Blame Democrats for financial fiasco

Democrats, using government interference with the private markets, are responsible for the crisis that ruined Wall Street and may ruin Main Street.

In the ’70s, Democratic President Jimmy Carter started it off with his efforts at financial deregulation and his Community Reinvestment Act, which encouraged and pressured banks to make loans to those who were theretofore unbankable. In the ’90s, Democratic President Bill Clinton had his team push for further financial deregulation and for even more Community Reinvestment Act loans to unqualified borrowers.

Clinton sent Budget Director Franklin Raines over to head Fannie Mae and encourage lending to anyone who wanted a home. Fannie Mae’s vice chairman, Democrat Jamie Goerlick, ardently defended these loans in interviews. For their false accounting that hid troubled loans, Raines and other Democratic Fannie principals were recently fined $3 million, only a fraction, of course, of the well over $100 million the principals took in compensation, for a few years’ work, before resigning. Haines is now economic advisor to Democrat Barack Obama.

Together with the Federal Reserve’s persistent downward force on market interest rates, the number of mortgage loans to unqualified borrowers took off. Banks, worried about the risks that Democrats had made them take, began hiding risky loans with good loans in complicated security instruments such as credit-default swaps.

These instruments were then peddled here and abroad, spreading the coming ruination. Fannie and Freddie today comprise half of the entire U.S. $12 trillion mortgage market. Since 2000 the Bush administration tried repeatedly to install enforceable oversight over the risky loans Fannie and Freddie were making. Democrats shut down each attempt.

In 2006, alarmed by Alan Greenspan’s warning that these loans presaged a financial fiasco and taxpayer exposure of cataclysmic proportions, Republican Sen. John McCain took to the Senate floor to echo the alarm, introducing legislation to rein in the runaway loans and prevent the coming disaster.

Democratic Rep. Barney Frank, along with every Democrat on his Financial Services Committee, voted against such oversight, proclaiming that he foresaw no financial problems and criticized those who would sound alarm, including Greenspan.

Democrats, not Republicans, are to blame.

Mainstream press and TV still intentionally refuse to inform the public of these facts and expose proper blame for what we now suffer, without which the public cannot possibly come to grips with what really happened, much less understand how the problem can ever be solved and its recurrence avoided.

Author: JOHN A. LANZETTA, attorney, Mellon Financial Center, Miami. From the Miami Herald, Opinion page, “The Reader’s Forum.”

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