posted September 22, 2008 09:14 AM            

But aside from all that, anyone with an understanding of the economy at this time knows the impact confidence has had in this fiasco and the differences between real loss and projected losses. Further, you can't forget that the overwhelming majority of taxes are paid by the wealthy. A large percentage of Americans don't pay any taxes or get all or most of their tax dollars back after they file their returns (which shows just how lousy their understanding of finance is because they're simply giving the government an interest free loan at a depreciating value for themselves by allowing so much money to be unnecessarily withdrawn in the first place ... 'cause, like, nobody told them). Do you know whose money was actually at risk? Whose investments? Elucidate the facts for us, please, sans your speculation.

posted September 22, 2008 12:56 PM            

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He's been an imperialistic, capitalist pig for so long!

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Who called him a Capitalist? I don't recall ever hearing that one. I remember facist and imperialist, and even insider trader, but never Capitalist.

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Why ruin what's left of your reasoning credibility by suggesting that he's made a 180 degree turn?

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It is a fair call to say that bailing out a private enterprise by the government is a Socialistic move, is it not? The stimulus package was also a Socialistic move, so this isn't the first time Bush has been accused of such.

I know you might hate to consider it, but any Republican in the White House during this time would most likely be prompted into the same action, so let's not pretend that there's a Republican whose interests wouldn't be served by saving the financial markets. As such I have to discount any tough talk by any willing to go there.

posted September 22, 2008 01:12 PM            

Democrats putting Freddie Mac and Fannie Mae in place and using both quasi governmental organizations as piggy banks to fund their election campaigns and reward idiots within democrat ranks with millions in salaries and bonuses..not to mention funding extremist leftist groups like ACORN who were and still are attempting to overthrow the election process in the United States.

Demoscats opposed Bush in 2003 when he warned of the dangers of Fannie and Freddie and they also opposed a bill in 2005 which would have instituted some common sense rules and regulations on both institutions.

Now, brain dead leftists in Congress and out are attempting to tag Bush and McCain as being asleep at the switch and letting Fannie and Freddie get out of control.

God, if demoscat noses grew an inch with every lie they told, they would need nose supports just to keep those noses from plowing furrows in the ground.

There is no good solution to socialist meddling in the private sector which caused this mess in the first place.

posted September 22, 2008 01:51 PM            

democrats have always been for over regulating of private sector corporations but fought hard and won to keep regulation far away from their own piggy banks Freddie and Fannie. In fact, tying up private sector corporations in over regulation is the Socialist/Marxist model.

posted September 22, 2008 02:56 PM            

He also can't hide the fact that when Bush and McCain among other republicans wanted to reign in Freddie and Fannie to keep them on course to provide the services they were instituted by congress to perform...democrats opposed all efforts to do so.

O'Bomber also can't hide the fact that the collapse of Freddie and Fannie are at the base of the financial meltdown in the financial sector.

posted September 22, 2008 03:26 PM            

The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.

Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.

But really, it isn't. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.

In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Turning Point

Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.

Greenspan's Warning

The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

Different World

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''

Mounds of Materials

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)

posted September 22, 2008 09:26 PM            

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And banks shouldn't give out loans they know people can't afford, right?

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BlueRoamer, did you miss me writing

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and neither should anyone be lending money to people who can't afford the risk.

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I do, however, recall arguments of how certain groups were being discriminated against for not being approved for loans and how everyone should (magically somehow?) be able to afford their own home. We've painfully learned that that is just not the case. If you can't afford the (reasonable) down payment and the (fixed!) mortgage payments, you just can't afford to own your own home. Period. Am I saying the banks were being altruistic? By no means! But I happen to believe that there are greedy schmucks out there eager to take advantage of naive people's out of touch theories on trust and generosity. The ideal is not today and acting like it is has just backfired again.