Washington D.C.- Who is to blame for the current financial crisis in America?  Take a look at history, for there you will find a frightening pattern of Democrat politicians who set the stage for this housing market collapse.  I refuse to sit by and let the liberal leadership tell you that Republicans are to blame when over and over Republicans were the very ones who sounded the alarm.

 

It was Democrat President Jimmy Carter who in 1977 signed the “Community Reinvestment Act” into law.  The Clinton Administration later gave it more teeth.  The intention may have been good:  an attempt to curb discrimination within the housing and mortgage industry.  But what this law actually did was pressure financial institutions to extend home loans to those who otherwise would not qualify.  Fast forward 30 years and Rep. Maxine Waters, Rep. Barney Frank, and Speaker Nancy Pelosi are still talking about “affordable housing” and the need to continue to be able to make loans to people who cannot pay.

 

The way to put people in homes, the way to solve the poverty problem, the way in which we help people is not by placing them in a situation where it is almost guaranteed that they are going to have a foreclosure.  Instead, we should help them into a position where they can make the money to pay their mortgages.  This requires removing the tax and regulatory burdens off of small businesses so that small business owners may provide good paying jobs.  That is the way you fight poverty and stimulate the economy.

 

Despite repeated warnings, the Clinton Administration pressured Fannie and Freddie to expand mortgage loans among low and moderate income people!  Additionally, the Democrat-led Congress of the early 1990’s eased capital limits on the two mortgage lending giants, allowing them to hold just 2.5% of capital (as opposed to 10% for banks) to back their investments. To say the least, these were unsound business practices.

 

Fannie and Freddie became government sponsored entities (GSE’s), and taxpayers are put on the hook for their performance.  The mortgage lending giants are backed by taxpayers dollars for all losses but the GSE’s get to keep all their profits.  

 

Even the New York Times recognized the potential for disaster.  “Fannie Mae is taking on significantly more risk,” reported a 1999 article, “which may not pose any difficulties during flush economic times.  But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.”

 

It was President George W. Bush who in 2003 proposed what the New York Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."  Yet, congressional Democrats fiercely opposed the plan.  ''These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis,'' insisted Rep. Barney Frank, ranking Democrat on the Financial Services Committee.  

 

Republicans led the way during 2004 hearings calling for action to be taken against Freddie and Fannie for their illegal book keeping. Yet, Democrats refused to even acknowledge that there was a problem.  Why?  Because Freddie and Fannie paid millions to hundreds of politicians from both parties.  The three U.S. Senators who have received the most payoffs are Democrats:  (1) Senator Christopher Dodd, (2) Senator Barack Obama, and (3) Senator John Kerry.  Democrat Rep. Maxine Waters declared, “We do not have a crisis at Fannie Mae and in particular Freddie Mac.”

 

It was Senator John McCain who three years ago said:  "If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole."  He cosponsored the Federal Housing Enterprise Regulatory Reform Act of 2005.

 

Perhaps if we had listened to McCain’s warning back then, we would not be dealing with a crisis today.  The massive bailout and the philosophy of bigger government are NOT the answer.  The solution is found in turning to the free market and not putting taxpayers on the hook for the failed policies and poor decisions of others.  Instead of approving a $700 billion bailout, Congress should have taken the following action:

 

 1. Suspend Capital Gains Tax for two years.  There is a lot of offshore money that is not coming into this country because of capital gains tax.  Suspending the tax would allow a huge influx of cash into the American economic system.

 

 2. Create a market in the private sector for mortgage-based securities.  Imagine what would happen if the federal government allowed people to buy mortgage-based securities and later sell them with no tax consequences.  It would create an instant market.  People who could afford to buy these properties at reduced prices could hold on to them until the market improves and later sell them for a profit without being taxed. 

 

 3. Change Mark to Market account rules.  Mark to Market requires a company to daily evaluate its capital based upon the current market price.  Mark to Market works great as long as the economy is expanding, but when things are down and there is no market for these mortgage-based securities, guess what their values are.  Zero!  Mark to Market accounting rules must be changed because these loans are based on real estate, which is always going to have some value.  It’s not zero. The banks that own these mortgage-based securities need to be able to assign true value to their assets.

 

 4. Reform the bad policy that led to this crisis.  The bailout bill takes $700 billion dollars of taxpayer money and still does nothing to fix what actually caused the problems.  We must (a) repeal the Community Reinvestment Act, (b) de-fund ACORN and community activist groups which use extortion and threats to force financial institutions to make loans to people who cannot pay, and (c) privatize Freddie and Fannie so that taxpayers are not on the hook for their bad investments.

5. Make America energy independent.  We need a comprehensive energy plan that will end our dependence on foreign oil and drastically lower the fuel costs that hurt such a large part of our economy.  The American Energy Act would do just that and more.  It would create an all-of-the-above solution by drilling offshore and in ANWR, building new refineries, building nuclear power plants, and utilizing technology to develop alternative fuels.

We did not need this massive bailout, and now the liberal leadership is talking about spending another $300 billion for an economic stimulus package!  When will they understand that the real answer lies within the free enterprise system?  I believe that the marketplace, unencumbered by taxes and government regulation is the best way to control quality, quantity and cost of all goods and services.  We stimulate the economy by stimulating small business, getting the tax and regulatory burden off of small businesses so that they may create good-paying jobs.  

 

It was not FDR’s New Deal programs that moved America out of the Great Depression.  The Depression extended into World War II, but massive manufacturing and production needs, and unparalleled mobilization of a corresponding workforce to meet those needs, resulted in economic expansion.   New Deal socialism did not end the Depression.  Socialism never has worked, never will work, and it’s not going to work today. 

 

Former Communist leader Nikita Khrushchev once said that “We can't expect the American people to jump from Capitalism to Communism, but we can assist their elected leaders in giving them small doses of Socialism, until they awaken one day to find that they have Communism.”  Are we tending to this situation now?

 

God forbid we ever let this happen in the United States!  We must always remain vigilant in protecting our freedoms named in the Constitution.  The free market system is an integral part of this freedom to choose to pursue happiness, and we must strengthen it!  The future of our nation depends upon it.  Let us stand firm on the principles for which our Founding Fathers pledged their lives, their fortunes, and their sacred honor.  It is time to celebrate capitalism, not demean it.  It is time to expand the opportunities capitalism affords us, not suppress them.  It is time to return to our foundation.