Democrats and the Housing Crisis

After working in the commercial banking business for most of my career, I've observed that securitization of loans was only a vehicle to spread the problem. Yes as their was a conflict of interest between greedy rating companies, like Standard and Poors and the brokerage houses that bundled the loans into securities and sold them to investors, etc. The systemic problem of the real estate crisis originated with the corruption of Fannie Mae who originated over $1.5 trillion dollars of sub-prime loan--over one half of then should have never be purchased by the mortgage giant. The break down of the system had a political component as well as a financial component. The O.C.C. the agency that examines banks and the S.E.C the agency the regulates the financial markets failed as they did during the 1980's (The Savings and Loan Crisis) and the 1990's (The Dot Com debacle). The regulators failed again in during this most recent crisis to enforce rules, but instead sided with risky lending and investment policies--the repeal of the GlassStegal Act and repealing the "uptick" rule on short trading. As non-institutional lenders like Merrill Lynch. Leman Bros., and Bear Stearns decided to become lenders, a certain lack of experience in lending did exacerbate the problem. Many financial experts started waiving red flags that if lending and securities regulations were not corrected, a financial meltdown could occur. Key Democrats look the other way and disagree--Barney Frank (D) Mass-Chairman House Banking Committee, Christopher Dodd (D)Con., Chuck Shumer, (D) N.Y and Barack Obama (D)Il. These members came out publicly and endorsed Fannie Mae, stating the company was on sound footing. It was the Democratic leadership in their respective committees that squashed any meaningful attempt to restructure Fannie Mae. They came out openly and criticized those who were trying to warned the government and the public at large. Later it was discovered Fannie Mae had "cooked the books" and mislead thousands of investors including the so-called greedy brokerage houses and banks who purchased Fannie Mae securities for safety and to improve their balance sheets. What a surprise when they found out their securities were practically worthless. The mindless greed of the market did assist in the crisis were presently in, but it also took the enablers of government regulators and selected congressman and senators to help perpetrate the fraud. Of course any attempts to place the blame in its proper place is considered partisan if an opposing party loyalist happens to be in disagreement. Final note -- To their credit, President Bush and Senator John McCain (D)AZ did lead the charge by supporting a resolution to restructure Fannie Mae. The Democrats subsequently killed the bill in committee. President Bush's responsibility is not holding SEC Chairman Christopher Cox accountable on the securities side for not monitoring the investment markets closely enough -- Wise up.

Bill Dombrosky - Go Aztecs of FL 3:57PM December 31, 2008