Congress and Its Abysmal Failure to Lead
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The News & Advance
Published: September 30, 2008
What the nation and the world watched unveil Monday afternoon on the floor of the House of Representatives was a failure of leadership with unforeseeable consequences for all 340 million Americans.
And we’re not just limiting the definition of “leadership” to include President Bush, House Speaker Nancy Pelosi and the Democratic and Republican leaders of the House. Each and every one of the 228 members of the House who killed the financial stabilization package Monday is an example of failed leadership.
When the $700 billion package came up for a vote, 228 representatives lined up against it: 95 Democrats and 133 Republicans.
And when they were done, the Dow Jones Industrial Average plummeted 778 points, its largest point-drop in history. More than $1.2 trillion in wealth just vanished Monday afternoon.
Members of the House who voted against the package, including Virginians Bob Goodlatte, R-6th District, and Virgil Goode, R-5th District, say constituents were flooding their offices with calls, letters and e-mails urging them to kill the deal, saying taxpayers shouldn’t have to bail out fat-cat Wall Street financiers.
What a load of populist demagoguery. And what an abysmal failure of leadership and lack of intelligence on the part of these elected leaders.
The financial crisis the country is in is far more than just a Wall Street problem, and its impact is far wider than just the financial district in lower Manhattan. And that $1.2 trillion that vanished? It’s in the 401(k)s and pension plans of millions of Americans, not just in the wallets of some fallen Wall Street tycoon.
The entire economy is slowly grinding to a halt, and these people don’t recognize the depth of the abyss they’re staring into.
Overnight credit rates (for those who care, the LIBOR and the TIBOR) are through the roof, and have been since two weeks ago when Lehman Bros. collapsed and insurance giant AIG was effectively nationalized. And why should you care about the LIBOR and TIBOR? Because overnight credit is how companies cover themselves short-term for payroll and daily expenses; it’s how banks shift money around globally; it’s how governments and other entities finance themselves on a short-term basis.
And as important as those numbers are to Main Street, they’re even more important to the folks walking up and down Main Street. Those figures translate into credit-card interest rates, the ability to get a home or car loan and, in an extreme case, whether you have a job next week.
Think what happens when the oil in your car loses its viscosity: The engine keeps running, but ever more slowly, rods and pistons keep firing but with less efficiency. Unless you change the oil, the engine locks up, and you’re toast.
This is the point at which we find the U.S. and global economies. The credit markets are getting ever tighter with each passing day, and 228 members of the House of Representatives don’t seem to care.
The vast majority of them — many of them the 133 Republicans who voted against the rescue plan — based their votes on ideology, the ideology of the free market.
The problem is that the totally free, free market at whose altar they worship is a myth; politics, government and business have been intertwined since Day One. It’s time for Congress to set aside blind ideology, and do whatever it takes to pull this economy back from the brink.
Indeed, it’s past time.
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Reader Reactions
Posted by ( bigjimm ) on October 01, 2008 at 9:35 am
Get past the blaming? Then what will we do? Get back to work? No way, man.
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Posted by ( packer2dogs ) on October 01, 2008 at 9:32 am
Coffeeroad has only part of the story regarding Fannie Mae. First of all, Fannie Mae was working to reach affordable housing targets set by each administration including the administration of George Bush, he of the Republican “ownership society.“ They never did reach the levels of ownership sought out.
The evidence shows that the vast majority of subprime and adjustable rate mortgages were made by unregulated mortgage brokers. The risks were hidden by unregulated credit swapping devices. Then, as the bubble burst, a decline in home values made the mortgage loan problem much greater. Fannie Mae was indeed a problem and the blame needs to be spread around. The current administration pushed for new mortgages as much as any did.
Is pushing for affordable homeownership a problem? I only know that a fair amount of discrimination still exists in the mortgage industry. Racial redlining still occurs. Statistically, African Americans receive worse loan terms than do whites even when the data is adjusted for incomes and Lynchburg was in the top 20 in the nation regarding this practice (I’m sorry but I can’t find my reference for this data. The reference does exist.). In other words, an African American making the same money as a white American is more likely to have poorer mortgage loan rates.
It is specious at best to blame Democrats and particular administrations without all the information. The “blame” is everywhere. And, we now know that the Fannie Mae problem is but a small part of the whole. The real problem was unregulated mortgage brokers and those packaging investments around those bad mortgages.
John McCain calls for regulation? Barack Obama calls for regulation? Guess what, Barney Frank, as chair of the House Financial Services committee, authored a reform bill for Fannie Mae and Freddie Mac that was passed into law.
C’mon, lets get past this blame game and partisan junk and get on with a better program.
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Posted by ( bigjimm ) on October 01, 2008 at 7:49 am
It’s OK Cosmo, with contributors like coffeeroad at least you don’t have to listen to Sean Hannity on the radio or watch Fauxnews. You get it word for word right here. Plus, it’s just as accurate and truthful as if you heard it live.
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Posted by ( Cosmo Wafflefoot ) on October 01, 2008 at 7:46 am
Thanx (coffeeroad). A day without blaming EVERYTHING on Bill Clinton is like a day without sunshine. This problem has nothing to do with a nation that spends more than it produces at all. If we just borrow a little more…..
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Posted by ( coffeeroad ) on October 01, 2008 at 7:39 am
This crisis was caused by political correctness being forced on the mortgage lending industry in the Clinton era.
Before the Democrats’ affirmative action lending policies became an embarrassment, the Los Angeles Times reported that, starting in 1992, a majority-Democratic Congress “mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains.“
Under Clinton, the entire federal government put massive pressure on banks to grant more mortgages to the poor and minorities. Clinton’s secretary of Housing and Urban Development, Andrew Cuomo, investigated Fannie Mae for racial discrimination and proposed that 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low- to moderate-income borrowers by the year 2001.
Instead of looking at “outdated criteria,“ such as the mortgage applicant’s credit history and ability to make a down payment, banks were encouraged to consider nontraditional measures of credit-worthiness, such as having a good jump shot or having a missing child named “Caylee.“
Threatening lawsuits, Clinton’s Federal Reserve demanded that banks treat welfare payments and unemployment benefits as valid income sources to qualify for a mortgage. That isn’t a joke—it’s a fact.
When Democrats controlled both the executive and legislative branches, political correctness was given a veto over sound business practices.
In 1999, liberals were bragging about extending affirmative action to the financial sector. Los Angeles Times reporter Ron Brownstein hailed the Clinton administration’s affirmative action lending policies as one of the “hidden success stories” of the Clinton administration, saying that “black and Latino homeownership has surged to the highest level ever recorded.“
Meanwhile, economists were screaming from the rooftops that the Democrats were forcing mortgage lenders to issue loans that would fail the moment the housing market slowed and deadbeat borrowers couldn’t get out of their loans by selling their houses.
A decade later, the housing bubble burst and, as predicted, food-stamp-backed mortgages collapsed. Democrats set an affirmative action time-bomb and now it’s gone off.
In Bush’s first year in office, the White House chief economist, N. Gregory Mankiw, warned that the government’s “implicit subsidy” of Fannie Mae and Freddie Mac, combined with loans to unqualified borrowers, was creating a huge risk for the entire financial system.
Rep. Barney Frank denounced Mankiw, saying he had no “concern about housing.“ How dare you oppose suicidal loans to people who can’t repay them! The New York Times reported that Fannie Mae and Freddie Mac were “under heavy assault by the Republicans,“ but these entities still had “important political allies” in the Democrats.
Now, at a cost of hundreds of billions of dollars, middle-class taxpayers are going to be forced to bail out the Democrats’ two most important constituent groups: rich Wall Street bankers and welfare recipients.
Political correctness had already ruined education, sports, science and entertainment. But it took a Democratic president with a Democratic congress for political correctness to wreck the financial industry.
Now we, the taxpayers, are being asked to ante up $750 billion to save the firms that made these loans and the recipients of their largesse.
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Posted by ( bigjimm ) on October 01, 2008 at 7:25 am
There is, of course, no consensus even among economists that this bailout will fix anything except the portfolios of the fat cats on Wall St.
It will help the credit crisis temporarily since a few hundred BILLION dollars would help anyone’s credit. The question remains, what is the long term impact?
A weaker dollar, if that is possible, long term inflation and a weakened economy. This will starve out any possibility for any social programs or widespread infrastructure repair.
Let’s keep one positive thing in mind, at least Bush was stopped from handing over Social Security to Wall St., which would have happened if he had gotten the money into private accounts. It would all be going, going, gone.
We have gone from Bush’s “ownership society” to the society of government ownership.
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Posted by ( Cosmo Wafflefoot ) on October 01, 2008 at 5:18 am
Where the heck is Jesus when we need Him? We have been buying more than we sell for decades. We fight wars on borrowed money. America has a negative savings rate! What we need now is a remake of the old “loaves & fishes”. We can’t cover the cost of our borrowing or sustain our phony life styles. What do we do now? Why, we borrow more and pretend that it’s all just an accounting problem that will go away with a vote. COME ON JESUS! (Baby needs a new cell phone.)
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