Well, our mess is still a mess. Now that congress passed, and President Bush signed, a 700 billion dollar "rescue" package, we still aren't rescued. Who let us get into this mess to start with and who didn't have sense enough to get us out? I am now reading articles that make me quake in my boots. I've heard it said by the old timers that sometimes when an official did a very bad deed or messed the populace up real good that the men of the area would smear tar all over him and then roll him in feathers, and finally, make him straddle a two by four and several strong men carry him out of town. Have you tried to ride straddling a jostling two by four lately?
I read this morning where most foreign stock markets have fallen drastically because of our dilemma. Britain, France, Germany stocks all dropped between 4 and 5 percent, while Russia's RTS index dropped over 7%.
Of course the sad fact is, no one person or group is to blame. But you can dig into the history of the thing and come up with some people and factors which certainly played a part in it. Let's start from scratch. Fannie Mae (Federal National Mortgage Association) was created when I was 8 years old and most of you were not born... in1938 by Franklin D. Roosevelt. This was a part of his "New Deal" which brought about the recovery from the "great depression". It offered banks and other financial institutions an opportunity to borrow federal funds at low interest rates and loan to the deeply depressed housing industry. It worked but it developed into a costly business for the federal government and was privatized by Lyndon Johnson in 1968. It then began operating as a private enterprise owned by stockholders but still remained free of taxation and oversight. It became a virtual monopoly for the secondary mortgage industry. To avoid the monopoly, a second GSE was created as the Federal Home Mortgage Corporation, called "Freddie Mac".
Although, President Roosevelt faced a very difficult task in producing a strong recovery from that bad time there were several of his innovations which should have been phased out once the economy became strong once more. The government has no business in the private loan business, even remotely. In this case, it was not the government itself, yet there were such ties to it and influence from it, that they went belly up. Although they were deregulated, they still had to cater to government pressures if they remained tax free and able to borrow government funds at low rates. And as usual, governmental influence came in various forms with no telling how much graft and corruption. During the Clinton administration, the feds pressured them to extend low interest loans to people with low incomes and questionable credit . They were even threatened with a lawsuit if they did not accept child support payments and unemployment compensation pay as acceptable income to qualify for a mortgage. Over a few years time, this proved to be catastrophic. Then to put the lid on the jar, over the past decade or two, our economy blossomed into giving numerous people, especially the young adults, the illusion that everything would always be this way. So, thousands of them over extended themselves at the urging of the eager lenders.
Regardless of who the actual culprits are who caused these problems, there are many. One thing for sure and for certain, those two organizations should never have been continued. Fannie Mae should have been dissolved when strained finances forced Lyndon Johnson to privatize it. And, of course, Freddie Mac would not have been formed at all. These two organizations are the only two fortune 500 firms who do not have to inform the public when any financial difficulties are encountered by them. Their combined assets are 45% more than the nations largest bank, yet their combined indebtedness is equal 46% of our current national debt. Now that is frightening. Our current debt is 10 trillion, 160 billion, 500 million dollars. That is also frightening. We have a limit which is reported to be as far as we will go in debt. But when we approach that limit, they simply raise our limit. The senate recently raised our top limit by 8. 5 trillion dollars. It's like so many credit card issuers. I once had a credit card who appreciated my pay record so well they raised my limit to $15,000. Can you imagine a couple on Social Security owing $15,000 on a credit card??? I should have grabbed it an run.
There is an excellent article in the New York Times (and I rarely make a statement like that about them) concerning the role Fannie Mae had in this recent crisis. You have to wind up being a little sorry for their chief executive, Daniel Mudd, who actually took the job after most of the damage was incurred. What it all boils down to, accept it or not, is those congressmen or other federal officials who put the pressure on these firms to purchase trillions of dollars of low income mortgages must share most of the blame. But not nearly all of it. Read the Times article here:
http://www.nytimes.com/2008/10/05/business/05fannie.html?_r=1&oref=slogin
Of all the individuals I have been able to read of and identify as a guilty party in all of this mess is congressman Barney Frank from Massachusetts who was the pusher for low income mortgages explained above and then in 2003 he proclaimed that the two financial institutions were sound and on solid footing. He is known to have been sleeping with one of Fannie Mae's executives, Herb Moses who personally announced that he was the first male spouse of a male U.S. Representative. Frank received the most financial donations for his campaigns from Fannie Mae and Barack Obama was the next in line for their contributions. Those involved in the early years of this mess were primarily, Alan Greenspan, Bill Clinton and Barney Frank. But on the other hand, just about nobody is clean and clear in this mess.
My income is fixed. That could be a blessing in this whole deal or it could be disastrous. I pray a lot.
