Obama, The Candidate Of No Change

Somehow I don’t think that Wall Street would have showered Barack He-Who-Must-Not-Be-Middle-Named Obama with millions of dollars if they considered him the candidate of change. As of July 31 of this year, Wall Street barons had poured nearly $10 million into Obama’s campaign. Specifically, employees of Lehman Brothers, the securities firm that declared bankruptcy Monday, had given Obama $370,524. And in the last ten years, only Christopher Dodd (D-Connecticut) raked in more money from Fannie Mae than Obama, and Obama has only been in the Senate four years. His annual take was actually twice Dodd’s. Does this foretell change you believe in?

Before he was forced out under an ethical cloud, Obama economic advisor and former Fanny Mae CEO Franklin Raines soaked Fannie Mae for $100 million in just six years. He was accused of instituting accounting gimmicks that exaggerated Fannie Mae’s earnings. Can anyone say “Enron?” Former Clinton Administration Attorney General Janet Reno and her Justice Department lieutenant, Jamie Gorelick, squeezed $75 million out of Fannie Mae’s rotting carcass for their own bank accounts.

House Speaker Nancy Pelosi (D-Mars) blamed the Bush Administration and proclaimed the Democrats faultless. But, in 1999 the seeds of today’s disaster were sowed when two major changes were made to the banking laws and regulations. That year, Bill Clinton signed a law that dramatically deregulated banks. That law passed the House by a 362-57 margin and by 90-8 in the Senate. At the time, the all-knowing news media declared it a long overdue modernization. But, in addition, Clinton imposed new regulations intended to facilitate home ownership by minorities. His new rules forced lenders to write loans for people whose credit ratings would have prevented them from getting loans in the first place. One of the methods lenders employed to satisfy Clinton’s goal was the subprime mortgage – a practice now condemned as predatory by the same people who forced it upon lenders in the first place. More than half of all mortgages held by African Americans are sub-prime and about 40% of Hispanic mortgages are sub-prime.

I spent about 30 minutes searching the New York Times for news stories regarding the regulation of the financial markets, and I came across this gem from the September 11, 2003 edition. The Bush Administration saw peril in Freddie Mac and Fannie Mae management and proposed a new and stronger oversight agency to oversee the mortgage giants. From that article: “The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates,” the Times wrote.

But the reforms were thwarted by, “Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing,” wrote the 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.”

And so, to preserve the regulations that forced lenders to write doomed loans, Congressional Democrats killed stricter oversight that may very well have prevented the crisis we have today.

A further search found numerous efforts by the Bush Administration to reign in fiscal mismanagement at Fannie Mae and Freddie Mac. In December of 2003 the Times reports that “Freddie Mac Gets Penalty And Rebuke Over Scandal,” for improper accounting that overstated earnings. In the spring of 2004 a headline read: “Fannie Mae Says Its Equity Fell By $1.6 Billion In First Quarter.” Also in 2004, the Bush Administration proposed stricter regulation of Fannie Mae to, “'reduce the potential for future corporate misconduct.”

In 2005, the year Franklin Raines was forced out, John McCain proposed stricter controls that were not enacted.

The crooks responsible for this crisis are now Obama advisors. For example Obama chose Jim Johnson, another scandal-plagued former Fannie Mae CEO, to help him pick his vice presidential candidate. There is plenty of blame to go around. But considering his associations and the fact that Obama can’t even bring himself to criticize corrupt Chicago politics, there is no reason to believe that he’s The One to clean things up.