United Socialist States Of America?

Posted by on 9/20/2008

The Mother of All Bailouts = The Death of Fiscal Conservatism

Kurtz: Don’t trust Washington Post reporting

Why the Bailouts Don’t Bother Me (Much)

Obama Thugs Threatened to Yank Group’s Tax-Exempt Status Unless They Disinvited Palin
Plus: My First Official Non-Ironic Important Action Alert and Pretty Vicious Rant

SUB-PRIME SLIME: OBAMA AND PRITZKER

A CENTRAL FIGURE IN OUR CURRENT FINANCIAL FIASCO IS OBAMA’S FINANCE CHAIRPERSON – AND THE LEFT-WING KNOWS THIS:

FROM LEFT-LEANING CONSORTIUM NEWS – VIA THE LEFT-WING HUFFINGTON POST – 2/28/08:

SETTING THE RECORD STRAIGHT: WALL STREET GREED DID NOT CAUSE OUR FINANCIAL FIASCO, K-STREET CORRUPTION DID

K STREET AND THE DEMOCRATS ARE TO BLAME:

The entire “first cause” of our current financial fiasco is Fannie Mae and political – not Wall Street greed.

It was caused by K Street and Fannie Mae, not Wall Street and investors.

The problem is that the derivatives created by Fannie Mae (which mixed prime with sub-prime mortgages) have no transparency and are now therefore seen as worthless by the marketplace.

That many large firms on Wall Street and central banks around the world bought these is NOT symptomatic of greed – quite the opposite; they bought these Fannie Mae derivatives because of the inherent backing they got from the US Government, which made them a relatively conservative investment – you see, Fannie Mae has, for all intents and purposes, got a guarantee from the USG because it’s a special GSE, and because its so large the markets knew the USG could not let it fail.

That’s precisely why Bush – in 2003 – and McCain – in 2005 – proposed that Fannie Mae get much more oversight than Congress was giving it. Bush McCain and th4e GOP was very worried about the “shoddy” bookkeeping at Fannie Mae and the potentially enormous USG liability because Fannie Mae is GSE.

Democrats created Fannie Mae and Freddie Mac mess then stopped reforms

A brief history of the Fannie Mae and Freddie Mac mess is in order. Back in the days when a Bank or Savings and Loan approved a home loan, they did so with lending standards that had historically led to only safe loans. They had to because they kept the loan and were responsible if it failed. These standards included 3 major parts.
First, the mortgage payments could be no greater that a set percentage of your income, usually about 40 percent.

Second, a down payment was required of about 10 percent or above so the new owner would immediately have some equity in the home.

Third, A good credit rating was required to prove you had a history of paying your bills.
Some adjustments could be made, for example people that had poor credit could get a loan with a larger down payment so if the loan failed, the bank could still resell the house and cover the loan.

With the well intentioned goal of increasing the level of home ownership in lower income and minority groups, Lenders were encouraged to make home loans that did not meet normal standards with the promise that Freddie Mae and Freddie Mac would buy these loans and the lenders were not responsible if they failed.
The Fannie Mae and Freddie Mac crisis has its roots in the Community Redevelopment Act signed into law during the Carter Administration. President Clinton, influenced by multiculturalism, encouraged it further by dictating where mortgage lenders could lend. Tough new regulations required that lenders increase their lending in high-risk areas where they had no choice but to lower lending standards to make loans that sound business practices had previously rejected. And again, Freddie Mae and Freddie Mac bought these loans, which means taxpayers were ultimately responsible if these loans failed.
As long as home values rise, failed loans could be covered by selling the house. If however, home values fell as they did during the and after the 1973 Arab oil embargo when energy prices doubled, just as they have today, these failed loans caused a huge financial impact on Lenders and Freddie Mae and Freddie Mac. The huge increases in energy costs are an indisputable part of this financial crisis.

Others blogging:

Barack Obama, Democrats, Economy, Energy Prices, General Politics, John McCain, Presidential Election '08, Subprime Crisis, , , , , , , , , , , , , , , , ,

5 Comments.

  1. Credit Crunch » United Socialist States Of America? - pingback on 9/20/2008 at September 20, 2008 - 10:40 PM
  2. nikko mahor 9/21/2008 at September 21, 2008 - 10:06 AM

    what is clear is that the bail-out will come from taxpayers’ money, therefore, in the next administration, there will be more and more problems because government will have its funds tied up with bailing out these failing companies…

    america is in this mess because government gave incentives to businessmen to extend loans to people who would not otherwise qualify for a loan, and these people defaulted in their payments because they didn’t have the capacity to pay for them in the first place…

    i pity the next president… the guy will be in deeper shit than this outgoing president…:)>-

  3. snowy egret 9/21/2008 at September 21, 2008 - 10:49 AM

    Look the demacrooks are bailing ot ut another one of their supporters anyway the demcreeps can retain their finances=:)

  4. Heading Right! » All Cowards Blame Bush For Everything - pingback on 9/22/2008 at September 22, 2008 - 07:42 PM

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