The Way I See It!

I am an Ultra-Conservative, Alpha-Male, True Authentic Leader, Type "C" Personality, who is very active in my community; whether it is donating time, clothes or money for Project Concern or going to Common Council meetings and voicing my opinions. As a blogger, I intend to provide a different viewpoint "The way I see it!" on various world, national and local issues with a few helpful tips & tidbits sprinkled in.

Community Reinvestment Act of 1977 created the need for a $700 billion dollar bailout.

Guest Blog, Economy, National, Banks

Originally, posted on the RVW on Friday, September 26, 2008 by Amy Geiger-Hemmer


The Community Reinvestment Act, enacted in 1977, required the banks to make loans to people who couldn't afford them as part of our social programming.  (You know, the "feel good" programs that liberals are so fond of.)  Congress also created Fannie Mae and Freddie Mac to buy mortgages from banks all over the country.  Since these were, in effect, guaranteed by the federal government, these mortgage companies didn't pay much attention to the credit worthiness of the borrower or the value of the asset.  In essence, almost anyone could now get a loan, regardless of their credit rating.


What happened over the years is Fannie Mae and Freddie Mac together processed over 5 trillion dollars worth of loans and sold them as securities all over the world.  This easy credit inflated the cost of homes and created over-building and an over-supply of homes until this finally stalled.  As we are seeing now, the values of homes started to go down, which meant the mortgages were over-priced to begin with.  (Foreclosures began to crop up all over the country.)  Now the banks want to unload these securities in order to have money to loan -  but they can't sell the mortgages for what they got them for.


The biggest creditor is China - and this has not been mentioned in most news reports for some reason.  If America did not owe so much to China, we could deal with this problem much more effectively.  However, China has said that the U.S. must make good on all the debt or they're going to stop lending us money.  Currently that debt is in the trillions of dollars.  China has already stopped lending us money.  If we can't borrow money every day (almost hundreds of billions of dollars is needed) the U.S. will default on the loans that are coming due.


So, this is a problem created by the government in the 70's.  Free enterprise, capitalism, and corporate greed -- have really played little, if any, role.  In  fact, this is a good example of what happens when the government gets involved in the private sector.  It just doesn't work.  Government has enough issues just running the government...   


We should not have been brought to this brink in the first place.  Patterns and signs throughout the years pointed to a mess like this on the horizon.  A number of politicians, including John McCain, have tried over the years to change the regulations in regards to such businesses.  In 2003, the Bush Administration sought to create an agency to oversee Fannie Mae and Freddie Mac.  The proposal was shot down in congress.  Barney Frank (D-Mass.), Chairman of the Financial Services Committee, said at the time: "these two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis.”  In 2005, the Federal Housing Enterprise Regulatory Reform Act of 2005 was introduced in the Senate.  The bill would have increased government oversight of loans given by Fannie Mae and Freddie Mac.  The bill never passed either the House or Senate.  The Democrats have consistently protected Fannie Mae and Freddie Mac -- and some Republicans are also to blame.  Democrats, however, have consistently been the recipients of huge campaign contributions from Fannie Mae and Freddie Mac.  Chris Dodd (D-Connecticut) has received the most money over the years, with Barack Obama leading the pack at number one for an election year.


The United States government should not be buying parts of companies, buying stocks, mortgages, selling those in the markets, or tinkering in the financial markets.  The problem we have here is that by the government essentially promising to come in and do that, it is causing the credit markets to go in a holding pattern.  They're waiting for the government to provide funds.  They're also waiting for the government to buy at a higher market rate.  In the meantime, they’re not operating and credit is closing down in America.


There should be no $700 billion dollar bailout as proposed by Treasury Secretary Henry Paulson.  The House Republicans holding up this bailout right now are the heroes.  No one can blame them for trying to stop Paulson' proposal.  If the Democrats really believe  Paulson's plan is the right thing to do, they could pass it if they wanted to. They are the majority.  There are not enough Republicans in the House to stop them.


(Please note:  Some of the information provided above can be found on " - An Interview with Jim DeMint on the bailout crisis.") 


To quote from the Milwaukee Journal/Sentinel (9/26/08):  "House Republicans have thrown Capitol Hill into a frenzy a day after unveiling an alternative financial rescue plan at odds with a $700 billion bailout proposed by Treasury Secretary Henry Paulson.  Rep. Paul Ryan, a Janesville Republican, is at the center of the plan that has thrown a kink in the negotiations.  Emerging from a midday meeting of House Republicans on Friday, Ryan told the Journal Sentinel that his caucus did not like Paulson's plan. The administration plan would allow the government to buy up loans from troubled firms in an effort to give sluggish credit markets a boost.

"Our goal is to protect the taxpayer," Ryan said.

Under the House Republican proposal, the government would offer companies insurance for their mortgage-backed securities for a premium.  The government would pay up only on those that default.  The government already insures roughly half the nation's mortgage-backed securities."


Ryan and the Republicans backing this plan need to be supported.  John McCain needs to come out in favor of this plan.  President Bush has the wrong idea when it comes to the $700 bailout.  Trying to push something through, just for the sake of getting something done and leaving the mess for a newly-elected president is wrong.  $700 billion is at stake here.  The time and effort needed to do the right thing should be most important. 


(*As an interesting sidenote, on talk radio today it was mentioned that ACORN (yes, that liberal get-out-and-vote organization constantly involved in voter registration fraud) stands to be the recipient of 20% of the $700 billion dollar bailout money.  Taxpayers should be outraged that such money could be going to a liberal political group.)


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