Why Ayers Matters (Guest Voice)
Republican presidential candidate Sen John McCain is getting a lot of criticism from many pundits in many news organizations and on many sites (such as this one) for raising the “Ayers” issue. In this Guest Voice column, Michael Reagan, the popular talk show host and son of former President of Ronald Reagan, argues that the issue does matter. Guest Voice posts do not necessarily reflect the opinion of TMV or its writers.
Why Ayers Matters
by Michael Reagan
To listen to the Obama spin-masters you’d think that the McCain campaign’s questioning of their candidate’s association with unrepentant terrorist bomber Bill Ayers is a smear tactic falsely elevating a casual relationship between the two men into one where they worked together in promoting Ayers’ far-left goals.
Their reaction to the continuing revelations that disprove that claim is one of sheer panic — and they have a good reason to be scared witless that any in-depth probe of what went on between the two comrades will reveal Obama’s true colors — all of them dark red!
If the truth becomes better known — and it will if the Ayers issue is doggedly pursued — it will be clear that Obama was not only deeply immersed the fetid swamp of Chicago’s far-left political scene, but was from the very beginning of his career carefully groomed by the city’s socialist left to follow the path he’s on now in his quest for the presidency of the United States.
Giving credence to the charge that Obama was “groomed by an older generation of radical leftists for insertion into the American political process, trading on good looks, brains, educational pedigree, and the desire of the vast majority of the voting public to right the historical racial wrongs of the [past]” as the American Thinkers’ Thomas Lifson has written:
• Obama belonged to the socialist New Party, described by Lifson as “a radical left organization, established in 1992, to amalgamate far-left groups and push the United States into socialism by forcing the Democratic Party to the left.” A March 22, 1998 article by John Nichols in These Times revealed, “After six years, the party has built what is arguably the most sophisticated left-leaning political operation the country has seen since the decline of the Farmer-Labor, Progressive and Non-Partisan League groupings of the early part of the century.”
• Obama has been allied with ACORN and their Project Vote, the radical leftist group now charged with massive vote fraud aimed at electing Barack Obama president of the United States. Obama has long been directly involved with ACORN. An article by Toni Foulkes of ACORN, “Case Study: Chicago-The Barack Obama Campaign,” which appeared in Social Policy magazine in 2004, Foulkes revealed ACORN noticed Obama when he was organizing on the far south side of the city with the Developing Communities Project. Wrote Foulks: “He was a very good organizer. When he returned from law school, we asked him to help us with a lawsuit to challenge the state of Illinois’ refusal to abide by the National Voting Rights Act … Obama took the case, known as ACORN vs. Edgar … and we won. Obama then went on to run a voter registration project with Project VOTE in 1992 that made it possible for Carol Moseley Braun to win the Senate that year. Project VOTE delivered 50,000 newly registered voters in that campaign (ACORN delivered about 5000 of them). Since then, we have invited Obama to our leadership training sessions to run the session on power every year, and, as a result, many of our newly developing leaders got to know him before he ever ran for office.”
• Obama and Bill Ayers were close associates for years, going back as far as 1995 if not earlier. According to CNN: “A review of board minutes and records by CNN show Obama crossed paths repeatedly with Ayers at board meetings of the Annenberg Challenge Project. The Annenberg Foundation gave the project a $50 million grant to match local private funds to improve schools… Obama was asked to serve as the board chairman in 1995… For seven years, Ayers and Obama — among many others — worked on funding for education projects, including some projects advocated by Ayers … The board, for example, gave hundreds of thousands of dollars to Bill Ayers’ small schools project… The funding, according to records… CNN reviewed, came directly from the Annenberg foundation which Obama chaired. While working on the Annenberg project, Obama and Ayers also served together on a second charitable foundation, the Woods Fund.”
No wonder the Obama campaign wants the Ayers connection to be off-limits.
©2008 Mike Reagan. Mike’s column is distributed exclusively by: Cagle Cartoons, Inc.
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86 Responses to “Why Ayers Matters (Guest Voice)”
JSpencer: We've already had a combination of socialist and capitalism in the brilliant GSE scheme that gave us the subprime mess. We had the worst of both systems- wealth redistribution in the form of housing subsidies through the private banking system, with govt backing for defaults, and capitalists who used the newly structured mortgage products to leverage loans that could only be paid back if the housing bubble had continued indefinitely. Meanwhile Franklin Raines told us that there was no problem, because everyone knows that houses never decline in value, and the Dems in Congress told us that we shouldn't listen to the Republicans calling for better oversight because they were only fearmongering about imaginary problems.
You know, just like folks (hi jkarczek!) who say that it shouldn't raise any eyebrows if documents go down the rabbithole- of course people have to protect themselves from the smears of the devious Republicans!
This is what happens when we demonize one party and pretend that all political corruption is one sided. Didn't you guys read Animal Farm?
CS- The point most economists were making is that McCain was being unrealistic about the cost. He also changed the plan's terms after the debate giving into pressure from conservatives. The plan is now to buy the bad mortgages at full value so that the banks dont' lose money- but the bill will be footed by the taxpayers. In putting out this plan he's to the left of Obama!
CS- Ok so the Ayers connection bothers you but the Chryson one doesn't?? And it doesn't bother you that Sarah Palin initially said she'd cooperate with Troopergate and then tried to shut the investigation down when she found out she was picked for the VP slot? Or that the campaign issued its own “investigative report” clearing her of all wrongdoing???
But YOU are worried about Ayers even though the reason he was there in the first place was that he wrote the winning proposal and was selected by ex-Ambassador and good friend of Nixon, Walter Annenberg. Now, Nixon was President during some of the bombings and certainly was a war hawk. So if Annenberg believed this guy had credibly reformed his life- why should'n't Obama who was only 8 when the bombings occurred?
The country is going through the worst financial crisis in 80 years and this is an issue that is vital to the American public????
Marlowe-
If you say that Liddy and Ayres have nothing in common you are sadly mistaken, my friend. Liddy admitted plotting to kill Jack Anderson- that it wasnt' carried out certainly does not give him brownie points- Ayres was proud of the fact that he made his political points without hurting anyone.
Also, both men did what they did out of principle- though they were at opposite ends of the spectrum. Ayres believed that what we were doing in Viet Nam was so immoral that the bombings were justified if it could bring the atrocities to a halt. Now I don't condone bombing anything— but neither does Obama who has issued statements repudiating Ayers past actions.
But both have successfully rehabilitated themselves in their present incarnations , which is why this is just a stupendous waste of time.
Kim, you don't appear to have read at least 80% of what I've written (maybe it was in another thread- there are two or three that are ongoing discussions about this that I've kept coming back to because people are addressing points that I have made and I felt I had to be clear about what I was saying and what I wasn't saying. I'll try to quickly address some of the points you're making but a lot of this is repetition.
Ayers/Obama- yes, bothers me more than Chryson/Palin. I don't know of any credible threat of Alaska seceding or inciting war with US, so I don't consider an AK secession party to be a big problem. I realize that the radicals of the Viet Nam era aren't currently bombing either, but those like Ayers who haven't expressed any regret appear to have taken their fight against our system into a more mainstream venue (education.) That is a credible problem IMO.
I never once said that this should be the central issue of the campaign, and I've stated just the opposite (have criticized the McCain and GOP for raising it to this level, though some of that is hyped by the media and by Obama- the other day, Palin and McCain spent a small portion of stump speeches talking about this and a huge portion talking about the economy, and then the news and blogs ran the clips of Ayers parts of the speeches over and over and said, “Why are they talking about this to the exclusion of the real and serious issues?!?)
Some of what you are alleging isn't true so you'll have to produce facts before I can rebut…e.g., Troopergate. Seems that first there were criticisms that McCain didn't vet Palin, and then when his campaign publicly looked at the Troopergate issue he's criticized for 'issuing a report clearing her of wrongdoing' (as though that was actually an attempt to circumvent the actual investigation.) Sounds like you're way overstating what happened to the actual investigation after her VP selection too, so unless you have a specific allegation I can't rebut a vague exaggeration that appears to be based on one side of the story only (for instance, you don't think it's expected that Palin and the others involved wouldn't become a bit less cooperative after the guy leading the investigators told the press that this was going to be an October surprise??)
I also already provided material that rebuts your (mis)understanding of the grantmaking processes of charitable foundations. It's more than likely that Annenberg had nothing to do with the actual decisionmaking process in choosing the grant recipients, so I don't see how his judgment comes into it at all unless you have evidence to the contrary.
And the constant cries here about how this is distracting from talk about the economy is odd, considering that I haven't seen one article here or one commenter expressing what it is that Obama will likely do to navigate through this crisis. Who is stopping discussion of that?
CS, the war is socialist because we all pay for it, some in blood, all of us in treasure, so regardless of the fact that it was an unneccesary war that was pitched under false pretenses, and regardless of the fact that some folks are getting rich off it, we ALL pay one way or the other. As for the economic meltdown, look to your unfettered capitalism, law of the jungle, unregulated environment which we in the old days used to refer to as “greed” and “lawlessness”. We both know who spearheaded and pushed hardest for less regulation and oversight. Wake up and smell the coffee kiddo.
JSpencer, you're obviously a victim of reading only the kinds of sites that end up in dark blue on the new Memeorandum gizmo. I keep wondering if Joe Gandleman has stopped saying that reading alternative view sources doesn't cause brain cancer- was there a new study out that I missed proving otherwise?
Do the names Barney Frank, Maxine Waters, Chuck Schumer, Chris Dodd, Gregory Meeks, or Lacy Clay mean anything to you? How about Hagel, McCain, Bush, and Richard Baker? You do know the party affiliation of each, I imagine; now, can you tell me which group called for more oversight of Fannie Mae and which side fought against more regulation? Here's more if you can bring yourself to read a blog that hasn't lurched to the left.
CS, apologies for not being more gentle about introducing reality into the mix. It appears you may be projecting your own MO on others here, and perhaps would benefit from getting your own news from a wider variety of sources. Then again if the intent is to arrange facts to your own liking it isn't going to matter where you get them, since the conclusions will be predetermined. I believe this is called intellectual dishonesty. In any case, your sarcasm is wasted on me, I've been spoiled by the best and tend to get bored by the rest.
Ah, well, I suppose if you have nothing to say to refute any of the facts that I presented, you'll certainly score more points here by calling me a rightie troll. Carry on!
My take on why Obama will not answer questions on Ayers:
By acknowledging McCain's questions, and admitting anything to do with Ayers (even if it's something small, such as working together, even restating what he said before) it will be immediately chopped up and thrown into an out of context ad that the Republicans are famous for. It will also (possibly) be the catalyst for more Republican violence. If they hear a soundbite that 'confirms suspicions' it could give them 'probable cause' to do something about an 'admitted terrorist'. I don't doubt the ignorance of any hardcore supporter.
CS, I bow to your superior imagination. Without it your creative arrangement of facts could never be so “compelling”!
Btw CS, I've never even paid much attention to “points” here. I base my opinions on the veracity of what I read, not a subjective scorecard. There is at least one poster here who is deep in the negative numbers who I have as much respect for as anyone else, and frankly I don't care what numbers are assigned to me.
Well, JS, you still haven't mentioned what it is that I've posted that lacks veracity, or what you mean by creative arrangement of facts (personally I thought your arrangement of the facts on spending on Iraq and socialism as a neat feat of creativity, though, so kudos for that one since socialism has nothing to do with military spending.)
CS- Isn't going mainstream through legitemate channels like education the American way? After all the country has moved far to the right since the late 60's early 70's.
Obama said that he didn't think much about it because the guy was rehabilitated. He said he doesn't approve of any kind of violence but that the violence happened 40 years ago when he was 8. I don't know what more there is to say. I still don't see that much difference between associating with a reformed antiwar bomber, a reformed Watergate burgler or an unreformed radical secessionist. They are all folks on the fringe of society that call into question the candidate's judgment.
Troopergate seems to be the most troubling, however because it involves abuse of power- use of one's office to settle personal/family matters. And Palin certainly was not honest to the public or to the citizens of Alaska about why Monegan was fired.
This is from MSN.com
“ANCHORAGE, Alaska – Sarah Palin unlawfully abused her power as governor by trying to have her former brother-in-law fired as a state trooper, the chief investigator of an Alaska legislative panel concluded Friday. The politically charged inquiry imperiled her reputation as a reformer on John McCain's Republican ticket.
Investigator Stephen Branchflower, in a report by a bipartisan panel that investigated the matter, found Palin in violation of a state ethics law that prohibits public officials from using their office for personal gain.”
She can claim that a Democrat on the ethics committee was out to get her, but the truth is that the committee had 10 Republicans on it and only 4 Democrats- so it was certainly a bipartisan decision to publish the report.
Kim- writing radical left wing political indoctrination into an education program is the American way?
And again, you keep bringing up things I've discussed at length, so either read my full comments in these threads or stop addressing my arguments if you don't know what they are. I've explained at length what I think the real concern is regarding Obama's judgment in working with someone who still holds to radical ideology and whose writings show a desire to imbibe school children with his own values.
And please- I was going to comment in another thread about Troopergate, but why do you keep using it to change the subject here? I also have a hard time believing that you really believe in everything you write. Do you really see everything completely through such a partisan lens that you can't credit the GOP ethics committee for their impartiality rather than preemptively using their votes to bludgeon Palin with?
From what I've seen of the report so far anyway, the issue was that Todd Palin was using access to officials to push for the trooper firing, and Sarah Palin didn't block him from doing so. After all of the Clinton scandals (including Troopergate 1.0) do you really want to claim this was the 'most troubling' incident in recent history? I'm not objecting to the ethics committee having investigated it and come to this conclusion (at least I don't see anything untoward in their findings so far) but it's hardly the most egregious abuse of power I've ever heard of. If the timing was different and Palin wasn't running for VP right now, my guess is that this 'scandal' would have faded into obscurity and she could easily have gone on for a successful run in '12 or '16 if she maintained her current course in Alaska.
CS This article with many links shows that the Republican party, while in control, talked out of the sides of their mouths about reform. They talked/sponsored many bills, but let them die. Why can't we admit that both parties used this mess for political capital, with little regard for the consequenses. Damn W, Barney Frank and McCain…
http://uspolitics.about.com/b/2008/09/18/republ…
Rudi, I don't believe that the fault is all one sided (though I can see how a reasonable reading of that one comment I made sounds that way- I was pointing out how in that particular situation, it was the GOP members who were pushing to regulate Fannie Mae more effectively and the Dems said that wasn't necessary.)
I'll read your link but you don't need to convince me that there is fault to go around. What concerns me is that everyone from center to far left DOES attribute the economic problems to one party, and in one of the key parts of the whole crisis it was actually the party that they believe favors regulation which was blocking regulation.
The way I see it, Dems feel that private sector greed is the problem and convince their voters of that, GOP feel that that's not true, when actually all voters need to wake up and realize that most of the elected officials in both parties are profitting from schemes that involve private sector AND govt abuses. The malfeasance that has occurred is breathtaking, but still voters remain loyal to their party instead of looking for the specific members of each party that were responsible and the specific members who really did try to stop it.
OK, Rudi, I'm still reading and have to check out all of the links to the bills themselves, but a couple of immediate observations:
First, the title of that article and the use of quotation marks around “a Freddie Mae accounting scandal in July” talking about July 2003, are indicative of the author's obvious bias. I still read on in case the substance of the article might actually override the bias, but then quickly noticed that she includes the bill introduced by Rep Baker in June 2003, after saying that none of the GOP introduced legislation prior to the “July scandal” and that the action that was taken as a result of that bill was that committee hearings were held (you know, those committee hearings which we saw on the C-Span youtube, where Frank said that there was no problem with Fannie, Rep Lacy said it was just a political 'lynching' of Franklin Raines, etc.
Then she includes two Democratic sponsored bills which were about INCREASING HOUSING OPPORTUNITIES, not about oversight of Fannie Mae. You (and she) really don't get that this was how the problem started in the first place- trying to legislate assistance in homeownership in ways that ignored fiscal soundness??
Those are just my off the cuff observations that jumped out right off the bat…I'm off to read more now.
Here's a timeline that I can discern so far:
June 7, 2003: OFHEO director Falcon begins a special investigation into accounting irregularities at Freddie Mac.
“On June 7, 2003, Armando Falcon, the Director of the Office of Federal Housing Enterprise Oversight (OFHEO), ordered a special examination to be conducted into the events leading to the public announcement on June 9, 2003, of the termination, resignation, and retirement of three principal executive officers of Freddie Mac. On that date, the Enterprise announced the retirement of former Board Chairman and Chief Executive Officer Leland Brendsel, the termination of former President and Chief Operating Officer David Glenn, and the resignation of former Executive Vice President—Chief Financial Officer Vaughn Clarke. The special examination was ordered to expand and supplement an ongoing OFHEO examination of the financial condition of the Enterprise and the decision of Freddie Mac to restate its financial reports for 2000, 2001, and 2002.”
June 15, 2003: Report of this date has opening statements by OFHEO director Falcon speaking in glowing terms of Fannie and Freddie- no mention of problems!
June 24, 2003: Rep Baker introduces legislation Result: committee hearings
Aug 31, 2003: Sens Hagel, Sununu and Dole introduce legislation
Sept. 10, 2003: Sen McCain signs onto Hagel/Sununu/Dole bill as cosponsor.
Sept 25, 2003: Sen Corzine introduces legislation related to s.01508. There were apparently no co-sponsors
July 21, 2003: Legislation introduced by Ed RoyceAgain, no cosponspors
What seems to emerge is a pattern of a select group of Republican congressmen and senators initiating legislation which then becomes stalled in committee.
I have no doubt that many GOP are to blame for that (and would bet that the names of the guilty parties who wouldn't get on board with these reforms can be detected by looking at the lobbyist donors to the members.)
But when you look at the CSpan videos of the hearings- it is UNIFORMLY Democrats who are actively attempting to block the regulatory reforms and UNIFORMLY Republicans who are promoting the reforms.
There was obviously tension between the HUD goals of increasing housing opportunities (rabidly supported by Waters, Frank, etc.) and the rational desire to carry out those goals in a fiscally sound way.
VIEW THIS IN IT'S ENTIRETY. This is not a partisan cherrypicking of fact- it's the entire hearing (OK, I fast forwarded through some of the dry parts- it's almost three hours long- but I stopped to catch the key parts of each speaker, to see who was advocating for and against reform. I'll note, for example, that Rep Kanjorsky (D) raised reasonable concerns, and I don't lump him with the rest of the Dems.
But again, there's this tension between providing affordable housing and doing it in a fiscally sound way- and the Dems constantly worked to promote the first at the expense of the second.
The bills that the author you linked to cited as Democratic bills to try to 'do something” represent more attempts to pour gasoline on the fire, not to fix the oversight of these GSEs.
I haven't had a chance to view the actions of current Congress that she linked to yet- I will do so, but so far her bias and lack of understanding is so obvious that I'm not optimistic that she's representing their actions correctly either.
Having now read through the concluding part of that uspolitics article you provided, Rudi, I'm still unpersuaded that the title of the article was supported in the facts she presented.
In fact, after getting past the early history in the 108th Congress, she then goes on to praise the overwhelming passage of HR 1461 in the (still GOP led) House of the 109th Congress….but she tempers her enthusiasm by complaining ( a legit complaint, mind you) that the Senate didn't act on it (she adds that this may have been due to filibuster attempts by the Dems in the Senate, but she doesn't know…gee, so maybe we should find out?)
In short, she writes an article saying the GOP talked of the problem but did nothing, yet her facts support a number of actions that were taken (even though ultimately they were unsuccessful, and even though at least PART of that failure was due to Dem opposition in a Congress that had a thin GOP majority.) She also displays a lack of understanding by including Dem sponsored bills which sought to increase housing opportunities, not to address the oversight problem- as though these were indicative of a Democrat desire to address the looming financial meltdown.
I haven't gotten through all of the Pelosi bill yet- it's quite confusing because it contains so many other elements besides the GSE oversight issue. I'm not necessarily criticizing the final outcome there, but it's quite disingenuous to pretend that the Democrats were only late to the game because they lacked the votes in the earlier Congress when really the record shows that they were actively opposing the regulatory overhaul when the problems first came to light.
I'll also note that Baker once again was the member who introduced HR 1461 in '05 (the one that passed the House but died in Senate committee.) I'm beginning to consider writing in Baker for president- and at least I hope he returns to govt service in some capacity. I have no idea why conservative leaning pundits aren't knocking his doors down to get him on the public airwaves right now- he's the real unsung hero in this whole mess who tried repeatedly to sound the alarm before it was too late.
CS, if your committment to POV can be measured by volume of words then I commend you on your devotion
Seriously, I appreciate that you may well believe your interpretation of the facts, but l have to say, at most you concede there may be equal culpability among the parties. Sure, I agree they both share blame, I just don't think the scales can be balanced by some politically-correct longing for fairness. Here's the bottom line: The republicans have long been champions of deregulation and removal of oversight. They, more than the democrats, have been in positions of greater power, longer, and therefore have done more to create this climate of anything goes. I'm not just looking at the GOP's last abysmal 8 years; I'm including the two decades before that (yes, I remember those years as well). As for the relationship between public spending and the military? I'm surprised you don't see the connection. Public money goes to fund enormous phony war, therefore getting wasted – except on the few who profit. It ain't rocket science. We the people are taken to the cleaners. This bothers me. YMMV.
JS- If I've moved you to consider the culpability to be shared by the parties then I'll consider that a success (though I do think I've provided pretty overwhelming evidence that in this particular situation- and it's an important one that set off our current meltdown- the blame is more to the left.) I'm not going to quibble though if at least I've gotten you thinking about it.
One last point is that I truly am not committed to this POV because of dedication to fairness of spreading the blame- it's because I honestly think that we as voters won't be able to exert any positive effect to fix the mess unless we understand how we got here.
OK you asked me to comment about the “roots of the subprime meltdown.” This is actually complex and not well known and there is obfuscation all around.
The argument for Fannie/Freddie is that the bulk of American's net worth is in housing, and that traditionally minorities and the poor have been shut out, and there is research that argues this is part of the cause of generational poverty.
The counter argument is that by providing a government subsidy to housing, it increases the cost of housing and thus makes it even more unaffordable and unsustainable.
Historically Democrats have been the prime supporter of GSEs because of their social aims (and they don't recognize the unintended consequences) while Republicans have tacitly supported it primarily because it causes rising asset values. Now as I'm sure you know, they used to be on the government books, but they were privatized in the 70s because we wanted them to be off the balance sheet. There are some convincing arguments that the structure of the entire system is inherently unstable and would collapse at some point.
OK so with that little background out of the way it's to the subprime crisis. The primary reason why housing started going up a lot was because Greenspan made money so cheap (cause he was scared of deflation) and everyone was looking for the next big thing and a bubble started. Once housing started going up a lot, then subprime became an issue because everyone wanted in, and to keep it going they had to go to non-traditional bases.
However it should be noted that Fannie/Freddie never did subprime loans as they were always prohibited by regulations. The accounting scandal arose in part because they were private companies and they were missing out on this huge boom that they weren't allowed to participate in. So to counter that, they started reducing the amount of downpayment that they would require, and let non-profit groups start paying the down payments for people (when the boom started all these social groups said that the poor should be able to get in on it so a lot was set up to help them get ownership even if they hadn't saved much).
Most people don't distinguish between “sub prime” which means that you were a bad risk (and the GSEs never did), Alt-A which meant on paper you were good but you didn't necessarily want to have a large downpayment or show proof of being good and Prime, which is most traditional but too saw a decrease to about 10% down (there is also a difference between “conforming” which means the GSEs could buy it, some of these were Alt-A and “non conforming” which means the loans were too big or two risky to be bought).
To be brief, what ended up happening was that a lot of the unsustainable part of the bubble was built on subprime and jumbo loans that the GSEs weren't allowed to buy, but they didn't want to lose market share so they expanded their lending far past what they should have…..everyone assumed that housing values would rise forever. Also somewhere along the line they bought securitized mortgages that were Alt-A…I'm not sure why they were allowed to do this.
So in my understanding the fairest assessment is that they are not really responsible for the housing bubble excess, but that working within the existing rules they took on too much on stupid assumptions……and the Democrats blocked attempts to slow this down. But on the other hand it was the Republicans that were primarily the ones that created the environment that led to the bubble in the first place.
CS- So your argument is that Clinton did it too? It is no longer the '90's and the Clintons are not running, LOL. And BIll Clinton did a credible job as president even though he has been blamed by the GOP for practically every one of GW's woes for the past 8 years.
We have to decide who to vote for out of the candidates who are running. You seem more concerned with an old association of Obama's (and remember Ayers had been chosen “Citizen of the Year”), than a tendency by McCain's VP to use the perks of her office to solve personal problems. That action has been determined by the Alaska legislature to have violated the ethics of her office.
All I'm saying is that you are sounding much more judgmental about the Democratic ticket than the Republican one.
I was a bit confused by your comment Kim since the discussion has gotten off topic thanks to me and Rudi- and actually on the GSE discussion I've pointed to an article on Stubborn Facts where Pat is praising Bill Clinton- and I heartily agree with him on that point!
Anyway, now that I remember what you are referring to, I also recall that as I wrote that I was thinking you'd probably come back with the “Clinton did it too” thing but I included it in my comment mainly because I think it's so funny that we're recycling Clinton scandal names now. But yeah, I do think there was quite a bit in Bill and Hillary's history that indicates a far worse pattern than what we now know about Sarah Palin (I object to the use of your word “tendency”, for instance, to refer to one incident.) I'm not excusing her for it- I think it's good that the ethics panel did it's job and exposed this incident where she allowed her family affairs to get mixed up with her job. But as a pattern of behavior, I think put against the real reforms that she has tackled that's pretty weak tea. If it does become a pattern then get back to me on that in a couple of years and I'll agree to hold her accountable.
mikkel- your summary of the GSE's is not what I”ve come to understand, regarding them actually making subprime or risky loans. I'm going to have to do more reading I guess, but do you have any sources to explain when you say that they were legally barred from doing so? That's certainly not what I've heard- in fact just the opposite.
CS I had to dig for this one, Paul Gigot of WSJ writes about Fannie and Freddie meltdown under Republican over site. Seems Hasert stripped hearing responsibility from Florida Republican Cliff Strearns in 2003 and allowed Barney Frank to scuttle the next hearing in 2004.
http://online.wsj.com/article/SB121677050160675…
Of course the WSJ is guilty of Liberal bias…
I should add though, mikkel, that most of your comment is exactly as I've understood it- but the part about what the GSEs were and were not allowed to do is critical to understanding what role they played in the overall crisis IMO- because from what I've read (admittedly mainly from conservative sources like WSJ and IBD- so not partisan hacks but people who look at the situation from a conservative perspective), is that the factors behind the bubble were 1) money supply too loose- your comment about Greenspan 2) irrational belief that housing prices could rise indefinitely- which was at least partly fueled by the increase in housing demand that came from this influx of buyers who previously couldn't qualify 3) belief that risk could be sliced up to become negligible through the mortgage securitization process and 4) belief that what risk was there was almost eliminated completely due to the GSEs buying up the mortgage securities, and the implicit govt backing that came with that.
There's also a lot about CRA and how that led to more and more pressure on banks to fill quotas- stories about groups like ACORN protesting and suing banks which were trying to merge or expand so that they couldn't do so unless they had enough of the Alt-A loans, etc.
I'll try to gather a few links and to read more to see if I'm misunderstanding it, but your summary seems to either skip or contradict some of those factors which put Fannie and Freddie more at the center of the maelstrom, so I'm not sure what to make of it.
Thanks for the link, Rudi. I had read that article when it first appeared but don't think I caught the Hastert part. Believe me, Denny is one that I'd help run out on the rails- but I didn't realize he had his fingerprints on this mess too.
CS : “If I've moved you to consider the culpability to be shared by the parties then I'll consider that a success”
Well, I don't mean to rain on your parade, but you didn't really do any moving. My position hasn't shifted; I've always held both parties culpable, one less, one more.
I've gotten most my information from the Big Picture and Calculated Risk…both of which are far more on top of things than any mainstream source.
Some links:
Here
here
here
and here
from the Big Picture. Those have all been recent.
Calculated Risk has been talking about it a long time and I don't want ot spend the time to look through their archives. One of the points there was that the Downpayment Assistance Programs run by the non-profits were awful because they made it so the owners had no skin in the game. But overall they too have echoed the Big Picture (CR is run by a couple of people that have been in the business their whole career and explain some of the intricacies of the process and pointed out problems a long time ago).
You have to be careful when talking about the difference between “risk” and “subprime” and GSE securitization and CDOs.
Near the end of the bubble (starting in 04 and 05) the GSEs started taking risky mortgages because they didn't do enough to verify that the data was good, and CR had a long thing about how the process was automated in a way where there are reports of mortgage originators fudging data until it worked. They also lowered their downpayment requirements and verification. But that's STILL not subprime, which means that the people had really bad credit or outrageous loan amounts..that is different.
Those were driven not because they were securitized in a way to sell to the GSE, but that they were sold to pension funds, governments, wealthy investors, etc. The root reason was the same (hey they're not on our books who cares) but that wasn't part of Fannie/Freddie. The vast majority of problems so far have been caused by subprime (below the standards of the GSEs) and jumbo loan (house worth more than they were allowed to buy) pools.
It's the next wave over the next two or three years where Fannie and Freddie are going to start being in trouble…..and that's partially because they did do some Alt-A (meaning they were good risks but there wasn't verification) partially because of fraud by the originators and/or buyers and more significantly a lot of the lower-middle class buyers that are the entire point of the GSEs are going to be underwater and many will lose their jobs. Just the expected default rate based on house valuation is going to be a huge problem regardless of whether the GSEs did anything “wrong.”
You can see this buy looking at foreclosures. I've been looking in Cleveland for a long time now and on the Fannie Mae/Freddie Mac site they have only had about 5 dozen foreclosures (I just looked and it's up to 150) while RealtyTrac which shows all foreclosures has thousands. So far at least, the GSEs are a small portion of what's gone bad.
Of course now they are being directed to buy up massive amounts of junk so I'm sure they'll get much worse.
mikkel, I'll spend some time looking around the sites you mention, thanks.
I guess it seems like perhaps my language is sloppy (or that which I'm getting from other sources ) in referring to subprime, and I know it's better to be accurate but if you use whatever term is right for 'bad, high risk loan' it still seems that the concept of CRA and the GSEs were a big driver (notwithstanding that I may find other information in the sources you provided that disproves that- but from what I see so far.)
The parts that I've read elsewhere that you don't seem to address involved the mandates by CRA (which were basically like affirmative action, requirements to make loans to certain percentage of minorities even if they really couldn't afford the loans) and it seems that various new mortgage instruments were created in order to help meet those goals. But since it was done in this way, the new mortgage instruments also left the door open for other buyers and speculators to jump on the bandwagon and leverage real estate investments in a way that was fundamentally unsound and only worked for a while because of housing price inflation.
Where the CRA and ACORN type of involvement came in was in putting more and more pressure on the private lenders- not that the banks weren't willing participants in these schemes, they definitely were- but it was only the ones who really pushed these types of mortgage products (which perhaps had some of the beneficial effects that ACORN wanted, but as usual had the unintended negative consequences too.) There is a lot of talk here in Atlanta about thug tactics that ACORN used when they didn't think certain banks were doing their part- so that the banks that pushed the junk loans the most were the only ones that could expand or participate in mergers and such.
We'd have been far better off funding the housing programs directly in some way- maybe partnering with groups like Habitat for Humanity that allow unqualified buyers to get in by giving sweat equity- rather than creating this ponzi scheme. It seems like Bill Clinton foresaw some of these problems and he now has to admit that the Dems in Congress refused to address them from the outset.
And as far as the GSE role as I understand it, Fannie and Freddie also had perverse incentives both by their mandate and by the corporate bonus structure, so that they created the demand for the private institutions to peddle more and more of the bad loans (again, not that they didn't do so willingly in most cases.) The more I think about that, although I didn't realize that Fannie and Freddie didn't originate most of the bad loans and you're probably right about that, it doesn't really matter if their structure and mandate was such that they were creating a huge demand that incented all of the private lenders to do so, does it? Which brings to mind lenders like Countrywide, which seemed to be completely on board with this whole scheme and took full advantage of it, which had disastrous outcome.
From this link:
You should read the links, since Barry points out the vast majority of originators didn't even have CRA apply to them.
Now don't get me wrong, I am all for conservative standards in home buying. I think that they should get rid of the mortgage tax deduction and the industry standard should be 20% downpayment and that the mortgage payment takes up a maximum of 28% of the monthly income. I don't think that home ownership should be a goal in and of itself. In fact I got into an argument with my dad because he said that he thinks we need to have policies that are inflationary to keep people in their houses and that lending to the poor was good policy, while I argued that it was just papering over systemic imbalances and it's better to have policy that lowers the cost of housing and helps address poverty, and then they could buy a house the old fashion way.
But part of the reason why Barry at the Big Picture is so angry (he normally has very temperate posts) is because he has been talking about these things for over 5 years and now literally the exact same people that told him he was crazy and helped perpetuate the problems are trying to get out of the blame.
What I object to in your understanding is the conflating of regulation with moral hazard. There is an objection to government ventures that they create moral hazard by mandating objectives and backing companies in a way that they'll do things they normally wouldn't (or by stepping in and bailing out companies “to big too fail”), but regulations provide rules to limit this risk.
Starting with Clinton in the late 90s, but especially in the early part of the decade and through Greenspan's malfeasance, the regulations were all but destroyed while the moral hazard remained. This leads to crony capitalism.
The GSEs obviously had some crony capitalism but the vast majority of it was not their regulations (which were basically untouched) but the lack of regulation on the rest of the industry. Now we are paying for it.
OK, I'm going to need to find time to read the links so I'll stop commenting on it after one brief point here.
When you mention the moral hazard issue starting with Clinton- it seems to me that the point that was made, even by Clinton, was that the regulation needed to be close to the source of the problem (good independent oversight of the GSEs themselves) because otherwise it would spread systemically. Now, from what I can tell your argument seems to be that the problem was laxity in the overall system to regulate in the private sector lending agencies- but I think what was being said was that the primary cancer needed to be treated rather than trying to regulate against metastasis. Does that make sense?
The primary cancer is excessive liquidity through pro-debt and cheap money policies. Andrew Bacevich links that (and energy) to most of our current climate.
These policies are reflective of our entire economic system on a basic level and is not specific to a party nor even politics in general.
The best analogy though is that liquidity is a river and regulations are levees. The more liquidity there is the better the regulations have to be to keep it from overflowing and both the Republicans and Democrats (and business and economists) encouraged a raging torrent of liquidity that even perfect regulations couldn't contain fully…but then in the last 10 years they knocked down most of the very important regulations — and Phil Gramm was instrumental in a lot of that — and so now we're all flooded.
The only policy that they know how to do is add more liquidity, and it's not helping because that was the problem in the first place. Hence our current crisis.
I agree about excessive liquidity.
Can you please point me to what it is that Phil Gramm is responsible for? Seems like a mixed bag from what I can tell, where some of the deregulation he enabled (he was by far not the only one doing that- Bill Clinton admits that he favored the overhaul of Glass Steagall, he wasn't pressured by Gramm and other Republicans- and a lot of people are refuting the idea that those changes caused more harm than good.)
I keep hearing Gramm's name being thrown around as the embodiment of deregulation, and I think that's a gross exaggeration and possibly a complete distortion of what he really did.
And although I take your point that the policies are reflective of our entire system rather than policies of one party or another- the problem I see is that people in general don't see it that way and instead view it completely through partisan lenses. I don't think there's any hope of fixing that until we correct the public perceptions.