America’s Financial Chickens Coming Home to Roost

Liberal Democrats are quick to blame Capitalism and the Free Market for the recent collapse on Wall Street. This is foolish, class warfare rhetoric that is irresponsibly exploiting voter’s fear and ignorance.

The heart of the problem is Fannie Mae, or the Federal National Mortgage Association, created by FDR.

By the way, the current situation, despite what you hear, isn’t anything like the Great Depression. The Great Depression had triple the unemployment, a prolonged negative GDP, five times the stock devaluation and 400 times the number of bank failures!

Fannie Mae, unlike private business, was granted an exclusive state monopoly on the secondary mortgage market in 1938. It is now in conservatorship along with Freddie Mac and holds an interest in about half of all mortgages. It’s important to note, however, that 98% of our banks are in good shape with over 90% of our mortgages in good standing.

For 2007, seller-rated “AAA” subprime ARMs, that constituted most of the Fannie market, were just 6.8% of all mortgages, and yet, represented nearly half of all foreclosures. The overall delinquency rate stands now at about 6.4%. So, although Fannie is deeply corrupted and having grave implications for our Financial System, nevertheless, over 90% of the mortgage industry seems to be on strong, fundamental ground.

A couple of weeks ago, Treasury Sect. Henry Paulson and Fed Chairman Ben Bernanke announced a bailout of Fannie Mae and it’s partner Freddie Mac with a price tag of about $200 billion. Of course, now we know this is not the total bill as AIG has been added to the list, ($85 billion), along with Bear Stearns, ($30 billion), and now, the pending $700 billion in additional funding for a comprehensive bailout package before Congress. Speaker Pelosi has been quick to say that Democrats have nothing whatsoever to do with this failure. The evidence, however, suggests otherwise.

Countrywide CEO Angelo Mozilo along with former Obama-advisor Jim Johnson, and Dem. Sen., Christopher Dodd, Chairman of the Bank Committee, were recently implicated in a sweetheart loan scandal. Reduced rate loans, and perhaps other considerations, were made in exchange for large campaign contributions. Fannie Mae is connected because it was the single largest customer for Countrywide’s mortgages.

In 2006, the year Democrats took control of Congress promising “the most ethical Congress in history,” 26% of Fannie’s purchases were Countrywide loans. In 2007, the figure rose to 28%. Sen. Dodd received the most money from Fannie, $165,000, while Obama came in second with $126,000. There’s also another Fannie CEO, Franklin Raines, who has served as an advisor to the Obama campaign.

In 2003, Rep. Barney Frank, the ranking Democrat on the Finance Committee, responded to the Bush Administration’s repeated pressures to reform these institutions:

“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, the less we will see in affordable housing.”

“Affordable housing” apparently means taxpayers get to buy houses for unfit credit risks while politicians like Barney Frank, Christopher Dodd and Barack Obama get to pad their campaign war chests!

And then there’s the 2005 Federal Housing Finance Reform Act co-sponsored by Sen. John McCain. It failed in committee strictly along party lines with Democrats defeating the reform measure. McCain’s statement at the time was prophetic:

“For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…and the sheer magnitude of these companies and the role they play in the housing market. The report this week does nothing to ease these concerns. In fact, the report does quite the contrary. It solidifies my view that these Government-sponsored entities, or GSEs need to be reformed without delay. I join as a co-sponsor of 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.”

Credit comes from the root word “credere” which means “to trust, entrust, believe!” Perhaps, the most important thing we face now is who to believe. (send comments toWFC83197@aol.com, or mail to POB 114, Jacksboro, TN 37757