Monday, October 6, 2008

Fixing The Problem

During the Vice Presidential debate, Joe Biden said, concerning this economic crisis, that in order to prevent this from happening again, we must first understand how it happened this time. He's right. So some bright folks went forth and tracked it down, starting from the day it started in 1938. Joe, be careful what you wish for next time.

Today, as our economy is threatened with collapse, Americans are asking, "What happened? Who is to blame for this?" And, as can be expected, the majority automatically blame the current administration - Bush and Republicans (even though Republicans are not in control of Congress right now).

So, just what DID happen, and whose fault is it, really? The answer is complex, but can be broken down by following the history that brought us here.

During the Great Depression, FDR initiated the "New Deal", the largest upsizing of government in history. He was able to do this because the depression had created desperation among the people - much as 9/11 caused us to over-react with passage of bills that went too far, and encroached on our freedoms. People will accept the unacceptable when desperate.

Part of the New deal was the creation of Fannie Mae in 1938. The purpose of Fannie Mae was to make it possible for more people to own homes. Though a good intention, the basis was faulty.

30 years later, in 1968, Lyndon Johnson and the Democrat Congress initiated the second biggest upsizing of government, called "The Great Society". And part of this "great society" included the privatization of Fannie Mae, which put it into the position of allowing corruption to creep in. It opened the door to greed.

Then, in 1977, Jimmy Carter signed the Community Reinvestment Act. While this also had good intentions - bring fairness into lending, and making discrimination illegal, it also put lenders in the untenable position of having to make risky loans, to avoid being accused of, and prosecuted for, discrimination. Banks were now required to make loans to low income people who were less able to repay those loans.

Along comes ACORN, a radical activist group determined to push a radical agenda and change how American government works, to turn the economy upside down - the power would be in the hands of the poor. To this end, one of the things ACORN accomplished was to pressure banks into making even riskier loans. In fact, ACORN threatened families of bankers, and even took them to court. Eventually, by court order, they pressured lawmakers to lower the credit standards, to make even more low income people able to qualify for loans they could not afford, nor repay.

In 1999, President Clinton signed into law a bill that literally forced lenders to take on even riskier loans. The law actually required that fully one-half of all mortgage loans must be to low income people.

This, then, is the history of how we got here.

In 2003, 2004, and 2005, some Republicans, including John McCain and Judd Gregg, tried passing bills that would regulate Fannie Mae and Freddie Mac. They saw the disaster looming on the horizon. But these bills were blocked by Barney Frank and Chuck Schumer, both Democrats.
How could they do this? Because Fannie Mae and Freddie Mac paid millions of dollars into Democratic coffers. The three biggest receipients of those funds were, in order of amounts received, Chris Dodd (D), Barack Obama (D) and Chuck Schumer (D).

Republicans again tried to push through a regulatory bill in 2006, spearheaded by John McCain. But the bill was shot down by the Democratic majority in Congress.

The short take: From its inception in 1938, Democrats have spearheaded the Fannie Mae Debacle throughout its 70 years. Created by FDR (D), privatized by LBJ (D), forced to accept bad loans by Jimmy Carter (D), forced to make at least 50% of all loans to bad credit risks by Bill Clinton (D), with reform and regulation thwarted by Barney Frank (D) and Chuck Schumer (D), it would seem that the fault lies heavily at the door of the Democrats.

But the fault lies deeper than that. It lies with us. We, the People. First, we elected those people, and gave them the power to do this. And because this "loose credit" helped us all to live the American Dream with less hassle and responsibility, we soaked it up like a dry sponge soaking up a puddle. It was we, the People, who wanted the best of everything, and we wanted it now. We wanted it, even if we could not afford it.

So we kept electing these "beneficial Democrats" who were making it all possible.

We never stopped to think that if you want to dance to the music, sooner or later, someone must pay the piper.

The piper is here, and he's demanding to be paid!

The real question now, just before a critical election, is who should we trust to fix this mess. Frankly, not the party that created and fed the beast for 70 years, then set it loose among us.
I'm not certain the Republicans can fix it, either, but at least they were not part of its creation, and were the only ones to warn of this debacle years ago. So it would seem our best chance is with them.

To elect Democrats to fix the economy would be to hire the fox to guard the henhouse.

Care to begin your own research? Here are some places to start:

Origin/about Fannie Mae:, and


Community Reinvestment Act of 1977:

Gramm-Leach-Bliley act 1999: & Obama:

Regardless of your party affiliation, understand this: the 2008 election is probably the most important election in American history. If you want to continue the trend of the New Deal and the Great Society that caused this problem, that is your choice. But if you want a chance at changing things, and fight the big government that caused this, then you need to get out there and vote this year. It is that close. If you sit back and leave it up to other people to vote, do not expect them to vote in a way that protects you and your family. Get up. Get out. Vote. Because this year, every vote counts. The people who created this monster, fed it, and set it loose to wreak havoc are pushing hard to win this election. They are getting new people registered. YOU can offset that. But only if you take this seriously and do your part. If you do not, it is a guarantee that you will not like what comes next!

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