In Oct. 4 Issue
Russell County NewsBy Ron Phillips
I'm sure by now that everyone is wondering what happened to our economy and how did we get into this mess? It is also quite clear that nobody wants to take the blame for this current economic crisis, so once again House Speaker Nancy Pelosi is blaming the Bush administration. Robert McTeer, the former president of the Federal Reserve Bank of Dallas, is considered by many to be an expert in economics.
McTeer said recently in an interview that this problem began when banks basically stop being directly responsible for the money they were lending. Instead, banks would lend money short term and then sell these loans to secondary lenders like Fannie Mae, Freddie Mac and other investment companies. These loans were then bundled together and sold as Investment Securities, thus bringing Wall Street into the picture.
In 1977, Former President Jimmy Carter sponsored the Community Reinvestment Act. While the bill was meant to help lower income Americans to purchase homes, it actually pressured banks to extend mortgages to people who were borrowing more than they could afford. Still, there were many banking institutions that were reluctant to follow these guidelines, so in 1995, the Community Reinvestment Act was substantially revised under the Clinton Administration. These revisions made it easier for the government to prosecute lenders who did not follow the more relaxed lending guidelines.
An excellent example of a practice that evolved from this legislation is 100% financing. Most of us saw advertising that said "Buy a new home with no money down." Most reasonable thinking people realized that this was risky business, but the banks were betting that the real estate market would remain strong.
On several occasions, our lawmakers set back and talked about the possibilities of what could happen. In 2004, the republicans clearly pointed out that Fannie Mae and Freddie Mac was not following the rules set before them and something needed to be done. Democrats rebutted those concerns and said that everything was fine and there was nothing to worry about. Well, here we are, just four years later and I think we now have something to worry about. One would think that the Savings and Loan Crises of the late 1980's would have taught us something. That mess costs the American taxpayers nearly $125 billion.
I believe we now have no choice but to trust those same republicans and democrats to figure out a way to get us out of this mess! It does appear that the house is working hard to insure that this bail out is something that we can all live with. It is clear that the republicans and democrats are not going to let this bill just get rushed through, however the bill failed Monday, the DOW fell 777 points and our Congress went home for the Jewish Holiday.
Senator Obama was also quick to criticize Senator McCain for putting his campaign on hold last week and for going to Washington? I think this is an excellent comparison of the two presidential candidates. Do you want a president that is going to dive in a help resolve a crisis or do you want a leader that says "Call me if you need me?" You may have heard that Senator Obama went to Washington anyway. I'm certain that the voters in this community can answer this question very easily.
On "Face the Nation" Sunday, Barack Obama took credit for the bailout bill and stated that Senator McCain basically did nothing. Senator McCain has also been criticized and mocked for saying that our economy is fundamentally strong and now Senator Obama is saying the same thing. If you had the opportunity to see the first presidential debate, you probably noticed that Senator Obama agreed with John McCain several times. Maybe this will help us decide who the best choice to be President is.
May God bless…