Wednesday, September 24, 2008

reply to unlearned zealot

While I appreciate Congressman Perlmutter"s attempt to lay all the blame for present economic turmoil on the Bush administration, carefully over looking the brilliant contributions of democrats and republican members of congress,I would like to iterate some history. Subsequent to the 1929 debacle the "Glass -Steagle Act" was passed along with the "Bank Holding Company Act" these acts effectively prohibited banks from acting in non-banking activities like bond underwriting and investment banking.
Sniping at these restrictions started in 1960 reached a crescendo in 1987 resulting in the federal reserve voting 3 to 2 to ease restrictions. Paul Volcker objected strenuously, fearing that lenders would lower loan standards. The lobbying for further easing continued unabated for years , with Greenspan ,the new head of the Fed, as an ally. In November of 1999 President Clinton signed a bill repealing "Glass-Steagall".
"Fannie Mae". was created in 1938 to insure funds for mortgages which private lenders were loath to make in the wake of the depression. It provided funds to local banks to make loans to raise home ownership.then the mortgages owned by "Fannie Mae" became security for loans to "Fannie Mae" at rates lower than it was charging homeowners, this was profit. This secondary market was the private domain of "Fannie Mae" . In 1968 Lyndon Johnson privatized "Fannie Mae" in order to remove it from the federal budget, In 19 70 "Freddie Mac" another "government sponsored enterprise" was created ostensibly to relieve the monopoly position of "Fannie Mae".
In 2003 the management of "Fannie Mae" was charged with manipulation of earnings in order to increase bonuses, 50 million for executive Franklyn Raines and unknown amount for Jamie Gorlick.The two organizations contributed millions to politicians of both parties,. however the largest contributions from 1989 to present went to the impeccable Christopher Dodd, John Kerry, Barrick Obama. President Bush on numerous occasions tried to place some controls on these entitities but was thwarted by Barney Frank and Chris Dodd. There is enough blame for this mess to tar everybody some republicans and some democrats but the whole of Washington is at fault


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