October 6, 2008

Reactions to the Bailout Bill

Carroll Andrew Morse

Reaction from Second District Congressional candidate Mark Zaccaria on the bailout bill that passed Congress on Friday…

This week Rhode Island's entire congressional delegation voted in favor of an open ended plan to nationalize private property on a scale that boggles the mind. If this had been done using the government's authority under Eminent Domain the legal term for it would be 'A Taking.' Since this bill has been characterized as the cavalry charging to the rescue from over the hill there has been no outcry against it in the press. Too bad. Life is full of compromises, of course, but I wish we had thought more about the pain we were trying to avoid vs the pain we will now induce as the federal government takes ownership of a giant piece of the country.

Think about it. With plenty of blame to go around in Congress you could make a case that those who induced this crisis, through misguided incentives to Fannie Mae and out-and-out quotas for sub-prime mortgages to private banks, have now taken management control of ⅓ of all residential properties. In the military the term for that is Screw Up & Move Up. What kind of financial horsepower have we just given to the Senate Banking Committee and the House Financial Services Committee? What will that kind of authority do to the men and women who now hold its keys?
…and from First District Congressional candidate Jon Scott, on the same subject…
This bailout bill, which supposedly benefits "Main Street America" contains tons or Pork Barrel projects that have nothing to do with the financial crisis. Mr. Kennedy's actions suggest that he is fighting to empower the power brokers on K Street at the expense of those who live on Main Street. Does he even know where Main Street is? It is time we asked him.

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.

I share the opinion of many people. This wasn't a bailout bill, it was a rescue bull that won't stimulate the economy, but will hopefully at least thaw out the credit markets.

Make no mistake, we've given a large blank check to Congress and we're not guaranteed anything.

It's remarkable that John McCain hasn't pulled ahead of Obama given the role that Fannie Mae and Freddie Mac have played in fueling the subprime crisis and the extent to which Obama supported affordable housing efforts.

But in my view, government is only the third most culpable party.

People borrowed more than they could afford.

Mortgage companies wrote mortanges for people they shouldn't have.

Credit rating agencies either failed to understand or ignored the fact that a new group of even more risky subprime borrowers were entering the housing market and didn't make the necessary adjustments when grading CDO's, etc.

The government is responsible to the extent that it pushed "affordable housing" policies seting the stage for the debacle. But if you blame the government primarily, you have to ignore the fact that alot of people aren't accepting personal responsibility for their actions.

Posted by: Anthony at October 6, 2008 2:21 PM


You make a lot of sense and good points.

To me, it's not as surprising as it is sad that McCain was politically hurt by this despite your correct view that Obama supported the very government intervention that caused this.

Unfortunately, I believe that most the electorate reacts simply. The political affiliation of the Executive branch at that moment is held responsible for any adverse event.

This can be helpful or hazardous to people seeking political office. Much of their political success is out of their control. And a policy which reaps benefits in the long term will likely benefit someone else.

‘Why & how’ are not given proper due diligence by most. If things are not good, those perceived as 'in charge' are punished. And that ultimately falls on the President and his party.

It's not fair or reality, but it is what it is.

Posted by: msteven at October 6, 2008 4:40 PM

I understand completely. Most people treat the economy like a football team. If it's performing poorly, you should just fire the head coach.

And you really can't explain the situation in a 30 second TV spot.

I also noticed on the Projo's website reports that Barney Frank is now trying to inject the race card by saying that any criticism of the government's affordable housing efforts is racially motivated. How ridiculous can you get!?!?

According to the Projo, Fran "said that blame is misplaced, because loans under the act are issued by regulated institutions, while far more foreclosures were triggered by high-cost loans made by unregulated entities."

What Frank knowingly omits is that the problem isn't with issuing, it's with purchasing. Last year Fannie and Freddie held more than half of the $1 trillion of Alt-A mortgages. When Freddie and Fannie purchase mortgages, it freed up the ability for addtional underwriting by those companies originating and issuing mortgages.

It's not about race, it's about risk!

Posted by: Anthony at October 6, 2008 6:20 PM

Anthony and msteven, I hate to be the skunk at the party, but ground zeros for these mortgage frauds and excesses were Orange/Riverside County, CA, Phoenix, Las Vegas, Colorado, South Florida,etc. Do you think there are lots of brothers in these hoods? It was the "ownership society" republicans who blew out all sense of financial prudence in this real estate boom/scam. I'm not saying there weren't excesses in the urban/dem areas, but they certainly don't even equal 50% of the problem. McCain can't get any mileage out of the situation because his base (and his top campaign operatives) caused it.

Posted by: observer at October 6, 2008 7:18 PM

You're making so many fundamental errors, it's almost laughable if you actually believe any of what you say.

Let me address them one by one:

1. You generalize the housing markets by geographic regions, but it's the subprime borrowers within those regions that were at the root of the problem. Prices for high-end housing in many areas that you mention are actually INCREASING (http://www.palmbeachdailynews.com/biz/content/business/EOS_biz_real_estate_0518.html)

The truth of the matter is that all of the areas you mention experienced very high growth, which led to an overheating of the market. Many workers moved to these areas from the Rust Belt and economically struggling northern states.

But the problem started with subprime mortgages. As much as you'd like to deny it, you won't get any reputable economist--Democrat, Republican, liberal or conservative to deny that fact.

2. You also stereotype the people who live in each area. The reality is that while many wealthy people live in Las Vegas, it actually has the highest per capita population of service workers of any major city. California and South Florida have high populations of service workers as well.

Once again, if you want to seriously address the problem, you have to look at those who held mortgages that DEFAULTED, not the people who kept paying their mortgage, but happen to live in California, Nevada, Florida, etc.

3. You say that McCain's base and "operatives" caused the problem. Yet not a single member of McCain's advisory team or "operatives" was ever an employee of Fannie Mae or Freddie Mac.

Just the opposite.

McCain co-sponsored the bill to increase improve Fannie Mae's operational standard and reduce taxpayer risk (http://thomas.loc.gov/cgi-bin/bdquery/z?d109:s190:)

On the other hand, Barack Obama had Jim Johnson the former chairman of Fannie Mae running his VP search committee, took advice from Franklin Raines,a former CEO of Fannie Mae, was the recipient of more campaign cash from Fannie Mae and Freddie Mac than any other member of Congress during his time in the Senate, and was publicly thanked by the interim CEO of Fannie Mae in 2005 for "advancing Fannie Mae's agenda".

Now, I won't blame Obama for the economic crisis. He supported the wrong policies, but didn't have the seniority to really play a role.

Barney Frank is a different story. He may be more responsible than any other Member of Congress for our situation.

Frank actively prevented reform of Fannie and Freddie.

It shouldn't come as a surprise. Barney Frank was involved in a relationship with Herb Moses, a Fannie Mae executive who was responsible for developing Fannie Mae's 203(k) and Title One lending programs.

Here's a direct quote from Barney Frank in the 9/11/2003 edition of the NY Times:

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

So Observer, if you want to believe the spin you're putting out about McCain being somehow responsible, go right ahead and believe it. You're just deceiving yourself.

But please don't respond to me with some unsubstantiated talking points that were put out by the Obama campaign in an effort to mislead voters unwilling to do the research.

My guess is that the Obama campaign will want to shift the debate away from the subprime mess to something like healthcare or social security as soon as possible.

They're into the economic crisis up to their knees and it's only a matter of time before the McCain campaign wakes up and smells the coffee. At that point, maybe, just maybe, the McCain campaign will decide it's worth taking the time to explain the whole thing to the American electorate.

It may not fit a 30 second clip, but if Americans understand the origin of our current economic woes, Obama would be in serious trouble.

Posted by: Anthony at October 6, 2008 8:12 PM


I was going to respond but Anthony stole my thunder - and well done. The idea that this was caused by Republicans and particularly by people involved with John McCain is blantanly false. Of course, it is the reason Obama will likely win the election. But that doesn't make it fair or reality. TIt makes it political. That's an assertion I'll stand by.

Posted by: msteven at October 6, 2008 9:19 PM

Now if we could only get Jon and Mark elected.....

Posted by: DonnaC at October 7, 2008 7:20 PM
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