Dad Blame It, Who's To Blame?
Posted: Monday, October 06, 2008
by Joel Hendon
http://hebronics.org/index.html
Well, our mess is still a mess. Now that congress passed, and President Bush signed, a 700 billion dollar "rescue" package, we still aren't rescued. Who let us get into this mess to start with and who didn't have sense enough to get us out? I am now reading articles that make me quake in my boots. I've heard it said by the old timers that sometimes when an official did a very bad deed or messed the populace up real good that the men of the area would smear tar all over him and then roll him in feathers, and finally, make him straddle a two by four and several strong men carry him out of town. Have you tried to ride straddling a jostling two by four lately?
Of course the sad fact is, no one person or group is to blame. But you can dig into the history of the thing and come up with some people and factors which certainly played a part in it. Let's start from scratch. Fannie Mae (Federal National Mortgage Association) was created when I was 8 years old and most of you were not born... in1938 by Franklin D. Roosevelt. This was a part of his "New Deal" which brought about the recovery from the "great depression". It offered banks and other financial institutions an opportunity to borrow federal funds at low interest rates and loan to the deeply depressed housing industry. It worked but it developed into a costly business for the federal government and was privatized by Lyndon Johnson in 1968. It then began operating as a private enterprise owned by stockholders but still remained free of taxation and oversight. It became a virtual monopoly for the secondary mortgage industry. To avoid the monopoly, a second GSE was created as the Federal Home Mortgage Corporation, called "Freddie Mac".
Although, President Roosevelt faced a very difficult task in producing a strong recovery from that bad time there were several of his innovations which should have been phased out once the economy became strong once more. The government has no business in the private loan business, even remotely. In this case, it was not the government itself, yet there were such ties to it and influence from it, that they went belly up. Although they were deregulated, they still had to cater to government pressures if they remained tax free and able to borrow government funds at low rates. And as usual, governmental influence came in various forms with no telling how much graft and corruption. During the Clinton administration, the feds pressured them to extend low interest loans to people with low incomes and questionable credit . They were even threatened with a lawsuit if they did not accept child support payments and unemployment compensation pay as acceptable income to qualify for a mortgage. Over a few years time, this proved to be catastrophic. Then to put the lid on the jar, over the past decade or two, our economy blossomed into giving numerous people, especially the young adults, the illusion that everything would always be this way. So, thousands of them over extended themselves at the urging of the eager lenders.
Regardless of who the actual culprits are who caused these problems, there are many. One thing for sure and for certain, those two organizations should never have been continued. Fannie Mae should have been dissolved when strained finances forced Lyndon Johnson to privatize it. And, of course, Freddie Mac would not have been formed at all. These two organizations are the only two fortune 500 firms who do not have to inform the public when any financial difficulties are encountered by them. Their combined assets are 45% more than the nations largest bank, yet their combined indebtedness is equal 46% of our current national debt. Now that is frightening. Our current debt is 10 trillion, 160 billion, 500 million dollars. That is also frightening. We have a limit which is reported to be as far as we will go in debt. But when we approach that limit, they simply raise our limit. The senate recently raised our top limit by 8. 5 trillion dollars. It's like so many credit card issuers. I once had a credit card who appreciated my pay record so well they raised my limit to $15,000. Can you imagine a couple on Social Security owing $15,000 on a credit card??? I should have grabbed it an run.
There is an excellent article in the New York Times (and I rarely make a statement like that about them) concerning the role Fannie Mae had in this recent crisis. You have to wind up being a little sorry for their chief executive, Daniel Mudd, who actually took the job after most of the damage was incurred. What it all boils down to, accept it or not, is those congressmen or other federal officials who put the pressure on these firms to purchase trillions of dollars of low income mortgages must share most of the blame. But not nearly all of it. Read the Times article here: http://www.nytimes.com/2008/10/05/business/05fannie.html?_r=1 & oref=slogin
Of all the individuals I have been able to read of and identify as a guilty party in all of this mess is congressman Barney Frank from Massachusetts who was the pusher for low income mortgages explained above and then in 2003 he proclaimed that the two financial institutions were sound and on solid footing. He is known to have been sleeping with one of Fannie Mae's executives, Herb Moses who personally announced that he was the first male spouse of a male U.S. Representative. Frank received the most financial donations for his campaigns from Fannie Mae and Barack Obama was the next in line for their contributions. Those involved in the early years of this mess were primarily, Alan Greenspan, Bill Clinton and Barney Frank. But on the other hand, just about nobody is clean and clear in this mess.
My income is fixed. That could be a blessing in this whole deal or it could be disastrous. I pray a lot.
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Top-level comments on this article: (10 total)Joel we found the culprit and it is you and your neighbor. It certainly isn't me and mine or those politicans or bankers now is it? best wishes, Robert.You got it Robert. I read a quote from some famous person once, but cannot remember who he was, nor can I recite his quote verbatim, but it went something like this:A democracy, truly of the people, by the people and for the people cannot long endure. For as soon as the people learn that they can elect men who will give them gifts, they will soon vote themselves into self destruction.Thanks for commenting.
hi joel,this was a well written and interesting article, and explained in a way i can understand, about fannie mae and freddie mac. thank you for sharing your thoughts, they do make a lot of sense.my best to you,sueThanks Susan, for your nice comment. I do appreciate your kindness.
Speaking up makes a difference. Thanks for offering your insights!Thanks for the comment Walter, I appreciate it.
Great informative article. Who is the blame? Probably me. Thanks Joel for letting me know.DeborahHey, never would I mean that. I meant every one else other than me and you. Thanks for the comment.
Interesting article. Now we are all being sucked dry in this mess. Greed is taking us down.KathyYes Kathy, you have the answer, greed is where it is. I was born in the middle of the worst depression ever known in the U.S. and it looks as if I may go out the same way. Maybe this one will be over soon.
Very informative article and I enjoyed reading it very much. Keep up the good work.Thans Arlene, for reading and commenting. Isincerely appreciate it.
Hear, Hear, Joel!!! Can't you just see all the finger-pointing going on amoung the politicians and top executives of these conglomerates!My husband and I are on fixed incomes, too and we also do a lot of praying.Well-written, too-the-point article.SandraThanks Sandra. What worries me is I don't know what is yet to come. I am now to where I cannot work. If the country bankrupts, I'll starve. But I do trust in God that he'll provide enough. Maybe not to live as sumptiously as we have, but still enough to live.
Thanks, Joel, for explaining it so well. I'd love to hear your thoughts on the Federal Reserve. Great article, as always.Hi Lorrie, thanks for your comment. You know, I dislike the Federal Reserve. I am sure that it is another bureaucracy that could be handled better some other way. But, with that being said, I have to admit that I am not that knowledgable of the situation and am hesitant to say we would be better off without it.I think I may research the thing though and see. I do know that some think it should be abolished. But yet, I have known them to help matters as far as helping in controlling inflation and minor recessions. I'll probably write an article on it when I get it researched well.
Hi Joel, you did a wonderful job explaining the history of this whole mess. Thank you for sharing. I remember when we were told we get a home for 0 down. I couldn't believe it! There was no way we could afford a home, but they made it look easy. Praise God, we didn't go for it, but we were tempted. Not that we didn't fall for other things, like those extended credit limits on credit cards... I think the bottom line is creditor and creditees are to blame. We want more than we need, and we will stop at nothing to get it. We think we deserve a big house because we work hard, but then we are praying for God to provide for us. Go figure. Maybe his provision is that we sell it and be content with a smaller home, maybe even renting? Jesus warned of this long ago. It all comes down to greed. Thanks again for sharing. God forgive us.Hi Teresa;Long time no hear from you! I thought I had angered you somehow. But thanks for reading and commenting. You're right. We all have our share of the blame.Hi Joel, what could you possibly do to anger me? I'm sorry you thought that. I just hadn't seen any articles from you in a long time. (I must have missed them?) All is well, God is doing what He does best in my life and I am trying to hang on for the ride :-) How are things for you on your end of the world? By the way, I haven't heard anything from you in forever either :-) In christ, Teresa
Excellent. We enjoy being educated.Thanks Steve, for reading and commenting.
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