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First, the Mortgage Bailout

November 18, 2008

The September financial crisis may be seen as the turning point in the 2008 presidential campaign when McCain’s slight lead in the polls turned around for good. But it was more than that. One can easily piece together how this happened.

The background to the mortgage crisis started back in the late 1980s with the “Community Reinvestment Act.” It forced banks to make loans in “the neighborhood” which meant making loans to people who really didn’t qualify. Pressure groups like ACORN (remember, the group Obama helped train?) would actually picket banks until they made loans they never would have based on financial considerations. No president after Carter stopped that: certainly not Clinton, who accelerated it nor Bush who also approved. Loans get bundled, then sold and resold. Fannie Mae and Freddy Mac, quasi-governmental agencies, grew huge, eventually controlling half the mortgage market. Earnings were mis-reported (a felony that has, so far, gone unprosecuted) so that corporate leaders could earn bonuses. Who? Among them former Clinton budget director and Obama financial adviser Franklin Rains who made $90 million in 6 years. Obama’s take? $85 million in campaign contributions, the second highest of any senator. McCain’s? A couple of hundred thousand, the second lowest. McCain sponsored legislation in 2005 to bring Fannie and Freddy under closer regulation. It didn’t pass; Obama voted against it. The whole thing blows up in 2008 and who gets the blame? The Republicans! Why? Wall Street isn’t regulated enough, said the Democrats. Who do people turn to to fix it? The ones most at fault. (Clearly, the Republicans and Wall Street and individual mortgage holders bear some blame, too.)

People just weren’t paying attention and now the taxpayers are $700 billion the poorer for it.

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