By Joe Garrett
A lot of voters evidently don’t know how our nation got into the fiscal & financial meltdown we’re seeing all around us.
It was done by liberals (aka “progressives”), pure and simple, and anyone who doubts that might be interested in the evidence.
The direct cause occurred in 1977, when President Jimmy Carter (D-Georgia) signed the “Community Reinvestment Act” into law. This statute made it legal for federally insured lending institutions to lend house purchase money to people known to have no capability to make repayment. Mr. Carter must have construed the law as “The Santa Clause Act” since the certain-to-happen defaults would become taxpayer liabilities.
These lenders were, at first, less than enthusiastic about making certain-default loans. But then our very own William Jefferson Blythe Clinton III, President of the United States, (D – Arkansas) “came to the rescue” of this deficit-addicted cabal by signing an executive order in 1993 that made such lending practices mandatory. Doubt it? Please read Clinton’s Executive Order 12892 for yourself.
This, of course, created a cascade of red ink in the home loan business and, as a matter of fact, is how the term “sub-prime loans” got started. Most of these loans were sold by the commercial banks and mortgage brokers to Fannie Mae and Freddie Mac, two Washington D.C area quasi-federal corporations that packaged them with performing loans then resold them to investment bankers, no few of whom headed institutions that consequently bit the dust.
These packages carried a Standard & Poors rating of “AAA”, by the way. After all, payment was guaranteed wasn’t it – albeit with taxpayers’ money – so why bother with determining the borrowers’ solvency?
What these people seemed not to know, or chose to regard with indifference, is the amount of subsidy money the government would have to spend to keep this monument to squandering from collapsing the nation’s banking system.
It – including the bail-out money the fed spent to prop up other types of businesses – has literally exceeded the sum of our government’s tax revenues plus what our creditors were willing to lend. Why? Because this debauchery plus the other fiscal escapades Barack & his congressional friends have engaged in have increased the national debt by $4 T (four trillion dollars – from $10 T to $14 T) during the two years he’s been in office.
It left him with no way to meet his spending goals except to have the mints print fiat money – “shin plasters” – green paper bearing no redemption clause and backed by nothing – not even evidence of indebtedness. In the process he also managed to hide the real inflation rate.
How did he do that? By removing items that developed rapidly inflating prices (mainly food and fuel) from the market basket on which the CPI – and the inflation rate – are based. That’s out and out fraud, folks.
The fiat money was used to purchase treasury paper which was, in turn, used as a deposit into the government’s checking account(s) so the regime could spend most of it extracting Obama’s liberal friends from the results of their financial reversals. Do you doubt this? If so, stream Rush Limbaugh’s show of 24 May 2011. If anyone else had run this “funny money” scam they would have been arrested for counterfeiting.
Immediately after his inauguration in January 2009 Obama reacted to Fannie’s and Freddie’s September 2008 take-over by the Federal Home Loan Finance Agency by infusing huge amounts of cash into their accounts so their checks wouldn’t start bouncing. This kind of “pie in the sky” nonsense can cause hyperinflation of the nation’s currency and we’re already seeing the beginnings of it in the upward movement of food and fuel prices.
Anyone who doubts how much fiscal blood this will put on the ground needs to read that part of The Rise & Fall of the Third Reich that deals with Germany’s Weimar Republic. The book was written by an in-country journalist named William Shirer. Your friendly library has it. [And no, this isn’t – yet – an attempt to compare Obama to Adolph Hitler.]
The activities of certain people who facilitated this scenario are noteworthy. Fannie Mae’s and Freddie Mac’s CEOs were Franklin Raines and Samuel B. Johnson, respectively, whose employment contracts paid them hefty bonuses if certain financial objectives were met. [News stories indicated that Raines collected ninety million dollars ($90 million!) in bonus money over a period of six years.]
So that raises the issue of who was “cooking the books” at these two institutions – obviously to create the illusion that these guys’ financial objectives were being met. All I know for sure is that the news media organs that were willing to report on this subject at all said it was Raines & Johnson. (See this, for example.)
Even more interesting is how the whole thing was covered up. It was via political arm-twisting by (then) Senator Barack Obama (D-Illinois), Senators Charlie Schumer (D-New York) and Chris Dodd (D-Connecticut), and Congressman Barney Frank (D-Massachusetts) who thereby kept auditors away from Fannie’s and Freddie’s book-cooking. This was felonious activity. All four of these guys should be impeached, removed from office for cause, tried and – contingently – put in prison.
Is there a sequel? Yes indeed. It was the week of 16 May 2011 that administration officials announced that they were going to restart “sub-prime” lending. The circulation of more “funny money” will aggravate the present inflation rate. We’re not going to like this and, yes, we’ve been warned.
[Ed. Note: For an excellent, readable, and well-documented analysis of the housing crisis and its effect on our economy, see The Housing Boom and Bust by noted economist Thomas Sowell released in 2009. In this brief blog, Joe has correctly captured the highlights, but Sowell documents other egregious examples of government interference in the housing market, including environmental regulations, state regulations, local building codes, "open spaces" regulations, "affordable housing" policies, etc. If you're not mad yet, you need to do more research! ]