With the publication of "Reckless Endangerment," a new book about the causes of the crisis, this story is beginning to unravel. The authors — Gretchen Morgenson, a business reporter and commentator for the New York Times, and Josh Rosner, a financial analyst — make clear that it was Fannie Mae and the government housing policies it supported, pursued and exploited that brought the financial system to a halt in 2008.
After James A. Johnson, a Democratic political operative and former aide to Walter Mondale, became chairman of Fannie Mae in 1991, they note, it became a political powerhouse, intimidating and suborning Congress and tying itself closely to the Clinton administration's support for the low-income lending program called "affordable housing."
This program required subprime and other risky lending, but it solidified Fannie's support among Democrats and some Republicans in Congress, and enabled the agency to resist privatization or significant regulation until 2008.
"Under Johnson," write Morgenson and Rosner, "Fannie Mae led the way in encouraging loose lending practices among banks whose loans the company bought. . . . Johnson led both the private and public sectors down a path that led directly to the financial crisis of 2008."
The authors are correct. Far from being a marginal player, Fannie Mae was the source of the decline in mortgage underwriting standards that eventually brought down the financial system. It led rather than followed Wall Street into risky lending.
What is surprising is that this school of thought, based on Barney Frank’s defense of plain, old fashioned, mismanagement of a government sponsored entity (Fannie and Freddie), coupled with restraints on private banks, literally forcing them to make risky loans to individuals, taking a place not over years, but decades, was allowed to go on for so long without either a banker, or Republican, or fellow Democrat screaming from the rooftops that the sky was falling. Therefore, laying the blame on incompetent Progressive ideologist, Barney Frank, is a bit of a stretch, as there were so many hands in the pie of stupidity that Frank, although central to the whole nightmare, was, in essence a bit player.
Dodd, the former Senator from Connecticut, retired just prior to the 2010 midterm elections, his role in the fiasco among other issues related to sweetheart deals and mortgages, would have placed him firmly in retirement either way, Frank ran again and was reelected by a less than stellar margin in the highly gerrymandered Democrat controlled 4th district of Massachusetts. The more that reads into the length and breadth of the debacle, the more one has to question why these bozo’s were allowed to continue unabated, a practice that would eventually crash the housing market and the economy? There were Republican’s that asked, and received answers from Frank and Company that all was well, nothing to see here, move along. Apparently, satisfied, they did just that. That is a failing of the inner DC beltway politics that is akin to someone setting fire to the capitol and having one ask the guy across the aisle if perhaps they should evacuate - upon learning no, they both stay to perish.
It is noteworthy that the Dispatch published the article in the first place, considering that most press is firmly in the Progressive mindset of spreading the wealth, even if it takes down (or perhaps especially if) the financial system. The idea that banks were forced to make loans that were clearly risky, and allowed to make loans which were, in a word, predatory, makes one wonder why those mortgage lenders weren’t more vocal about the destruction of their industry – housing bubble or no – aren’t bankers more likely to be conservative when it comes to saving for the long-haul (their institution, jobs and economy), rather than risking all for a quick buck, at the say so of one Barney Frank?
The whole debacle could have been easily avoided, had there been follow-through from all corners, and a review made that clearly showed incompetence, bad legislation and a ton of bad loans to consumers who could not pay – an immediate halt would have meant no need for bailouts (TARP), and no need for taxpayers to pick up the slack, for decades. It would not have changed the outcome of the election, however, it will impact the next election, as the hole that has been dug, and dug so deep, is now squarely in the hands of progressives, who clearly believe that higher taxes and continued spending will, somehow, right the ship – it did not work in the past, therefore, there is no reason why a failed economic policy would work in the future – as nothing in our nations makeup has changed.
With the Bush Tax Cuts expiring, and the Health Care Act taxes beginning to kick in, those taxpayers still standing, especially in states such as Massachusetts, New York, California, Illinois, will most likely see incises in state taxes as well, and this is across the board, from the very minimal earners to those considered “wealthy” by Obama standards (couple making $250,000 annually). This lack of relief to both the individual taxpayer as well as private sector business will show a drop in retail, as well as a drop in hiring and or continued layoffs through the next year. The end result, “The Buck Stops Here”, will place the blame on one man and one man alone, the President.
Therefore, when one is considering just how bad Barney Frank’s management might be, one must also considering thanking him for eventually ridding the government of certain like-minded Progressives, come 2012. Barney Frank, will, of course, be up for reelection in 2012, along with cohort, Nancy Pelosi, the former Speaker of the House. It is simply the fact that Progressives truly believe that the masses (otherwise known as “we the people”) are too ignorant or busy working three jobs, if one can find a job at all, to pay attention to all of their accomplishments. Therefore, as the general election begins to take shape, and the field narrows in the spring of 2012, to challengers for the White House, Senate Seats and all Congressional Seats (they are all up for reelection), one has to suspect that there just may be changes in the beltway a la 2010.
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