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Letters to The Editor

Congress Created the Mortgage Financial 'Crisis'
October 13, 2008

Congress Created the Mortgage Financial 'Crisis' (Oct. 13, 2008)

----- Original Message -----
From: John C
To: Editor
Sent: Monday, October 13, 2008
Subject: History.

Interesting history..for your consideration...with an open mind!!

There is a whole lot of finger pointing going on in the world of politics this week. For those of you who would rather stay in the dark, stop reading. I would never want to upset your political party's talking points and ruin your day. But for those who just enjoy history or want to understand how or why we got to this point in financial chaos:

1938 Roosevelt got through a Democratically controlled congress Fannie Mae.

1970 Freddie Mac was created by Democrats in congress 57-43 Senate and 234-192 House.

1977 the Community Reinvestment Act was passed by the Democratic congress (61-39 Senate and 292-143 House) and signed into law by Jimmy Carter. It encourage banks and mortgage lenders to loan money for housing to people who would not otherwise qualify (with Freddie and Fannie backing same by taking the paper).

1995 President Clinton signed the executive order mandating lenders expand their lending for mortgages to sub-prime borrowers (that means people who would not qualify under any criteria in a sane world). Failure to do so would result in the lending institution not having access to federal funds or the quasi governmental Fannie and Freddie.

1999 Republican Senator Phil Gramm pushed through congress deregulation laws (Gramm-Leach-Bliley Act) removing Depression era laws separating banking, insurance and brokerage activities. (a really stupid move...Black Cloud's opinion). The vote in the Senate was 98-1-1. McCain was the one who did not vote, another Republican was the lone no vote. Biden and Harry Reid, who are now saying it's all Bush's fault, voted for the bill. Even Obama this week places the blamed on Gramm, but fails to mention that his running mate voted for it, and Clinton signed it into law.

2003 President Bush tried to get congress to amend Fannie Mae and Freddie Mac rules to disallow loans to people who would not qualify under normal lending institution rules for making loans.

In other words, rescind the Clinton Executive order which had by now become the rules of Freddie Mac and Fannie Mae.

The Democrats in the Senate (48) used the threat of filibuster to kill the bill (got to have that magic 60 in the Senate to stop a filibuster).

2006 Greenspan testified before congress that Fannie Mae and Freddie Mac were both a house of cards and needed a lot more oversight and controls in case this country found itself in a recession in the future. That duty falls to the U.S. Senate Committee on Banking, Housing and Urban Affairs. Democrat Chris Dodd is Chairman. He wasn't thrilled with Greenspan's advice, because he was the number one campaign money receiver from Fannie and Freddie over the years. Obama was number 2, and he raked his largess in two years.

Now Dodd is saying he may go for the 700 billion, but he wants more oversight, which he had in the first place, but doesn't want to point his finger at himself for not doing his job, even when told there was a big problem.

Every single piece of legislation the Republicans have put up to regulate the financial industry since 2000 has been killed in the senate by Democrats.

95% of the homeowners are paying their monthly mortgage payments. It's those 5% that are facing foreclosure that will cost the taxpayers a trillion or so if the bailout goes through.

But when the politicians start pointing fingers, watch closely. Note that they are nowhere near a mirror.

And that's my history rant for this week.


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