tag:www.talkingpointsmemo.com,2008:/talk/blogs/ronharris//5536 2008-10-20T18:09:34Z Movable Type Pro 4.21-en tag:www.talkingpointsmemo.com,2008:/talk/blogs/ronharris//5536.238484 2008-10-20T18:00:28Z 2008-10-20T18:09:34Z

Aren't we all fedup!Listening to the "wingnuts" out there, especially the "dittoheads" who revere every word spoken by Rush Limbaugh, you'd come to the conclusion that this financial crisis that threatens every household in this country was a result of...

Completely Fedup http://www.fedup.com fedup!

Listening to the "wingnuts" out there, especially the "dittoheads" who revere every word spoken by Rush Limbaugh, you'd come to the conclusion that this financial crisis that threatens every household in this country was a result of the liberal leanings of past Democratic presidents (think Carter and Clinton) and their "obedient" cohorts in Congress.

But, wait a minute! Let's analyze that for a moment. When right wing conservative Republicans, hereinafter referred to as: "wingnuts", make that accusation, they back it up by pointing to a bill approved by the 95th Congress and signed in 1977 by President Jimmy Carter. Equally, they accuse President Bill Clinton of making changes to the original bill that "forced" lending institutions to make loans to unqualified buyers who would almost certainly default.

There are several unfortunate "facts" that put a lie to what these wingnuts are claiming. For example, the opening line of The Community Reinvestment Act that wingnuts point to as evidence that the democrats are "forcing" banks to make risky loans is:  


"The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities...".

Note the phrase "designed to encourage", that doesn't sound like "force" to me.

Next they point to legislative changes signed into law by Bill Clinton. There's more than one problem with this claim. First off, if you think back, you'll remember that the republicans "impeached" President Clinton in 1998 and weren't being the least bit cooperative with him. Add to that the fact that in 1999, the makeup of the Congress was 45 Democrats and 55 Republicans. Not only did the Republicans have a large majority, they had things completely their way. Hell, Democrats were complaining that they couldn't offer amendments to bills and were even denied access to conference rooms in which to caucus.

No, liberals didn't create this problem, although they certainly cannot be held blameless.

The real culprit in creating this sick environment that allowed the banks and lending institutions to run rampant was the financial sector's favorite lapdog, Phil Gramm, retired senator from Texas. When Gramm was in the Senate, he was receiving millions of dollars from lobbyists representing the financial world. And, you can be sure he earned those millions of dollars. How, you ask? Well, it's a very interesting story.

On December 15, 2000, Gramm slipped into an omnibus spending bill, a little ditty called the Commodity Futures Modernization Act (CFMA) that had the effect of prohibiting any governmental regulation of a cute little financial instrument know as "credit default swaps". These swaps, known as CDS'S, were used by financial institutions to essentially guarantee the credit worthiness of huge securities that consisted of these sub-prime loans, bundled together and sold to hedge funds, big investors, banks and governments around the world. Simply, a CDS supposedly guarantees the buyer of these securities that they will be made whole in the event of a default.

A nice little package for everyone, don't you think? The investment houses could bundle up these sub-prime loans, relieving the originator of the loan of the obligation so they could continue loaning money, and sell them to unwary investors. And then, they sell to that investor a credit default swap, which would protect them. What they didn't reveal to these investors was what seemed to be an insignificant detail; there was no regulation in this market. No one kept track of the volume of these CDS's and worse, no one made sure that the sellers of these swaps had the resources to back them up. It has now been revealed that there are some $62 TRILLION dollars in the credit default swap market!! Now that the housing market is imploding, companies like AIG find themselves virtually insolvent, without enough capital to cover their bets on CDS's so they have turned to a very compliant Bush administration to bail them out with taxpayer money.

This CFMA bill that Gramm inserted into another bill in the dark of night had a provision lobbied for by Enron - a huge Gramm contributor - was the cute little provision that exempted energy trading from regulatory oversight which allowed Enron to virtually rape electricity consumer of California to the tune of billions of dollars. His wife, Wendy, who at the time was chairwoman of the Commodity Futures Trading Commission, had pushed through a rule excluding Enron's energy futures contracts from government oversight. Her reward; a position with Enron that brought between $915,000 and $1.8 million to the Gramm family.

By the way, Phil Gramm is now the co-chair of the McCain presidential campaign and has been mentioned as a candidate to become Treasury Secretary. Ain't that grand! ]]>