This summer, an enormous quantity of unmarketable mortgage?backed securities precipitated bank failures, a stock market collapse and "required" a gigantic government rescue. The Democratic Party largely caused this financial crisis. Should the Democratic Party prove ascendant on Election Day, the damage it has done to the economy could well be replicated in energy supply, health care, civil liberties and national security. The case against the Democratic Party as regards the financial collapse follows below:
Investor's Business Daily wrote in September 2008, "It was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend and originally helped create the market for high-risk subprime loans. Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.. President Clinton put on steroids the Community Reinvestment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans."
Fannie Mae and Freddie Mac abetted this disaster. These corporations, chartered by the Democrat-controlled Congress in 1968, bought home mortgages from lenders and, in part, bundled them into mortgage?backed securities. The CRA?imposed mortgages, so packaged, were sold all over the world. The collapse of many banks holding these securities was used to justify a $700 billion government bailout.
Democrats James Johnson and Franklin Raines were successive CEOs of Fannie Mae. An Office of Federal Housing Enterprise Oversight report in September 2004 found that during Johnson's tenure, Fannie Mae had improperly deferred $200 million in expenses. This enabled Johnson to receive substantial bonuses. OFHEO has accused Raines of abetting accounting errors such that he, as well, received multimillion-dollar bonuses.
Though she had no training or experience in finance, Jamie Gorelick, Janet Reno's deputy attorney general, was appointed vice chairman of Fannie Mae from 1998 to 2002. She proudly announced in 2001 that "specially targeted CRA loans surpassed the $10 billion mark in second-quarter 2001 - 1 1/2 years ahead of its goal.. This expanded approach has improved liquidity in the secondary market for CRA products and has helped our lenders leverage even more CRA lending." During Gorelick's tenure, she earned $26 million including, as OFHEO reported in September 2004, an improper bonus of $779,000.
In addition to fraudulent enrichment of their own executives, Fannie Mae and Freddie Mac made big contributions to political campaigns. The top four recipients from 1989 to 2008, for a total of $350,000, were Democratic Sens. Christopher Dodd, John Kerry, Barack Obama and Hillary Clinton.
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In 2003, the Bush administration proposed that a new agency within the Treasury Department assume supervision of Fannie Mae and Freddie Mac. This agency would have had the authority "to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And, it would determine whether the two are adequately managing the risks of their ballooning portfolios." To this proposal, Rep. Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee, responded, "These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis.. The more people exaggerate these problems, the more pressure there is on these companies, and the less we will see in terms of affordable housing."
Sen. John McCain made a final try for oversight and reform, speaking in May 2005: "I join as a co?sponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole."
The Bush administration and McCain were not heeded - occasioning the $700 billion bailout. This large increase in national indebtedness will, over time, subject today's college students to a weaker dollar, inflation and probably higher taxes. If Democrats prevail on Election Day, more of the same is likely. Remember what happened under Jimmy Carter. Please vote Republican to protect and preserve this great nation.
Donald Gluck is the president of UNM College Republicans.
