BARACK & FDR-IDENTICAL -CHANGE? NEW DEAL

I got much of this article off the net and it was by a very, well informed, astute writer Kevin Hassett. I have added a little and changed a little but I totally agree with the entire article and perhaps if you take the time to read you will understand my heading...Barack & FDR. In the 30's FDR sounded exactly the same as Barack and I believe that is due to his backers as well as his Saul Alinsky training. As I have said many times Barack is a puppet that does a smash up job reading his scripted material off three teleprompters and his flair for celebrity has too many convinced that he knows of what he speaks. If he and his backers should get their way they will have all the perks...the homes, the cars, the travel, the wardrobes while the rest of us stand in line for our socialized healthcare and jobs.

Sept. 22 (Bloomberg) -- Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex. But, it isn't. The story is now clear. The economic history books will describe this in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.

When Fannie and Freddie couldn't make the market, they became the market. Last June, Fannie owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, their entire house of cards came tumbling down.

Take away Fannie and Freddie, or regulate them wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened. It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by myAmerican Enterprise Institute colleague Peter Wallison, the Securities and Exchange Commission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting firms were less eager to be associated with them.

Greenspan's Warning: The gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolio’s, (which they need to do for interest rate risk aversion), they potentially create ever-growing potential systemic risk down the road, he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required companies to eliminate their investments in risky assets.

If that bill had become law, then the world today would be different. In 2005, 06 and 07, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable Institutions without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. Democrats and few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many opposing the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials in defense of their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie including Barack Obama, Ms. Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Obama has gotten more than $125,000 in contributions from employees and political action committees of Fannie and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000. Clinton, the 12th-ranked was a very willing recipient of Fannie, Freddie, PAC and employee contributions and has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear. Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.