Friday, April 24, 2009

Authors Of Fiscal Meltdown

Our economic meltdown all stems out of the subprime crisis. There were three authors of that meltdown: Bill Clinton, Barney Frank and Chris Dodd. Clinton turned the Community Reinvestment Act into a tool of social engineering. Clinton, along with Frank and Dodd, unleashed Fannie and Freddie to create a huge market for subprime loans and then spread the poison of mortgage backed securities throughout the world economy, and gave groups such as ACORN the keys to the courthouse in an effort to strong-arm banks into making subprime loans. They pushed these programs and protected them at all turns.

Compliments of Hot Air today, here is Barney Frank in action in 2005, claiming that talk of a "housing bubble" was pure fantasy and that he intended to push us further into home ownership morass.

I include below the fold some of the numerous other posts I have done documenting Frank as being at the center of the crisis. One of the great misfortunes of the left taking the reins of power was that this is now the one true area where "we are looking" only "forward and not back." Not only does that mean that those responsible for this fiscal crisis go unpunished, more importantly, it means that the underlying problems have yet to be addressed and groups such as ACORN are funded to the tune of billions of dollars of taxpayer money in order to pursue the same goals. It is obscene. And equally as obscene is Barney Frank today engaging in a full scale rewrite of history:

Previous Posts

Barney Frank In Bed With Fannie Mae

Chris Dodd, Barney Frank & The Subprime Crisis

Barney Frank's Fingerprints

Resolution of the Initial Problems Caused By The Subprime Crisis

A Spotlight On The Left's Subprime Crisis

1 comment:

cdor said...

Barney Frank is an absolute partisan hack lying scumbag. Other than that, he's just, gosh, such a swell fellow. Besides the numerous congress critters who turned their heads and closed their eyes in this financial morass that has undermined all the world's confidence in our financial system, there are a few so significant and close to this mess, they deserve to be named. Yes Clinton and Dodd, but do not forget Phil Gramm. He was at the center of removing the wall between banks and financial houses. With that wall knocked down, the restraints on leverage were also removed. How do you turn a number of bad mortgages in the U.S. into a world financial meltdown?


This was a perfect storm. Starting with forcing banks to make bad loans (CRA) until they became a matter of standard practice, to mortgage brokers who held no responsibility for who they signed up because they would simply skim off the top and push the paper along, to greedy and stupid borrowers who took advantage of or were taken advantage of (it worked both ways) an ability to roll their debt into a house that was miles above their ability to pay for. They were/are merely renters with no down payments, and even skating their credit card debt, which had been rolled into their mortgage. Let's not forget the crooks at Fannie and Freddie, Democrat appointees all, who bonused themselves hundreds of millions while buying up, at Frank's and Dodd's encouragement,these less than dubious loans and securitizing them ( an invention of a brilliant Wall Street gun). Remember Jamie Gorelick of the famous wall between the FBI and the CIA? After that brilliant service to the American people, she slipped over to Fannie for a few short years and gobbled up about 20 million in bonuses while overseeing a cooked books scheme with her boss Franklin Raines. But back to where the leverage comes in... banks have to have a minimum of 10 or 12 percent capitalization. There seemed to be no restriction at all on securitized derivatives or tranches of bundled mortgages which were created by Fannie and Freddie and others to precisely hide the bad with the good.

But what else was going on? Well Bush was doing his best to heat up an economy mired in a recession brought on by the previous idiot bubble called DOT COM and of course, 9/11. The Federal Reserve was cooperating as Greenspan kept rates at 1 or 2 percent. Hedge funds, Soverign funds (arab oil money) and the Chinese were looking to do a lot better with their trillions than Treasury notes could yield at such low rates. Wall Street obliged by creating investment vehicles out of whole cloth yielding two or three times what Treasury notes could provide. And what the heck, this is the USA. How could anything go wrong?

But wait, that's not even the end. Insurance giant AIG has a gun in their financial division in London who wants in on the action. So he creates a new entity called a credit default swap. For a few hundreds of billions, financial houses could now buy insurance on these trillions of dollars (because of leverage) of derivatives to cover just in case.

Chris Cox, Republican appointee at the SEC was out playing golf while all this was happening.

The just in case became OH SHIT! as some of these mortgages went south when the adjustable rates renewed at twice the monthly payment. The housing market had been over built by 10 times the normal demand. Foreclosures combined with over supply to begin a precipitous drop in the value of homes, which led to even more foreclosures which led to the bottom dropping from the derivatives based on bundled mortgages whose value could not be determined any longer. Mark to market accounting rules forced banks and financial houses to declare a complete loss. Many couldn't come up with enough capital to stay in business. Bear Stearns, Lehman Brothers, and others gone along with a number of banks and about 35% of hard working American's savings.

There's still more, but I am too depressed. I have to stop.

Bottom line, a perfect storm of financial tsunami.