing didn’t mean inexpensive homes poor people could afford, but instead, easy credit to buy homes they could not afford.
Clinton’s Treasury Secretary was Democrat Robert Rubin, aided by Democrat Lawrence Summers, now on the Obama economic team. Rubin and Summers honcho’d the effort to repeal the Depression era Glass Steigal Ac, allowing investment banks to use federally insured depositor cash to back millions of mortgages, while easing underwriting standards at the same time. No money down? No problem.
In addition Rubin pushed through the Commodity Futures Moderenization Act, which allowed the creation of mortgage back securities, liar loans packaged as investments and sold to pension funds.
Democrats in the New York State Insurance regulators allowed AIG to insure mortgage backed securities with an invention known as the Credit Default Swap.
We all know what happened to those “improvements” in the financial system. When the economy fell apart, the trail of tears led right back to these financial shenanigans. Democrats created a mortgage casino which led to chaos. But because the housing bubble stirred up so much action at the banks, Democrat Rubin took home $100 million from his post-Treasury job at Citi Bank (which was eventually saved by a bailout.)
Democrats used Republican Phil Gramm to front their greedy back room plot, and nowadays tend to say it was all Graham. It’s true Graham was in the picture, but look closely: he’s surrounded by Democrats.
Later, when Fannie and Freddie–the places where the buck actually stopped– started to give off a strong odor of stinking loans and the threat of large losses the taxpayer would have to cover, Democrats blocked reform. In 2003 when Republicans ran DC, they pushed for HR2575–The Secondary Mortgage Market Interprises Regulatory Improvement Act, which would have strengthened an independent regulator for the government backed mortgage giants, Fannie and Feddie.
The “party of no” in those days was the Democrats, who used cloture rules to keep the act from moving to a vote in the Republican controlled Senate. When the Democrats came back in control in 2006 it was like hiring Democrat chocoholics in the taxpayer candy store. Eighteen attempts by George W. Bush and John McCain to prod the Democrat controlled Congress to exert control over Fannie and Freddie were rejected summarily by Democrats.
Democrat Barney Frank said, “I don’t think we face a crisis, I don’t think that we have an impending disaster… Fannie Mae and Freddie Mac do very good work and they are not endangering the fiscal health of this country.”
Democrats Maxine Waters said “These GSE’s have more than adequate capital for the business they are in: providing affordable housing…We should not be making radical or fundamental change. If there is anything to fix or improve, it is the (regulators).”
Bush administration regulators got a tongue lashing from Democrats for even issuing warnings that disaster was possible. Rep. Gregory Meeks, Democrat of New York, huffed “I am just pissed off at (the regulators) because if it wasn’t for you I don’t think that we would be here in the first place.” Democrat Meeks thought the hearings by Bush regulators were a waste of time. “I think there has been nothing that was indicated is wrong, you know, with Fannie Mae…the question that then presents is the competence of your agency has with reference to deciding and regulating these GSE’s.” Fannie and Freddie are Government Sponsored Entities, or GSE’s.
Rep. David Scott, Democrat of Georgia, told the regulators that home ownership for African Americans trailed the rate of whites by thirty points, and “Clearly, the mission of Freddie Mac and especially Fannie Mae, is to close that gap.”
At these hearings Fannie Mae’s Chairman and CEO Franklin Raines, a Democrat, and former Clinton official, told oversight committee members that the mortgages Fannie was buying were solid gold. “These assets are so riskless that their capital for holding them should be under two percent.” In other words, if banks had two dollars they should be able to loan one hundred dollars. The “assets” Fannie was purchasing from the banks were not that solid: they were junk.
For this type of brilliant forecasting Raines was compensated $90 million during his tenure. When Jamie Gorelick, Democrat, took over and continued Raines’ nothing-can-go-wrong-here policies, she earned $26 million. She was followed by Democrat Jim Johnson, who was at or near the wheel when the car went into the ditch in 2007. He took home a paltry $21 million. After all Fannie needed to be bailed out with $X billion on his watch.
OK, the car crashed. But when you backtrack, what do you find? Democrats.
Blame Bush? Next time Obama asks if you really want to go back to the policies of the people who drove us into the ditch, remind yourself “We already did that.”
Democrats crashed the car, and they are the last people to be driving the tow truck.
jgibson
This should give the public a better indication that most politicians regardless of their party affiliation have a different mindset from what come out of their mouths.
So why didn't McCain and the Republicans articulate this- shout it from the rooftops- in 2008? Maybe he could have won.
Sure obama likes the car in the ditch analogy,hopefully there are enuf americans that did not drink the coolade and can see that now its like an 80000 lb semi barreling down the road with no one behind the wheel ! Get out and vote !