The 3 a.m. Call
 Senator
McCain "metaphorically" answered his
phone call regarding the financial meltdown and
said "It has become clear that no consensus
has developed to support the administration’s
proposal. I do not believe that the plan on the
table will pass as it currently stands and we
are running out of time." He then again puts
country first and puts a halt to his campaign
and travels to Washington D.C.
The "chosen one"
answered his phone and said to everyone "They
will call me if they need me" and went back
to sleep dreaming of his "Ascension."
An overview of how this
debacle started:
One of the most frequently asked questions
by our members is how did the government get so
deeply involved in the housing market? According
to Investors Business Daily, the answer is President
Clinton wanted it that way. "After entering
office in 1993, he extensively rewrote Fannie’s
and Freddie’s rules. In so doing, he turned
the two quasi-private mortgage funding firms into
a semi-nationalized monopoly that dispensed cash
to markets, made loans to large Democratic voting
blocs and handed favors, jobs, and money to political
allies. This potent mix led inevitably to corruption
and the Fannie-Freddie collapse. Congress was
about to change hands, from Democrats to Republicans.
Rather than submit legislation that the GOP-led
Congress was almost sure to reject, Clinton ordered
Robert Rubin’s Treasury Department to  rewrite
the rules in 1995. It made getting a good CRA
rating harder, banks were given strict new numerical
quotas and measures for the level of "diversity"
in their loan portfolios. Getting a good CRA rating
was key for a bank that wanted to expand or merge
with another. Loans started being made on the
basis of race, and often little else. Other rule
changes gave Fannie and Freddie extraordinary
leverage, allowing them to hold just 2.5% of capital
to back their investment vs. 10% for banks. Since
they could borrow at lower rates than banks due
to implicit government guarantees for their debt,
the government-sponsored enterprises boomed. With
incentives in place, banks poured billions of
dollars into poor communities, often "no
doc" and "no income" loans that
required no money down and no verification of
income. Worse still was the cronyism! Fannie and
Freddie became home to out-of-work politicians,
mostly Clinton Democrats. Did it work? Well, if
measured by the goal of putting more poor people
into homes, the answer would have to be yes. From
1995 to 2005, a Harvard study shows minorities
made up 49% of the 12.5 million new home owners.
The problem is that many of the loans have now
gone bad and minority homeownership rates are
shrinking fast, and are a failed legacy of the
Clinton era."
2/17/2005- House Financial
Service Committee chairman Greenspan said "By
enabling these institutions to increase in size…We
are placing the total financial system of the
future at a substantial risk"
4/6/2005-Senate Banking Committee
hearing- Sen. Charles Schumer(D) N.Y.-"I
think Fannie and Freddie have done an incredibly
good job and are an intrinsic part of making America
the best housed people in the world: if you look
over the last 20 of whatever years, they’ve
done a very, very good job."
5/25/2006-Senate floor, Senator
John McCain "For years I have been concerned
about the regulatory structure that governs Fannie
Mae and Freddie Mac…And the sheer magnitude
of those companies and the role they play in the
housing market…the GSE’s need to be
reformed without delay"
5/26/2006-Senator McCain statement
as co-sponsorship of Federal Housing Enterprise
Regulatory Reform Act of 2005 " I join as
co-sponsor of the Federal Housing Reform Act of
2005 S-190 to underscore my support for quick
passage of GSE Regulatory Reform Legislation.
If Congress does not act…American taxpayers
will continue to be exposed to the enormous risk
that Fannie Mae and Freddie Mac pose to the housing
market, the overall financial system, and the
economy as a whole. "
The first thing to understand
is that this bailout plan does not have to cost
the taxpayers anywhere close to "700 billion",
as long that it has an excellent design. This
outrageous figure is an estimate of how much the
government would spend to buy deteriorating assets
not held by banks. Eventually the government will
turn around and sell these assets for a price
which will be greater than zero.
Philosophically, we at United
Small Business, are against government bailouts.
But, we feel the other options would be far more
risky. We believe that the taxpayers should get
more than just the avoidance of the apocalypse
for their risk. They have to get stock or warrants
on the receiving end. The government would eventually
sell the stock at a profit when conditions improve.
An approach like this was used in Sweden in the
early 1990’s when its’ financial systems
also melted down. We believe that this agreement
must have rigorous and independent oversight,
strong executive-compensation standards and protection
for the taxpayers. We need quick, bold action.
Malcolm Lunn
Chairman of the Board
United Small
Business
Proclaming Liberty to America's Small Business
P O Box 3132 St. Charles, IL 60174 - USB1@sbcglobal.net
Phone - 877/ 535-4 USB Fax - 877/ 722-4USB
|
