How Democrats Created Financial Crisis

iVillage Member
Registered: 08-29-2008
How Democrats Created Financial Crisis
73
Mon, 09-22-2008 - 12:29pm

September 22 (Bloomberg) -- 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

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0

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iVillage Member
Registered: 09-15-2008
Mon, 09-22-2008 - 2:23pm
Heck, it's starting to feel like about time to break out this list again:


Jukebox John keeps changing his tune





It’s obvious that the McCain campaign and the RNC have decided to go after Barack Obama as a flip-flopper. What’s equally obvious, though, that Republicans couldn’t have chosen a worse narrative.


McCain & Co. seemed to stumble on this line of attack almost by accident. They’d experimented with a variety of memes in recent months, none of which had any real salience. The right settled on “flip-flopper,” in large part because it’s the closest available, already-written Republican narrative, and in part because McCain staffers haven’t been able to think of anything else.


The irony, of course, is that the McCain campaign couldn’t have picked a more hypocritical line of attack. Below you’ll find a comprehensive list of reversals from the Republican nominee, numbered and organized by category for easier reference.


Remember, McCain recently said, “This election is about trust and trusting people’s word.” Just a few days prior, the McCain campaign admonished Obama for trying to “have it both ways” on issues.


I should note that there’s nothing offensive about a political figure changing his or her mind once in a while. Policy makers come to one conclusion, they gain more information, and then they reach a different conclusion. That is, to be sure, a good thing — it reflects a politician with an open mind and a healthy intellectual curiosity. Better to have a leader who changes his or her mind based on new information than one who stubbornly sticks to outmoded policy positions, regardless of facts or circumstances.


So why do McCain’s flip-flops matter? Because all available evidence suggests his reversals aren’t sincere, they’re cynically calculated for political gain. This isn’t indicative of an open mind; it’s actually indicative of a character flaw. And given the premise of McCain’s presidential campaign, it’s an area in desperate need of scrutiny.


The perception people have of McCain is outdated, reflective of a man who no longer has any use for his previous persona. What’s wrong with a politician who changes his or her views? Nothing in particular, but when a politician changes his views so much that he has an entirely different worldview, is it unreasonable to wonder whether it’s entirely sincere? Especially when there’s no other apparent explanation for six dozen significant reversals?


McCain has been in Congress for more than a quarter-century; he’s bound to shift now and then on various controversies. But therein lies the point — McCain was consistent on most of these issues, right up until he started running for president, at which point he conveniently abandoned literally dozens of positions he used to hold. The problem isn’t just the incessant flip-flops — though that’s part of it — it’s more about the shameless pandering and hollow convictions behind the incessant flip-flops. That the media still perceives McCain as some kind of “straight talker” who refuses to sway with the political winds makes this all the more glaring.


Here’s the list.


National Security Policy


1. McCain thought Bush’s warrantless-wiretap program circumvented the law; now he believes the opposite.


2. McCain insisted that everyone, even “terrible killers,” “the worst kind of scum of humanity,” and detainees at Guantanamo Bay, “deserve to have some adjudication of their cases,” even if that means “releasing some of them.” McCain now believes the opposite.


3. He opposed indefinite detention of terrorist suspects. When the Supreme Court reached the same conclusion, he called it “one of the worst decisions in the history of this country.”


4. In February 2008, McCain reversed course on prohibiting waterboarding.


5. McCain was for closing the detention facility at Guantanamo Bay before he was against it.


6. When Barack Obama talked about going after terrorists in Pakistani mountains with predators, McCain criticized him for it. He’s since come to the opposite conclusion.


Foreign Policy


7. McCain was for kicking Russia out of the G8 before he was against it. Now, he’s for it again.


8. McCain supported moving “towards normalization of relations” with Cuba. Now he believes the opposite.


9. McCain believed the U.S. should engage in diplomacy with Hamas. Now he believes the opposite.


10. McCain believed the U.S. should engage in diplomacy with Syria. Now he believes the opposite.


11. McCain is both for and against a “rogue state rollback” as a focus of his foreign policy vision.


12. McCain used to champion the Law of the Sea convention, even volunteering to testify on the treaty’s behalf before a Senate committee. Now he opposes it.


13. McCain was against divestment from South Africa before he was for it.


Military Policy


14. McCain recently claimed that he was the “greatest critic” of Rumsfeld’s failed Iraq policy. In December 2003, McCain praised the same strategy as “a mission accomplished.” In March 2004, he said, “I’m confident we’re on the right course.” In December 2005, he said, “Overall, I think a year from now, we will have made a fair amount of progress if we stay the course.”


15. McCain has changed his mind about a long-term U.S. military presence in Iraq on multiple occasions, concluding, on multiple occasions, that a Korea-like presence is both a good and a bad idea.


16. McCain was against additional U.S. forces in Afghanistan before he was for it.


17. McCain said before the war in Iraq, “We will win this conflict. We will win it easily.” Four years later, McCain said he knew all along that the war in Iraq war was “probably going to be long and hard and tough.”


18. McCain has repeatedly said it’s a dangerous mistake to tell the “enemy” when U.S. troops would be out of Iraq. In May, McCain announced that most American troops would be home from Iraq by 2013.


19. McCain was against expanding the GI Bill before he was for it.


20. McCain staunchly opposed Obama’s Iraq withdrawal timetable, and even blasted Mitt Romney for having referenced the word during the GOP primaries. In July, after Iraqi officials endorsed Obama’s policy, McCain said a 16-month calendar sounds like “a pretty good timetable.”


Domestic Policy


21. McCain defended “privatizing” Social Security. Now he says he’s against privatization (though he actually still supports it.)


22. On Social Security, McCain said he would not, under any circumstances, raise taxes. Soon after, asked about a possible increase in the payroll tax, McCain said there’s “nothing that’s off the table.”


23. McCain wanted to change the Republican Party platform to protect abortion rights in cases of rape and incest. Now he doesn’t.


24. McCain supported storing spent nuclear fuel at Yucca Mountain in Nevada. Now he believes the opposite.


25. He argued the NRA should not have a role in the Republican Party’s policy making. Now he believes the opposite.


26. In 1998, he championed raising cigarette taxes to fund programs to cut underage smoking, insisting that it would prevent illnesses and provide resources for public health programs. Now, McCain opposes a $0.61-per-pack tax increase, won’t commit to supporting a regulation bill he’s co-sponsoring, and has hired Philip Morris’ former lobbyist as his senior campaign adviser.


27. McCain is both for and against earmarks for Arizona.


28. McCain’s first mortgage plan was premised on the notion that homeowners facing foreclosure shouldn’t be “rewarded” for acting “irresponsibly.” His second mortgage plan took largely the opposite position.


29. McCain went from saying gay marriage should be allowed, to saying gay marriage shouldn’t be allowed.


30. McCain opposed a holiday to honor Martin Luther King, Jr., before he supported it.


31. McCain was anti-ethanol. Now he’s pro-ethanol.


32. McCain was both for and against state promotion of the Confederate flag.


33. In 2005, McCain endorsed intelligent design creationism, a year later he said the opposite, and a few months after that, he was both for and against creationism at the same time.


34. And on gay adoption, McCain initially said he’d rather let orphans go without families, then his campaign reversed course, and soon after, McCain reversed back.


35. In the Senate, McCain opposed a variety of measures on equal pay for women, and endorsed the Supreme Court’s Ledbetter decision. In July, however, McCain said, “I’m committed to making sure that there’s equal pay for equal work. That … is my record and you can count on it.”


36. McCain was against fully funding the No Child Left Behind Act before he was for it.


37. McCain was for affirmative action before he was against it.


38. McCain said the Colorado River compact will “obviously” need to be “renegotiated.” Six days later, McCain said, “Let me be clear that I do not advocate renegotiation of the compact.”


Economic Policy


39. McCain was against Bush’s tax cuts for the very wealthy before he was for them.


40. John McCain initially argued that economics is not an area of expertise for him, saying, “I’m going to be honest: I know a lot less about economics than I do about military and foreign policy issues; I still need to be educated,” and “The issue of economics is not something I’ve understood as well as I should.” He now falsely denies ever having made these remarks and insists that he has a “very strong” understanding of economics.


41. McCain vowed, if elected, to balance the federal budget by the end of his first term. Soon after, he decided he would no longer even try to reach that goal. And soon after that, McCain abandoned his second position and went back to his first.


42. McCain said in 2005 that he opposed the tax cuts because they were “too tilted to the wealthy.” By 2007, he denied ever having said this, and falsely argued that he opposed the cuts because of increased government spending.


43. McCain thought the estate tax was perfectly fair. Now he believes the opposite.


44. McCain pledged in February 2008 that he would not, under any circumstances, raise taxes. Specifically, McCain was asked if he is a “‘read my lips’ candidate, no new taxes, no matter what?” referring to George H.W. Bush’s 1988 pledge. “No new taxes,” McCain responded. Two weeks later, McCain said, “I’m not making a ‘read my lips’ statement, in that I will not raise taxes.”


45. McCain has changed his entire economic worldview on multiple occasions.


46. McCain believes Americans are both better and worse off economically than they were before Bush took office.


47. McCain was against massive government bailouts of “big banks” that “act irresponsibly.” He then announced his support for a massive government bailout of Fannie Mae and Freddie Mac.


Energy Policy


48. McCain supported the moratorium on coastal drilling ; now he’s against it.


49. McCain recently announced his strong opposition to a windfall-tax on oil company profits. Three weeks earlier, he was perfectly comfortable with the idea.


50. McCain endorsed a cap-and-trade policy with a mandatory emissions cap. In mid-June, McCain announced he wants the caps to voluntary.


51. McCain explained his belief that a temporary suspension of the federal gas tax would provide an immediate economic stimulus. Shortly thereafter, he argued the exact opposite.


52. McCain supported the Lieberman/Warner legislation to combat global warming. Now he doesn’t.


53. McCain was for national auto emissions standards before he was against them.


Immigration Policy


54. McCain was a co-sponsor of the DREAM Act, which would grant legal status to illegal immigrants’ kids who graduate from high school. In 2007, he announced his opposition to the bill. In 2008, McCain switched back.


55. On immigration policy in general, McCain announced in February 2008 that he would vote against his own bill.


56. In April, McCain promised voters that he would secure the borders “before proceeding to other reform measures.” Two months later, he abandoned his public pledge, pretended that he’d never made the promise in the first place, and vowed that a comprehensive immigration reform policy has always been, and would always be, his “top priority.”


Judicial Policy and the Rule of Law


57. McCain said he would “not impose a litmus test on any nominee.” He used to promise the opposite.


58. McCain’s position was that the telecoms should be forced to explain their role in the administration’s warrantless surveillance program as a condition for retroactive immunity. He used to believe the opposite.


59. McCain went from saying he would not support repeal of Roe v. Wade to saying the exact opposite.


60. In June, McCain rejected the idea of a trial for Osama bin Laden, and thought Obama’s reference to Nuremberg was a misread of history. A month later, McCain argued the exact opposite position.


61. In June, McCain described the Supreme Court’s decision in Boumediene v. Bush was “one of the worst decisions in the history of this country.” In August, he reversed course.


Campaign, Ethics, and Lobbying Reform


62. McCain supported his own lobbying-reform legislation from 1997. Now he doesn’t.


63. In 2006, McCain sponsored legislation to require grassroots lobbying coalitions to reveal their financial donors. In 2007, after receiving “feedback” on the proposal, McCain told far-right activist groups that he opposes his own measure.


64. McCain supported a campaign-finance bill, which bore his name, on strengthening the public-financing system. In June 2007, he abandoned his own legislation.


65. In May 2008, McCain approved a ban on lobbyists working for his campaign. In July 2008, his campaign reversed course and said lobbyists could work for his campaign.


Politics and Associations


66. McCain wanted political support from radical televangelist John Hagee. Now he doesn’t. (He also believes his endorsement from Hagee was both a good and bad idea.)


67. McCain wanted political support from radical televangelist Rod Parsley. Now he doesn’t.


68. McCain says he considered and did not consider joining John Kerry’s Democratic ticket in 2004.


69. McCain is both for and against attacking Barack Obama over his former pastor at his former church.


70. McCain criticized TV preacher Jerry Falwell as “an agent of intolerance” in 2002, but then decided to cozy up to the man who said Americans “deserved” the 9/11 attacks.


71. In 2000, McCain accused Texas businessmen Sam and Charles Wyly of being corrupt, spending “dirty money” to help finance Bush’s presidential campaign. McCain not only filed a complaint against the Wylys for allegedly violating campaign finance law, he also lashed out at them publicly. In April, McCain reached out to the Wylys for support.


72. McCain was against presidential candidates campaigning at Bob Jones University before he was for it.


73. McCain decided in 2000 that he didn’t want anything to do with former Secretary of State Henry Kissinger, believing he “would taint the image of the ‘Straight Talk Express.’” Kissinger is now the Honorary Co-Chair for his presidential campaign in New York.


74. McCain believed powerful right-wing activist/lobbyist Grover Norquist was “corrupt, a shill for dictators, and (with just a dose of sarcasm) Jack Abramoff’s gay lover.” McCain now considers Norquist a key political ally.


75. McCain was for presidential candidates giving speeches in foreign countries before he was against it.


76. McCain has been both for and against considering a pro-choice running mate for the Republican presidential ticket.


If and when you learn of a reversal that has not yet made the list, I hope you’ll let me know.






But for the present age, which prefers the sign to the thing signified, the copy to the original, representation to reality, appearance to essence.....truth is considered profane, and only illusion sacred. Sacredness is in fact held to be enhanced in proportion as truth decreases and illusion increases, so that the highest degree of illusion comes to be the highest degree of sacredness.
- Ludwig Feuerbach, The Essence of Christianity, 2nd. ed., 1841


But for the present age, which prefers the sign to the thing signified, the copy to the original, representation to reality, appearance to essence.....truth is considered profane, and only illusion sacred. Sacredness
iVillage Member
Registered: 08-29-2008
Mon, 09-22-2008 - 2:26pm
Actually I was speaking from memory and it's been a long time ago. Since I couldn't remember who they were I looked it up. It was actually Democrats that McCain was fraternizing with (that figures, doesn't it, - he should have learned from that to beware of Democrats, lol), and they didn't actually go to jail because I am left to assume, there was Democrat leadership and they protect their own. The three guilty ones were allowed to serve out their term and did not seek re-election. That figures.
iVillage Member
Registered: 08-20-2008
Mon, 09-22-2008 - 2:27pm
Look up Keating 5.
iVillage Member
Registered: 08-29-2008
Mon, 09-22-2008 - 2:39pm
I knew that he had voted against some of the Bush tax cuts but most he has supported. I didn't know he was ever opposed to making them permanent. I will look that up.
iVillage Member
Registered: 04-04-2001
Mon, 09-22-2008 - 2:40pm

Thanks for posting the facts!

iVillage Member
Registered: 08-20-2008
Mon, 09-22-2008 - 2:47pm
Weren't the Republicans in control in 2005?
iVillage Member
Registered: 08-29-2008
Mon, 09-22-2008 - 2:47pm
I clicked on the first link and it directed me to a left wing website. I don't have the time or desire to read through all that and try to sort truth from propaganda. I am going to vote for McCain because he is the best of my two choices.
iVillage Member
Registered: 08-20-2008
Mon, 09-22-2008 - 2:50pm
same thing here only for Obama.....
iVillage Member
Registered: 09-15-2008
Mon, 09-22-2008 - 2:52pm

It just goes quite a long way towards illuminating comments of yours such as "mostly ignorant" when referring to others, after hearing you talk about the "three Republicans who went to jail" for the Keating Five scandal.

And - once again - you're incorrect regarding the reasons the three Democrats most penalized weren't rewarded with jail time: because they did not break any laws which would have necessitated it. What was under discussion at all times was their conduct as Senators and Representatives, within the framework of their particular houses, NOT criminal actions.

That'd be why none of them went to jail. However, as always, thanksferplayin'.



But for the present age, which prefers the sign to the thing signified, the copy to the original, representation to reality, appearance to essence.....truth is considered profane, and only illusion sacred. Sacredness
iVillage Member
Registered: 09-15-2008
Mon, 09-22-2008 - 2:54pm

Question: who controlled the Senate in 2005? The House? The WHITE House?

Oh, yeah.....those dastardly Democrats.



But for the present age, which prefers the sign to the thing signified, the copy to the original, representation to reality, appearance to essence.....truth is considered profane, and only illusion sacred. Sacredness

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