But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street’s most revered institutions.
Yes, making banks loan 300,000 to people who earn just 30K and less is not a good idea. Politicians made owing on a home the American Dream, not owning a home. They advocated for high risk lending, in order to make people feel good. A decade later, how good are those people feeling now? Of course, the reality is that 95% of people pay on their mortgage and aren't foreclosed. But, Bill Clinton and Andrew Cuomo and their admonitions against redlining have created a crisis. However, as noted by Stephen Green:
For his part President Bush has done little to deepen the crisis, and his Federal Reserve Chairman, Ben Bernanke, has done much to alleviate the problem. Some would say he’s done too much — the Fed’s seemingly endless injections of liquidity have maimed the dollar and spiked inflation. Monica Lewinski and Hillary Clinton, it would seem, aren’t the only ones still paying for Clinton’s sins.
So, how does this affect the current race? On the surface, it seems to be beneficial to the Dems, who are seen as anti-corporate. However, if you follow the money, you see a different view. Obama and Clinton made loads of money in donations from Lehman and its employees. So, who really is in the pocket of Big Finance? From the Green piece:
When it comes to Lehman Brothers in particular, both candidates have taken lots of donations. Obama has received almost $400,000 from Lehman employees in his three-plus years in the Senate. McCain has gotten less than $150,000 from them since 1989. Certainly both have benefited from Lehman’s largess, and simply taking donations doesn’t prove any kind of corruption. But a hundred k a year certainly cuts into Obama’s message of “change.” “Hope,” too.
In fact, of the nearly three million dollars Lehman employees and PAC distributed in the last 19 years, just two senators — Obama and Clinton — received more than a quarter of the total, split nearly evenly. McCain got about five percent.
So, what we have here is a regulation by the federal government had created this crisis...namely, that lending companies be incentivized to make high risk loans to people who will not pay them back...and what are the candidates giving us? Both, unfortunately are giving us more of this very same situation...again, from the Green piece:
In other words, when Congressional oversight of banks forces banks into taking risks they can’t afford, the solution is more Congressional oversight of banks. To put it more plainly: When the boat is taking on water, open up the taps.
And what’s the Obama Plan? In his own words:
This country can’t afford another four years of this failed philosophy. For years, I have consistently called for modernizing the rules of the road to suit a 21st century market - rules that would protect American investors and consumers. And I’ve called for policies that grow our economy and our middle-class together. That is the change I am calling for in this campaign, and that is the change I will bring as President.
If there’s been an actual governing philosophy these last four years — other than encouraging Republicans to spend like Democrats — I can’t find it. The Atlantic’s Megan McArdle calls Obama’s response “high-test hooey.” She continues:
This was not some criminal activity that the Bush administration should have been investigating more thoroughly; it was a thorough, massive, systemic mispricing of the risk attendant on lending to people with bad credit. (These are, mind you, the same people that five years ago the Democrats wanted to help enjoy the many booms of homeownership.) Lehman, Bear, Merrill and so forth did not sneakily lend these people money in the hope of putting one over on the American taxpayer while ruining their shareholders and getting the senior executives fired. They got it wrong. Badly wrong. So did everyone else.
Maybe Obama isn’t being too specific, because he doesn’t want anyone to look too closely. They might find there’s more — and less — there than meets the eye.
The solution is not more regulation and contracting of the free market. Coercing the market to lend to people who would have a hard time paying it back got us into this mess. That was regulation and government oversight and manipulation of the market. The way out is less of this, not more. The government tried to be a nanny to us in giving us "free money." Unfortunately TINSTAAFL still holds true, no matter how you try to bail it out:
THERE IS NO SUCH THING AS A FREE LUNCH!
We are finding that out now. Liberal, well intentioned, but shortsighted and fatally flawed policies got us here. They will not get us out.
