…requires that you first acknowledge the source of the problem.
Posted by Tina
The melt down, as the financial failures are being called, can be a learning experience for Americans or it can signal yet another round of government fixes. Usually the latter leads to greater opportunities for fraud and deception as well as a fat premium to be paid by consumers and taxpayers. Investors Business Daily has an excellent article that offers some historical background on the subject and an alternative explanation for the current troubles in the financial markets.
The Real Culprits In This Meltdown – IBD
Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the “trickle-down” economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend. *** 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.
Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties. *** The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but “predatory.”
If this were the end of the story we could chalk it up to socialist policies of a leftist politician and blame ourselves for being uninformed about history, government and economics when we elected (and re-elected) Bill Clinton. But that isnt the end of the story, there is much more:
As soon as Clinton crony Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud. *** Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million. *** Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses. *** In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk. *** Raines had reportedly steered Fannie Mae business to subprime giant Countrywide Financial, which was saved from bankruptcy by Bank of America. *** At the same time, the Clinton administration was pushing Fannie and her brother Freddie Mac to buy more mortgages from low-income households.
Wikipedia Franklin Delano Raines
On December 21, 2004 Raines accepted what he called “early retirement” [2] from his position as CEO while U.S. Securities and Exchange Commission investigators continued to investigate alleged accounting irregularities. He is accused by The Office of Federal Housing Enterprise Oversight (OFHEO), the regulating body of Fannie Mae, of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses [3]. *** In 2006, the OFHEO announced a suit against Raines in order to recover some or all of the $50 million in payments made to Raines based on the overstated earnings [4] initially estimated to be $9 billion but have been announced as 6.3 billion.[2]. *** Civil charges were filed against Raines and two other former executives by the OFHEO in which the OFHEO sought $110 million in penalties and $115 million in returned bonuses from the three accused.[5] On April 18, 2008, the government announced a settlement with Raines together with J. Timothy Howard, Fannie’s former chief financial officer, and Leanne G. Spencer, Fannie’s former controller. The three executives agreed to pay fines totaling about $3 million, which will be paid by Fannie’s insurance policies. Raines also agreed to donate the proceeds from the sale of $1.8 million of his Fannie stock and to give up stock options. The stock options however have no value. Raines also gave up an estimated $5.3 million of “other benefits” said to be related to his pension and forgone bonuses.[6] *** An editorial in The Wall Street Journal called it a “paltry settlement” which allowed Raines and the other two executives to “keep the bulk of their riches.” [7] In 2003 alone, Raines’s compensation was over $20 million.[3]
This man should have been as recognizable to the American public as Ken Lay was during the Enron Scandal. Instead he got a slap on the wrist and the problem was quietly swept under the rug…worse yet, practices that led to the future colapses continued.
I wonder how long the American people will put up with and ignore the unbalanced media coverage of the failures and greed of Democrats? Persistance along this path of ignorance will only lead to more crisis of a similar nature, as the IBD editors rightly conclude.
(all emphasis in this posting mine)