Letter to the editor:

Why the GOP is responsible for state we’re in

Neil Mizen, Las Vegas

Tue, Oct 7, 2008 (2:05 a.m.)

When one ponders the current status and actions of our government over the past few years, it is natural to ask who is responsible for it all. Inevitably one must conclude it is the Republican Party.

The Republicans have perpetrated on the American people the Iraq war, the pitiful response to Katrina, the treatment of GIs returning from Iraq and now the need, the Bush administration says, for a $700 billion bailout of the financial community.

Someone was responsible, and that someone was the Republican Party. It was the Republican Party that let Wall Street run wild.

Republicans repeatedly warned us not to interfere with the free market. They fostered the “us or them” attitude and labeled anyone who disagreed with them unpatriotic. Their mentality is that to be safe we must remove our shoes before getting on an airplane. Has anyone ever seen such a combination of arrogance and incompetence?

The reality is that the Republican presidential nominee, John McCain, will provide little more than four more years of the Bush mind-set. Yes, he shouts loudly, clearly and often, how he, if elected, is postured to change things.

But his party created this disaster and, given the office, he and his party will continue on this same old path of self-destruction. Trying to deny responsibility as he does, McCain was one of the designers and implementers of the programs that have gone so astray and he cannot just pretend that none of the responsibility lies with him.

Discussion: 16 comments so far…

By jfnance32

10/7/08 at 3:37 a.m.

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It was the Democrats that pushed, pushed, pushed, pushed more, more, more and more sub-prime loans so that minorities could get homes.

Now, we all are paying the price for that crazy social engineering.
By annienonymouse

10/7/08 at 5:55 a.m.

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Where's my boots!
By Future2012

10/7/08 at 6:23 a.m.

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Harry Reid, Nancy Pelosi, Chris Dodd, Barney Frank, and Barack Obama have done nothing in Congress and therefore they can not be responsible for anything.

Do not attack Harry Reid, Nancy Pelosi, Chris Dodd, Barney Frank, and Barack Obama for doing nothing in Congress.

Harry Reid, Nancy Pelosi, Chris Dodd, Barney Frank, and Barack Obama are not responsible for putting affrimative action requirements in the financial system.

Harry Reid, Nancy Pelosi, Chris Dodd, Barney Frank, and Barack Obama are not responsible for putting funding in place for ACORN.

Harry Reid, Nancy Pelosi, Chris Dodd, Barney Frank, and Barack Obama have nothing to do with preventing domestic drilling and sending 700 billion petro dollar overseas.

Harry Reid, Nancy Pelosi, Chris Dodd, Barney Frank, and Barack Obama have done nothing so do not blame them.
By KDR81

10/7/08 at 8:25 a.m.

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If you mean they got us into it by not eliminating Fannie and Fredie, overturning the Community Reinvestment Act, and terminating the Federal Reserves power to inflate the money supply and create easy credit then yes.

But blaming deregulation and limited government is nonsense. http://npri.org/blog/deregulation-didnt-...
By redferret

10/7/08 at 10:24 a.m.

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I'm just not a fan of lowering taxes while we are in the middle of two foreign wars.
By Rverp1

10/7/08 at 3:44 p.m.

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Are you kidding me???? You don't know anything that is going on here do you??? Starting back in the Carter and (mostly) in the Clinton years the federal government decided that everyone owning a home was more important than their ability to pay...So Feddie and Fannie along with all private banks were forced into selling "SUB PRIME" mortgages to people who could not afford to pay back...Banks used to red line areas because of unstable property values.. Once they were not allowed to do that anymore and payments on debt could be up to 50% of your income, then HOME PRICES skyrocketed because of so many more people being able to afford the homes...but alas all of the loans were written as Adjustable Rate loans with the idea that they could refinance in a few years...but then the market slid and they could not refinance so they were foreclosed on...IN REALITY THIS WAS FROM TOO MUCH REGULATION NOT THE ABSENCE OF IT....
By Gordon

10/7/08 at 4:36 p.m.

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Fannie and Freddie do NOT originate loans. Subprime prior to 2002 is not the problem, subprime 2003 forward is the problem. Subprime exploded in 2003 http://bigpicture.typepad.com/.shared/im...

60 minutes had a great piece Sunday explaining the financial crisis. It was the same as my theory. Unregulated credit default swaps, packaged derivatives, greedy realtors, greedy mortgage brokers, greedy wall street firms, and greedy banks. Not just greed either, outright illegal activity also.
http://www.youtube.com/watch?v=-wFFCtx7U...

During Bush's watch subprime loans turned predatory; 2/28's, 3/27's, teaser introductory interest rates that shoot up 10% or more on their resets, and Alt A Liar loans http://money.cnn.com/2007/03/19/news/eco... . When these loans started resetting, doubling homeowners' payments, then foreclosures started rising (again these predatory loans did not exist prior to Bush, subprime loans prior to 2002 have a normal default rate).

The law that DEregulated credit default swaps and derivatives: the Commodity Futures Modernization Act of 2000 http://www.cftc.gov/stellent/groups/publ...

Read the story of how the republican senator Phil Gramm (also McCains economic advisor until he said our current economy is "a mental recession") inserted the legislation in an underhanded way, as an amendment, into a 384 billion omnibus spending bill here http://www.motherjones.com/news/feature/...

The Republicans have asked for 1.8 Trillion in bailouts. They need to change their name to the GOSP-Grand Ole Socialists Party.
By Gordon

10/7/08 at 4:57 p.m.

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Here is Part 2 for the 60 minutes piece on what caused the financial crisis http://www.youtube.com/watch?v=GT76vCHKz...
By jfnance32

10/7/08 at 5:54 p.m.

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If you do not understand on how Fannie Mae and Freddie Mac impacts on sub-prime market then you are totally clueless.

Here is a good piece from the Wall Street Journal on the topic.

http://online.wsj.com/article/SB12221294...

"Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) -- and their sponsors in Washington -- are largely to blame for our current mess."

"Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse."
By jfnance32

10/7/08 at 5:54 p.m.

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Continue....

"If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs."

"The strategy of presenting themselves to Congress as the champions of affordable housing appears to have worked. Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure."

"If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it."
By Gordon

10/7/08 at 6:10 p.m.

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WSJ lost all credibility when Rupert Murdoch bought it and put his propaganda spin on news.

Sorry Republicans killed S.190 in committee; the republican leadership never brought it up for a vote. Who controlled congress in 2005?--Republicans..

If your theory of Fannie and Freddie is the problem, then bailing them out with 200 billion should have solved the problem. We are at 1.8 Trillion in bailouts and counting, far more than the entire subprime market.

The only 'clueless' people on here are the ones getting their information from Rupert's 'Faux News' and countless other media holdings.
By jfnance32

10/7/08 at 6:10 p.m.

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In other words.....Fannie Mae and Freddie Mac are major backers and purchasers of sub-prime loans.

In 2003, the CEO's of those entities were cooking the books to increase the millions in bonuses that they were getting. These same entities were making Obama number 2 in getting cash from this companies. Also, ex-CEO's of Fannie Mae use to be advisors to Obama's campaign.

After getting caught with their hand in the cookie jar, they promise to Congress to pop wide open the sub-prime market that even more minorities could get into homes.

They were buying left and right sub-prime loans. Greedy lenders were generating poor sub-prime loans because Fannie Mae and Freddie Mac would buy anything on the market. These lenders were making instant profit and walking away from the risk that they were generating. The taxpayer were going to get stuck with the tab.

Now, we are paying the price.
By jfnance32

10/7/08 at 6:25 p.m.

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I guess you need to understand the side of effects of the sub-prime boom and now bust.

The explosion of sub-prime created a housing boom. People were buying houses that normally would never qualified for a loan. Lenders were lending to them because Fannie Mae and Freddie Mac were buying these poorly valued products because Democrats wanted to get more minorities into homes.

This housing boom caused housing prices to go up. Investors were buying houses to flip.

This created a fenzy in home building. A very big supply of new homes were hitting the market everyday.

Once interest rates ticked up then many of these sub-primes were ARM---adjusted interest loans--- and many of these people could not afford the payments anymore.

Also because interest rates tick up it started to remove buyers of homes from the market place.

These people started to default and it pushed even more houses on the market.

This caused a very large inventory of unsold houses on the marketplace.

Suppy was out stripping demand in larger volume every day.

This cause a collapse in the construction industry.

High gas prices did not help things much either.

This caused home prices to start to fall. Anybody that bought a home in the last 2 to 5 years is probably upside down in their house (loan is greater than the house is worth).

So when a non sub-prime dude wants to move out his house then he had two choices. Find ten of thousand of dollars in cash (borrow it) or just default on the loan.

It will take 3 to 5 years for demand to catch up to this excess supply of houses. It will 3 to 5 years for the home construction business to recover.

It might be 7 years before homes start to appreciate in value again.
By LV_Tom

10/8/08 at 7:33 a.m.

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The Dems are deft at calling for instantaneous Congressional hearings on any variety of conflicts. But not in this case. Why?

Could it be that they are involved in the creation of this financial mess up to their necks and having hearings will just prove this point. They prefer to let the masses to continue to believe that business is evil factor here like they were taught in Publik Skool system. Business = Evil ........ Government (politicians) = Good
By Gordon

10/8/08 at 11:55 a.m.

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LV_Tom: Actually hearings are ongoing. Guess you missed the Lehman Brothers CEO being grilled during hearings Monday. He received 350 million in pay since 2000 for leading his company into bankruptcy.

Nance: If the facts matched your scenario it would make sense. Problem is the facts don't match.
1. "This created a fenzy in home building. A very big supply of new homes were hitting the market everyday." Houses were sold before construction even began, when bubble burst buyers forfeited their deposits.

2. "Once interest rates ticked up then many of these sub-primes were ARM---adjusted interest loans--- and many of these people could not afford the payments anymore." ARM stands for adjustable rate mortgage. Prior to 2002 ARM's were regulated, most had caps of 1% increase/decrease per year and a maximum increase/decrease of 5% during the life of the loan. The new subprime loans were mostly 2/28's and 3/27's; An introductory 'teaser' interest rate of 0-1%, then a reset after 2 or 3 years to a fixed rate increase of 10% or more. These gimmick predatory loans did not exist prior to 2002.

3. Because these new predatory subprimes were not tied to the prime rate or libor; prime rate/libor increases/decreases had no effect on their loan. There is a big difference between 'reset' and 'adjust'. Brokers received higher commissions for pushing these unfair loans.

4. "High gas prices did not help things much either." Thank Bush's energy policy and deregulation of energy trading for the 560% increase during his administration.

Some of your other points are accurate, but when putting them all together your theory is absolutely wrong. Typical actions of a neocon, rewrite history to fit their flawed theories.

The theory has so many flaws WSJ put the article you posted in the 'Opinion' section. That in of itself shows how flawed it is being that Rupert Murdoch owns WSJ and has no problem normally spreading lies, but this was to obvious of a fabrication for even him.
By LV_Tom

10/8/08 at 8:03 p.m.

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Gordon...My point was made. They are holding hearings on the evil business people. Lehman Bros Nothing on Fannie Mae and Freddie MAC....nothing because Messrs Dodd and Frank are up to their necks in this debacle... Nothing !!!.

I think both should be drug into the street and brutally savaged