Pajamas Media

50 Comments

1. BackwardsBoy:

McCain missed a golden opportunity in last nights’ debate when asked how we could “sacrifice”. He should have answered: “Thanks to the Democrat-led Congress and their reluctance to implement policies that benefit the majority of Americans, we’re already sacrificing when we have to pay twice the price for a gallon of gas and a gallon of milk compared to two years ago and you are forced to pay nearly half of your income in total taxes.”
Now that, folks, is the kind of straight talk that will win this election for the GOP and return our government to some reasonable semblance of sanity.

Oct 8, 2008 - 10:08 am 2. rocketeer:

Unfortunately, McCain just doesn’t have it in him to criticize democrats. He just has no track record of being able to do that. Republican’s, he has fought with his entire career, but democrats, he has never stood up to.
I’m so disappointed in last night’s performance (at presidential debate #2) by McCain. He had the opportunity to go for the jugular on this situation with Obama in particular and democrats more in general with what they have done to block any attempts to reign in the bozos over at FreddieMac and FannieMae. Instead of making these seamy relationships the centerpoint of his attack, he meekly made references to Obama’s actions.
If McCain, or one of his “advisers” reads these comments, GET ANGRY AND STAY ANGRY! You’re dealing with the democrats here, you’d better be willing to take them out at the knees, because they are certainly doing it to you.

Oct 8, 2008 - 10:11 am 3. CALIndie:

Hoping that John McCain is going to bring the heat and seal the deal is like being a Cleveland Browns or Ohio State Buckeyes fan. We’re all so hopeful until the reality of our plight sinks in each football afternoon. Doomed, we’re all doomed!

Now, in classic Browns fan fashion, maybe, just maybe the opponent will self-destruct worse than us! Oh… to have hope again!

Oct 8, 2008 - 10:18 am 4. attorneygirl:

I took the McCain yard signs down.

And they won’t be put back up.

I was appalled at McCain’s dismal performance in last night’s debate.

With McCain’s “Resurgence Plan” he wants to enlarge the already socialist bail out. I am so against McCain’s stance on this, I cannot vote for him. Why isn’t Sarah Palin on the top of the ticket? I’d vote for her.

Obama is a socialist of the worst kind.

But McCain failed to be a leader.

I cannot follow him.

I am now a woman with a vote, but with no one to vote for.

Oct 8, 2008 - 10:31 am 5. jb:

attorneygirl, Vote for Palin. If they do actually win this thing it would set her up nicely for 2012. Either way I’d rather have her in there as VP than Obama as POTUS.

Oct 8, 2008 - 10:58 am 6. Chris:

The issue needs to be framed thusly…

The Democrats wanted nearly everyone to have a mortgage and now want nearly everyone to have health insurance. Given the results in the former achieved by their pets, Fannie & Freddie, do we really want to let them try their hand at the latter?

Oct 8, 2008 - 11:25 am 7. The Postliberal:

McCain has said he’d rather lose an election than lose a war. He also needs to decide that he’d rather lose an election than lose our long-term prosperity, our cultural self-reliance (whatever is left of it), and our freedom to speak and hear the truth.

I’m sure the other candidate would trade everything for power; I hope McCain is humbly satisfied with the leadership opportunity that the Republican presidential nomination has given him. If he tells the truth he’s done his duty by America. The rest is up to the voters.

Oct 8, 2008 - 11:31 am 8. David Thomson:

Barney Frank must become the poster child of Democratic Party politically correct craziness. If the Massachusetts congressman become a household name before Election Day—Barack Obama will be defeated. Both McCain and Palin must constantly refer to Frank. He name should be uttered at least two or three times at each campaign stop.

Oct 8, 2008 - 11:57 am 9. jb:

Not to change the subject but I have noticed the signs going up in my neighborhood. I live in Southern Maryland and the signs are not surprisingly 3-1 McCain/Palin. What is interesting though are the signs for McCain saying McCain/Palin and the ones for Obama just have his name on it, Biden’s name is not there. I just thought that was interesting. Now, you may go back to the original conversation.

Oct 8, 2008 - 12:32 pm 10. USAF Captain:

..the silence that speaks volumes is the absence of the trolls in this thread and their invectives about how poorly McCain did in the debate.

Oct 8, 2008 - 12:32 pm 11. Bob:

Attorneygirl – Senator McCain DID say it was the democrats in Congress, including Senator Obama, who opposed tighter controls on Fannie Mae and Freddie Mac; Obama’s response was weak – that McCain ‘jumped on’ proposed reform legislation and that it didn’t pass (notice Obama never said he supported it).

Just like everything else, this was glossed over in the MSM’s rush to coronate Obama.

He’s starting to get this message out – note the speech a couple of days ago, and last night. Expect this to continue.

The problem is, we’re the only ones listening.

Oct 8, 2008 - 12:51 pm 12. Sandy Salt:

It is truly sad that McCain didn’t do any better in the debate, but I just don’t think he has it in him to cross the aisle and smack the Democrats on the back of the head. This election is one of no choice because we have no choice in who we vote for and once the masses elect Obama will have no choice. We will have to sit and take on the crap they will be shoveling our way. America really needs to wise up and see what damage Obama, Pelosi and Reid are going to do to this country. It will be far worse than Carter. The only choice we will have is to pray that 2010 and 2012 come quickly. Of course you won’t be able to pray except locked in your closet with no one home because it will be against some crazy new Muslim protection law.

Oct 8, 2008 - 12:56 pm 13. Provit2me:

test

Oct 8, 2008 - 1:06 pm 14. Jim Baker:

McCain looked too much like Bob Dole last night. (not his fault) Talked too much like him, too. (was his fault) Still hasn’t learned that the Democraps are the enemy and the media are Democrats. Wants us to guess that he is a better choice. That type of strategy works every blue moon for an incumbant, but never for anyone else. Go Sarah, keep hammering on that lying liar.

Oct 8, 2008 - 1:13 pm 15. proud elitist:

USAF…McCain was pathetic. A hybrid of Igor and Gollum.

McCain (and your) amnesia over the philosophical culture that led to our economic crisis is astonishing (and hysterical).

Yes, Freddie/Fannie took advantage of the loopholes. And both Obama and McCain have F/F peeps in their campaigns.

But it is true that McCain jumped on the bill a good year into it. He didn’t introduce it. And while he may have sounded an alarm in 2005/2006, let us recall the 20+ years prior to that. Let us recall that he was a “Keating Five” member. His campaign greatly benefited from Keating. McCain has said, in his own words, that his judgement was flawed with regard to Keating.

It is identical to your “Teh Surge” meme and Obama. You want to forget about 2003-2007 — prior to Teh Surge. You certainly don’t want to acknowledge that Teh Surge was only a small part of why the violence reduced in Iraq. Just like you want to gloss over the fact that McCain has been a very strong proponent of deregulation in his career in the Congress. It has not been until very recently that his tune has changed.

AND, finally, the 20005/2006 bill that McCain is referring to (which never passed, BTW) was supported by Freddie and Fannie.

You can have your Gollum.

I’ll take my Aragorn.

Oct 8, 2008 - 1:21 pm 16. J.E.Rendini:

Senator McCain suffers in these debates because he does not make the connection between free markets and truth. Take, for example, his remark about funding so-called alternative energy sources. The only reason government funding is required for such “alternates” is that the markets have judged them unworthy of investment. In other words, the market is saying these alternates are not worth much. If the government subsidizes windmills or solar cells, that subsidy constitutes a “lie” about their value. Such a policy will create a bubble in the energy market just as surely as forcing banks to subsidize subprime loans created a bubble in the housing market.

Oct 8, 2008 - 1:27 pm 17. TeamPlayer:

Interesting interview with David Brooks, just a couple minutes long:

http://www.youtube.com/watch?v=GvxQwNqZSOQ

Oct 8, 2008 - 1:35 pm 18. Cowcup:

McCain played wild right before the first debate. And he failed to pull it off.

Then, he’s like, after being bitten by a snake, he’s afraid of ropes now. He dare not to play wild again.

I thought he was a great strategist after the Palin pick. But then, his management of Palin during September was a disaster. Palin obviously has her own little problems. McCain, though, magnified it. Then he’s knocked off by the economic storm. It’s actually OK if he didn’t understand the whole mess from the beginning. However, you have to think, he SHOULD have qualified economic advisers around!! And if he does, then he should be at least a little prepared, don’t you think so? Now, after a few weeks, he’s still at a loss, and dare not take a popular stance. It does say something about his ability to lead.

At this moment, I am even having doubt that a McCain win might hurt Palin’s chance 4 years later.

The only thing he’s done that is good, so far, is to introduce Palin to the nation. But, even that, think about it, is hardly a real good job. (And Palin might not really need it.)

One thing is clear. McCain is a strong fighter for the Free Market. And the brand of Free Market, without a strong advocate, would not see light again in the coming 4 years in the aftermath of the financial mess. With much intervention already promised by this Congress, and the coming DDD, one really need the audacity of hope now.

Oct 8, 2008 - 2:01 pm 19. Michael:

Unfortunately we may get a socialist. God help us all.

Oct 8, 2008 - 2:36 pm 20. nobozons:

The earmark of my long inactive blog is “No Idiots for President” and now we have two.

Oct 8, 2008 - 2:42 pm 21. geokster:

Am I the only one that finds the perfect timing of this whole “crisis” suspicious?

Had this all happened several months ago, the political fallout would have been sorted out by now. If it happened as little as 8 weeks from now, it would not have had an effect on the election.

But just a week after the nomination of Sarah Palin had derailed plans already in place for the coronation of The One, the announcement that we had to bail out Fannie and Freddie was made. In rapid succession, this was followed by the failures of major investment banks, suddenly turning an election that been trending McCain solidly for Obama. Even democrat congressional gains had become questionable prior to this.

I have not been able to locate, despite extensive googling, anything that will show what exactly caused the announcement of Fannie and Freddie’s takeover to be made when it was. Planning for such a takeover was probably in progress for some time. Is it possible that the need to sway an election forced the timing?

Call me a cynic, but I have my suspicion that this problem had been known for some time to Henry Paulson, Fannie and Freddie executives, and their supporters in the Congress like Dodd and Frank, and its publication held in abeyance, waiting for the moment when it might be most useful to Obama and the democrats.

And all this follows the quadrennial Chicken Little economic reporting by the democrat media, which starts about a year before every election where the presidency is either open and/or the democrat candidate is not the incumbent. Note that there was no gnashing of economic teeth before either the 1996 or 2000 elections, even though an actual slowdown was occurring 6 months before the 2000 election. If there had been, the republicans could have tied Gore to it, and the infamous “chad” scandal would have been irrelevant. Historians will have to sort out how much of a role this incessant politically-motivated gloom-and-doom reporting actually had in making this “crisis” a self-fulfilling prophecy, by depressing consumer confidence to the point that it caused or at least contributed to economic malaise.

I’m not a conspiracy theorist, but all this seems way too coincidental, and I don’t believe that this the first time that events have somehow conspired to help Obama. He managed to get all his opponents thrown off the ballot in his first run for State Senator on technicalities, enabling him to run unopposed. Then in his election to the US Senate, he managed to find sympathetic judges (in Chicago – now there’s another coincidence for you) to release legally “sealed” divorce records for both his democrat primary opponent and then a strong republican challenger, to discredit him just before the election.
http://www.freerepublic.com/focus/f-news/2075850/posts

Is this the nationalization of Chicago machine tactics? David Axelrod, Obama’s campaign manager, came up through the Chicago system as well. Another coincidence?

Oct 8, 2008 - 2:54 pm 22. JMarra:

Boy, what a bunch of sad sacks. All that’s missing is the hiss of pot smoking and the gurgle of Yoo-Hoo.

Oct 8, 2008 - 3:08 pm 23. Marc Malone:

realitycheq – to be fair to Bush, much of the debt is also due to Homeland Security. Airports. Ports. Response teams. Training of local police. Counterterrorism. Increased surveillance. Border patrol.

Much also is disaster relief (been a lot of that). Changing FEMA to a proactive, rather than reactive organization. refilling the strategic reserve drawn down by Clinton. Rebuilding the military decimated by Clinton. Same with CIA. And NASA. Increased foreign aid, especially to Africa.

As for third party, I’m a fiscal conservative and a social moderate. I took the test at politicalcompass.com and was confirmed in my own assessment. Where’s my party?

Actually, my party is the Republican Party. It’s just been hijacked by the far right. Same happened to the Dems. That’s why there are so many Independents. They’re people who’ve had their parties drift away from them. Our parties used to be able to legislate, because they weren’t such fierce enemies. They were both more centrist. Now, they’re bitter enemies. Thus, this mess. Party means more than country.

Oct 8, 2008 - 3:10 pm 24. proud elitist:

Yes, geokster. You are.

This has been coming down the pipes for quite a while. The sub-prime issue bells were rung in 2007 without heeding of warning.

Let’s be fair, people. The Dems just don’t have what it takes to coordinate any type of conspiracy. Not these present Dems.

Nice try, though.

Actually, pathetic, but h*ck, you are a McCain supporter and that is the current state of his campaign…

Oct 8, 2008 - 3:39 pm 25. Yaakov Watkins:

Explain to me how the failure of a 540 million subprime market let to the need of a 700 Billion dollar bailout.

The problem is bigger than the subprime market.

Oct 8, 2008 - 3:53 pm 26. Yaakov Watkins:

Explain to me how the failure of a 540 million subprime market led to the need of a 700 Billion dollar bailout.

The problem is bigger than the subprime market.

Oct 8, 2008 - 4:03 pm 27. JED:

McCain’s first mistake at the debate was not disputing Obama’s invective that the entire global economic crisis was Bush’s fault. McCain could have defended the president, he could have pointed out the naivety of such a pompous “fact”, he could have made quite a list of the usual suspects. Instead McCain supported Bush Derangement Syndrome and later the new religion of global warming by not speaking up.

Oct 8, 2008 - 4:07 pm 28. kabud:

McCain made a very good proposition how to resolve financial crisis.

He said lets stabilize housing markets and house values.
SUPER.

Look what it means:

lets say we have 5 million foreclosures

figure is close and it may vary out there, but on the strategic level : 5 million

So we have to subsidise 5 million mortgages

Lets say average is 200 thousand dollars

Lets say 5 million houses lost 50% of their price in the last 2 years: they are the worst of course, it is Florida, las vegas, so on

So we have to `add` 100 thousand tax money each to `reimburse` the price

100 000 by 5 million = 500 billion.

This is MAXIMUM to make economy go ABSOLUTELY STRAIGHT

well, by the logic of BAILOUT

Oct 8, 2008 - 4:10 pm 29. Yaakov Watkins:

Explain to me how the failure of a 540 million subprime market led to the need for a 700 Billion dollar bailout.

The problem is bigger than the subprime market.

Oct 8, 2008 - 4:10 pm 30. SunSword:

BFD.

I don’t care. I don’t care if the credit market freezes between now and next year. I don’t care if the DOW hits 3000. (Yeah, my 401K will scream but I ignore it I am not going to pull on that for 20 years).

I don’t care. Let the housing market melt down. (Yes I own a house, but have no intention of selling for 10 years.)

I don’t care. Let the government go Socialist. Let it go broke. Let us all have Jimmy Carter deja vu squared. I think the streaker songs were funny. And the trucker/CB movies were nuts but fun.

So the heck with it. Let it ALL melt down. Heck, let high speed bolides hit the Earth. Let’s have nukes in shipping containers going kaboom, death plagues released from loonie Islamic mad scientist labs.

Bring it punky monkeys. Shoot it, eat it, or bury it.

Oct 8, 2008 - 4:20 pm 31. Hudel:

attorneygirl if you smart enough to be attorney then your smart enough to put your yard sign back. Palin is the real deal. If McCain loses we will never see her brand again. George Soros will make sure she is buried and never spoke about again. No history books will even mention the true grit of the American woman…

Oct 8, 2008 - 4:40 pm 32. BC:

Maybe you yahoos should Google a little bit:
1) Fannie Mae Rick Davis

2) Fannie Mae Christopher Bond HUD IG

3) President Hosts Minority Homeownership

Shmucks. Obama will bring in very bright, very competent people who will try to replace the dumb screw-ups currently peppering the federal government, and who came in during Bush’s reign of lies and incompetence. If you have any genuine concern for the well being of your country, you should be rooting for Obama to win and drop all your moronic and clueless “socialist” smears and such.

Oct 8, 2008 - 4:50 pm 33. USAF Captain:

Greenhut writes:

“Is it too much to expect the GOP ticket to figure out a way to make this case? Shouldn’t a maverick be willing to level with the public, not only about corporate America’s role in this disaster and the federal government’s role, but also about the role played by average Americans?”

Greenhut, you jerk, apparently you are not listening nor is the American [Idol] Public. How many times does one have to connect the dots: Barney Frank..Raines..Johnson..Dodd..Maxine “Everything is just fine” Waters and the rest of these clowns?

You and Bock over at the O.C. Register spend all of your time in your Libertarian Ivory Towers lecturing us on how the Republicans have screwed everything up (o.k., so they have) when you should expend some effort hectoring the great unwashed who think Obama is going to really be a Messiah and save their butts from oblivion.

Oh, wait, I get it. Obama becomes POTUS and you get to write four year’s worth of “I told you so” columns for your diminishing readership.

By the way, has Bock decided to vote in an election yet?

Oct 8, 2008 - 5:12 pm 34. kabud:

Palin is young enough to realize lots of things

older politicians did not get

she will go very high and very fast under any scenario

mark these words.

Oct 8, 2008 - 5:17 pm 35. Someone75:

kabud:

After conservatives blast Obama on a daily basis for being nothing but an orator, how can you possibly think Palin is more than the summer of her words? Like Obama, she gives a good speech. Unlike Obama, when she has to field questions – legitimate policy questions – her answers are utterly incoherent. Being president is more than making speeches and relating to the common folk. Besides – the whole idea of “common folk” is a myth. 70% of the population lives in an urban environment. Like it or not, small town America is in the minority and is losing its voice. A politician that relates well to small town America is worth less and less every election. This isn’t a matter of my opinion – it’s a matter of facts. The world is changing and we’re heading into some very uncertain times.

Personally, when I hear the words “Joe Six Pack”, I think “fat alcoholic sitting on the couch, watching NASCAR” – not my idea of a quality person. When I hear “Joe Six Pack”, I’m disgusted that anyone would try to cater to these slovenly people. Since when is drinking beers and watching NASCAR something to be proud of?

Oct 8, 2008 - 6:12 pm 36. Terry Gain:

“About $1 trillion was due to that completely unnecessary war in Iraq.”

Realitycheck

You are among the uninformed majority who don’t understand that the war in Iraq was lengthened because it became the war against al Qaeda. That entity was able to increase the violence in Iraq from 2005 to mid 2007 but in the end they have suffered a devastating and humiliating defeat – and not just at the hands of Americans – but Iraqis and Americans fighting together.

Another thing not comprehended by your “reality” is that but for this war America would now be facing the propsect of both Iraq and Iran training terrorists nad pursuing nuclear weapons.

Anyone who believes that al Qaeda does not need to be fought and defeated is not worthy of the name conservative. All the naive leftist wishing and hoping ain’t going to make al Qaeda go away.

Oct 8, 2008 - 6:40 pm 37. kabud:

nothing wrong with Sarah saying those things:
she is much better as an executive then as a national speaker, and it ssoes in everything she does

she said things on foreign policy that no politician is saying , even McCain

She has a very good instincts and knows about our main enemy first hand

what we see happening now is an economic war against USA. It is a war where organized crime, foreign shady money, russian aggression and other factors and corrupted politicians in USA from both parties are our enemy

Palin so far looks like she doesnt want to be a part of THEM but rather will take OUR side, the side of te people

and not just claims so as Obama but WILL DO IT

Oct 8, 2008 - 6:43 pm 38. Terry Gain:

“Since when is drinking beers and watching NASCAR something to be proud of?”

Since long after being a member of the New Socialist Party was cool. Or haven’t you heard?

Oct 8, 2008 - 6:56 pm 39. Someone75:

Kabud:

Here’s what I don’t understand. Obama talks about reform. Palin talks about reform. But, according to you, Obama “wants” to make change while Palin “will” make change. That just doesn’t make sense. They’re both making claims. The difference is, Obama is running for president where he has real power. Palin is running for VP, which essentially does nothing. If you think McCain cares about anything she has to say, just look at how his handlers dominate her. She doesn’t get to speak unless they have “secured” the situation, she doesn’t get to go on TV shows, even if she wants to, etc. McCain is forcing her to be who he needs her to be, not who she really is.

If she has such good instincts, why does she come off as totally uninformed in interviews? If she knows about the economy, why is she always so vague, or nonsensical? Couric gave her plenty of changes to state her position on policy. Palin had no idea what to say, so she said things that didn’t make sense in the English language. If she’s so smart, let her prove it by talking to journalists without McCain’s people hovering over her.

I, for one, have had enough of presidents who mangle the English language. I want a president that is prestigious again – someone to look up to – not someone who doesn’t know how to pronounce “nuclear”. We as a nation look like idiots when our president stands up and mispronounces words. Lopping off the end of gerunds is cute – if it’s your funny uncle from the deep south, but not if it’s the person with the “nucular” codes.

Oct 8, 2008 - 7:01 pm 40. keithacia:

let me check with amy goodman about what to think about this one

Oct 8, 2008 - 7:25 pm 41. thegr8_1:

2600 days no terrorist attack here. Coincidence Spitzer arrested right before Bear went under. I wish Bobby Jindal was willing to be President don’t know anyone else qualified. Hopefully he will run in 2012 if we still have free elections.
Leverage is how we are in this mess. Banks are at about 10-1 brokerages were 30-1 and Fannie and Freddie were 80-1. A small drop in asset values is making these companies insolvent. McCain needs to attack Barfy Frank, Chuckie Schumer, Chris Dud, etc and throw them under his bus. Also tie Obama to Ayers, Acorn, Soros, Annenburh etc.
I have job security work for the second largest law firm on the country that handles foreclosures and bankruptcies. Other peoples greed and stupidity are our gain.

Oct 8, 2008 - 7:37 pm 42. thegr8_1:

Go to the Great One’s website at Marklevinshow.com and listen to the first 15 minutes of last night’s podcast it will make your jaw drop.

Oct 8, 2008 - 7:43 pm 43. kabud:

McCain campaign is terrible

But everything i learned about Sarah- i like very much

i know this type very well.

All the words she said are correct. She has a very good understanding of things most polititians dont understand or are scared to touch

She is honest.

Oct 8, 2008 - 8:50 pm 44. Sen. McCain The New Greenspan? : The New Nixon: News and Commentary about the President, his Times, and his Legacy:

[...] his article at Pajamas media, the OC Register’s Steven Greenhunt explains that John McCain’s only hope of victory is to become an [...]

Oct 8, 2008 - 9:37 pm 45. Richard:

OK, here is the story with McCain. There are many Democrats who are going to vote for him. Angry Hillary Dems, Blue dogs, the Dems who won’t vote for a Black man. Of course their not telling Zogby, CNN or Rassmussen. The only thing that could change their vote is if McCain starts trashing the Democratic Party. That’s why he’s walking the line. Not for the undecided or the independents. Jeeze, why would you waste time on people who either can’t make up their mind or can’t inform themselves enough to take a side. And as much as you want to hear him say it, as an informed citizen you all know what’s going on. If you choose to ignore the facts, then your probably voting for Mr. Creepy Fingers anyways.
When he wins big we’ll all hear about how the pollsters got it wrong, and what a brilliant campaign strategy he had.
Enough said.

Oct 8, 2008 - 10:10 pm 46. ic:

I have a feeling McCain doesn’t really want the job. If possible, I think he would rather flip the ticket. He is not in it.

Oct 8, 2008 - 11:37 pm 47. myth buster:

A pox on both your houses! Democrats, you plot America’s ruin with wild spending, you kill our next generation (btw, realitycheq, abortion balloons the deficit because there should be 50% more young people than there are, that means tax revenues are much lower than they should be)! Republicans, you have become fools! You imitate the Democrats instead of sticking to your own principles (the ones that got you elected), and you ignore all warnings. Republican voters- you dropped the ball! The only voice of sanity in this election was Mike Huckabee, but though he actually represents real Americans, you refused to vote for him.
realitycheq, you are wrong. Romney wasn’t rejected for being a Mormon; Romney was rejected for being a shill, a fraud, and plastic. Romney was never a contender, but he had enough money to pretend to be one for several months.

Oct 9, 2008 - 11:26 am 48. kabud:

Richard:

very true

add to tha millions of republcans who did not show in the polls but voted republican

from democrats i know-

100% are scared by Obama and will vote McCain

Oct 9, 2008 - 5:13 pm 49. Laker:

The Government-Created Subprime Mortgage Meltdown

by Thomas J. DiLorenzo

The thousands of mortgage defaults and foreclosures in the “subprime” housing market (i.e., mortgage holders with poor credit ratings) is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call “communities of color” that they might not otherwise make based on purely economic criteria.

The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various “neighborhood organizations,” as they like to call themselves, such as “ACORN” (Association of Community Organizations for Reform Now). These organizations claim that over $1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty. A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act.

So-called “community groups” like ACORN benefit themselves from the CRA through a process that sounds like legalized extortion. The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA “protest” is issued by a “community group.” This can cost banks great sums of money, and the “community groups” understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.

A man named Bruce Marks became quite notorious during the last decade for pressuring banks to earmark literally billions of dollars to his organization, the “Neighborhood Assistance Corporation of America.” He once boasted to the New York Times that he had “won” loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group. And that is just one “community group” operating in one city – Boston.

Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.

Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as “subprime” loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do – and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans.

But this is discriminatory!, complained the “community organizations.” Thus, if one browses the ACORN web site, one can read of their boasts of having “predatory lending laws” passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to “subprime” borrowers.

These are price control laws, and price controls always cause shortages. Normally, banks would respond to such laws by extending fewer riskier loans. But in this case the banks are forced to continue making the marginal loans by their bureaucratic masters at the Fed and the other three federal bureaucracies mentioned above. So-called predatory lending laws therefore force the banks to “eat” the losses. This is undoubtedly a contributing factor to the bankruptcy of dozens of mortgage lenders over the past year.

Then of course there is the issue of the Fed’s monetary policy having created the housing bubble, characterized by a spectacular escalation of real estate values in every American city over the past decade or so. This created a further problem for the financial institutions that are victimized by the CRA. They are forced to make a certain amount of bad loans, but because of the Fed-created explosion in housing prices, many thousands of subprime borrowers no longer qualified, by a long stretch, for conventional mortgages based on their incomes.

The only way these borrowers could qualify for their mortgage loans (even ignoring their bad credit ratings) was to take out adjustable rate mortgages, some of which had astonishingly low first-year rates in the 3 percent range, and sometimes lower. This is what has largely fueled the subprime mortgage meltdown – the inability of thousands of subprime borrowers to afford their mortgages now that their rates have adjusted upward. Thus, the combination of the Fed’s enforcement of the CRA (with the help of political pressure groups like ACORN) and its post 9/11 monetary policy in general are the reasons for the bursting real estate bubble and the “subprime” mortgage meltdown.

Don’t expect to read about this in the “mainstream media,” however, which generally views groups like ACORN as heroic champions of the poor, laws like the CRA as anti-discrimination laws, and places all of the blame for the subprime mortgage meltdown on greedy capitalists, especially mortgage brokers. Encouraged by such reporting, the odious Senator Charles Schumer of New York has promised federal legislation that will reign in these miscreants, while the Bush administration is proposing an indirect bank bailout by having the Federal Housing Administration cover many of the bad “subprime” loans. This will create what economists call a “moral hazard” by encouraging even more bad loans to be extended in the future. Every banker in America will be glad to extend loans (at high rates of interest) to the most uncreditworthy borrowers if he thinks there is no possibility of default with the FHA effectively guaranteeing the loan.

September 6, 2007

Thomas J. DiLorenzo [send him mail] professor of economics at Loyola College in Maryland and the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe (Crown Forum/Random House).

Copyright © 2007 LewRockwell.com

Oct 9, 2008 - 9:25 pm 50. Trooplover:

Does anyone out there see the parallel between nOBAMA’s increasing numbers in the polls and the stock market’s decreasing numbers?

Oct 10, 2008 - 10:22 am

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