Congressional Democrats Bankrupted the Nation
By JB Williams Wednesday, January 28, 2009
Even though the US congress has been mucking up the banking industry since 1916, few Americans are familiar with GSE’s, (Government Sponsored Enterprises). As a result, the people have hired the same people who destroyed the US economy to begin with, to fix the US economy. Those people are now attempting to save the nation from complete economic collapse via the same failed economic policies that caused the crisis…
History repeats for benefit of those who have not yet learned the lesson
Although the US Constitution affords the federal government no such power whatsoever to engage taxpayer revenue in banking or any other economic enterprise, Congress has been recklessly meddling in private enterprise for almost one hundred years now, with a devastating track record of unparalleled failure.
The 2008-2009 collapse of the US banking system is not the result of failed free market mechanics, but rather a clear demonstration of just how unqualified the federal government is to regulate industry and private enterprise. It is not the result of the last eight years, but rather the last eighty years or more… It was not an accident, but instead a natural end to a bad idea.
The 64th US Congress created the first federal GSE in 1916, with the establishment of the Farm Credit System. Democrats controlled both the House and the Senate at the time and Democrat Woodrow Wilson was president.
The stated objective was to “provide sound and dependable credit to American farmers, ranchers, producers or harvesters of aquatic products, their cooperatives, and farm-related businesses. - We do this by making appropriately structured loans to qualified individuals and businesses at competitive rates and providing financial services and advice to those persons and businesses.”
A noble objective, but the key word in this statement is the word “qualified.” They were not talking about “credit worthy” qualifications, or a borrower’s ability to repay, but rather qualifications tied to a borrower’s “need.”
“Farm Credit institutions are chartered by the federal government and must operate within limits established by the Farm Credit Act.”
As is always the case, when the fed offers its helping hand, there are always strings attached. Five member Farm Credit Banks still exist today, AgFirst, AgriBank, CoBank, Farm Credit Bank of Texas, U.S. AgBank, and combined, they have outstanding loans of $158 billion as of September 2008.
The Federal Farm Credit program marks Americas first government venture into the banking business and while some good was done through this program over the years, we are about to see how this program laid the foundation for what would become the greatest economic calamity in world history.
Based on the model of the Farm Credit System, the 72nd Congress entered the home mortgage business in 1932, with the establishment of the Federal Home Loan Banks. At the time, Republicans controlled the Senate and Democrats controlled the House, Republican Herbert Hoover was president.
Historians have recorded that “Hoover deeply believed in the Efficiency Movement (a major component of the Progressive Era), arguing that a technical solution existed for every social and economic problem. That position was challenged by the Stock market crash of 1929 that took place less than 8 months after Hoover’s taking office, and the Great Depression that followed it, which gained momentum in 1930. Hoover tried to combat the Depression with volunteer efforts and government action, none of which produced economic recovery during his term. The consensus among historians is that Hoover’s defeat in the 1932 election was caused primarily by failure to end the downward spiral into deep Depression.” [Wikipedia]
Of course, Hoover was succeeded by FDR and his New Deal, which thrust the federal government headlong into what has become decades of ill-fated attempts to use the weight and power of the government to remedy an endless stream of socio-economic challenges.
[Roosevelt created the New Deal to provide relief for the unemployed, recovery of the economy, and reform of the economic and banking systems, through various agencies, such as the Works Project Administration, National Recovery Administration, the Agricultural Adjustment Administration, the Federal Deposit Insurance Corporation (FDIC), Tennessee Valley Authority (TVA), and the United States Securities and Exchange Commission (SEC), the Social Security system and the National Labor Relations Board (NLRB). ]
In other words, he took the same fundamental approach that Democrats are trying again. If FDR’s New Deal had fully succeeded, the nation would not find itself in the condition it is in today. Some lessons are hard to learn… or are they?
Like today, the nation was interested in an economic “quick fix” following the crash of ’29 - and like Barack Obama today; FDR came to power by promising that “quick fix.”
Yet, despite all of FDR’s efforts to spend the nation out of depression, the Great Depression did not end until WWII. Still, his aggressive use of the federal government created a New Deal Coalition which still dominates the Democratic Party today and that is FDR’s real legacy.
The fundamental ideological difference between the American right and the American left is that
the right looks at history and sees how the federal government has become proficient at “wasting the labors of the people under the pretense of taking care of them.” - A mistake that Thomas Jefferson had carefully warned the nation against.
The left looks at history and sees a means by which to increase their own political power. As Obama Chief of Staff Rahm Emanuel put it, ”You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.”
The Beginning of the End
In 1938, Democrats once again controlled both houses of congress during FDR’s second term. The Democrat controlled 75th Congress launched a new federal enterprise, the Federal Home Mortgage Association, known today as Fannie Mae.
The corporation’s stated purpose was to “purchase” and “securitize mortgages” in order to ensure that funds are consistently available to the institutions that lend money to home buyers. To provide government backed securities for sale to investors on the open market.
But at the root of the program was again, this word “qualified” borrowers, which did not mean borrowers able to demonstrate the ability to repay the loans, but rather as a mechanism to make mortgages more available to low-income families, people who would otherwise not qualify for a mortgage.
From the very beginning, Democrats had designed a program doomed to failure. Loans would be made to people we knew would someday, be unable to pay those loans. The government backed those loans in order to attract investors to securities that were collateralized by bad loans.
In 1977, with Democrat Jimmy Carter in the White House and Democrats once again controlling both houses of congress, The Community Reinvestment Act was passed into law. The law was designed to encourage commercial banks and savings associations to delve even deeper into financial abyss, to meet the needs of borrowers in all segments of their communities, namely low- and moderate-income neighborhoods. The law was designed to force lenders to make bad loans to otherwise unqualified borrowers.
Democrat Bill Clinton later reinforced the Act, as the Democrat Black Caucus expanded its enforcement at Fannie and Freddie and low-income Community Organizations like ACORN, soon perfected the art of exploiting the programs.
In April 2001, before the events of 9/11 and just after entering the White House, President Bush began signaling warnings to members of congress that both Fannie and Freddie were headed into deep treacherous waters which could cause “strong repercussions in financial markets.”
In early 2003, the Bush White House upgraded its warnings to “a systemic risk that could extend well beyond just the housing markets.”
On September 10, 2003, Bush Treasury Secretary John Snow testified in congress that something had to be done to confront the growing storm at Fannie and Freddie. Democrat Barney Frank, now Chairman of the House Financial Services Committee, reacted by saying “Fannie Mae and Freddie Mac are NOT in a crisis...” completely rejecting Bush administration calls for reform.
Frank went on to say that Fannie and Freddie should do even more to get low-income families into homes. “The more people, in my opinion, exaggerate the threat of safety and soundness, the more people conjure up the possibility of more serious financial losses to the treasury, which I do not see, I think we see entities that are fundamentally sound financially, and withstand some of the disaster scenarios, and even if there were a problem, the federal government doesn’t bail them out, but the more pressure there is there, then the less, I think we see, in affordable housing.” Said Democrat Frank
Congressional Democrats then killed the 2003 bill put forth by Republicans, intended to head off financial crisis.
In 2005, Fed Chairman Alan Greenspan went before congress to sound an even louder warning concerning the soundness of the Government Sponsored Enterprises headed for disaster, testifying that, “Without restrictions on the size of GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership.”
Again, Democrats reacted by ignoring the warnings and blocking all legislative efforts to confront the economic tsunami now raging towards land.
In May 2006, Republican Senator John McCain sponsored legislation aimed at immediately reforming Fannie and Freddie, and once again, Democrats led by New York Senator Charles Schumer, blocked the Republican effort to avoid impending financial calamity. The bill failed by a strict party line vote, in which every Senate Democrat voted against reforming the GSE’s.
Then Freshman Senator Barack Obama, did not comment on the bill or the impending disaster...
In 2007 and 2008, several more Republican efforts to address the coming failure of Fannie and Freddie were put forth, but Democrats regained full control of both the Senate and the House in 2006, and they continued to deny any impending financial crisis.
On September 7, 2008 Fannie and Freddie were placed into conservatorship, bankruptcy.
Since then, a trillion US taxpayer dollars have been poured into both in a failed effort to save them from extinction. Another trillion in federal “bailout” funds is proposed by House Democrats today, much of it directed to special interest government [welfare state] growth instead of the coming economic melt down.
In November of 2008, Americans elected the same people responsible for the entire financial crisis, currently sending financial quakes around the globe, into full unbridled power of the House, the Senate and the Oval Office.
What’s their remedy?
“You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.” Obama Chief of Staff, Rahm Emanuel - More of the same old leftist waste of taxpayer resources, and nothing more.
The biggest federal grab of private industry and assets is underway in Washington DC. Trillions in deficit spending and new taxpayer debt is being forced down the throats of the very Republicans who tried for eight years to head off impending disaster, and every American who must now tighten their belt once again, to pay for the disastrous policy decisions of the Washington leftist elite.
If that’s not complete insanity, I don’t know what is…
Call your congress representatives TODAY and tell them NO MORE waste of taxpayer assets in their quest for unbridled political power!
The current leftist “bailout” plan is designed to “stimulate” government growth and Democrat power, not the US economy. Stop it now!