Blame Clinton for Fannie Mae breakdown

There are many people to blame for the current economic crisis and the nearly $1 trillion taxpayer bailout designed to fix it.

I believe Sen. Chris Dodd, D-Conn., and the chairman of the Senate Banking Committee, should have been forced to resign for his failure to see this debacle coming. I believe Rep. Barney Frank, D-Mass., and chairman of the House Banking Committee, who proudly proclaimed Fannie Mae and Freddie Mac sound just last July, should be forced to resign in disgrace. And I believe Sen. Charles Schumer, D-N.Y., who irresponsibly started the first bank run at IndyMac as surely as the miserly Mr. Potter did in "It's a Wonderful Life," should be tarred and feathered and run out of Washington on an Acela Express Amtrak rail.

All informed people today also know about the role of Franklin Raines defrauding tens of millions to line his own pockets with bonuses. He should be breaking rocks at Sing Sing, not flirting with a Cabinet post in a Barack Obama administration.

But little has been mentioned about the very public role of the Clinton administration in pressuring Fannie Mae to expand mortgage loans to low-income people simply not qualified for them.

The move came in 1999 and was well-chronicled in the so-called "newspaper of record," the New York Times.

The story left little doubt about the meaning of the Clinton administration action: "In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements that it will purchase from banks and other lenders. The action, which will begin as a pilot program involving 24 banks in 15 markets – including the New York metropolitan region – will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring."

Now look where the initiation for this completely unsound idea originated: "Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton administration to expand mortgage loans among low and moderate income people and felt pressure from stockholders to maintain its phenomenal growth in profits."

Were the warning signs already there? You bet.

"In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times," the Times article said. "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 1980s."

Look at what Peter Wallison, a resident fellow at the American Enterprise Institute, told the reporter from the Times: "From the perspective of many people, including me, this is another thrift industry growing up around us. If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry."

In other words, the handwriting has been on the wall for this bailout since at least 1999 – nine years ago. There was plenty of warning. It was a bad idea from the get-go. Everyone understood the risks – even the New York Times!

Who pushed the button? Bill Clinton did. He has an uncanny knack of emerging unscathed from the scandals he creates. So far, this is another one. How many times have you heard his name dragged into the current scandal and bailout debacle as a prime suspect – as someone who pressured Fannie Mae to take on significantly more risk in its policies, risks that have now proven disastrous?

There's plenty of blame to go around, for sure. And everyone who voted for this bailout – the two leading presidential candidates included – just got themselves in deeper. But, if you want to boil down what caused this economic crisis to one thing, you can accurately state that it involved a political decision to write more risky mortgage loans. It's clear who made that decision initially, who got the ball rolling down the cliff, who pressed the wrong financial button. It was Bill Clinton.

I have nothing but contempt for the roles played by George W. Bush and John McCain in worsening this crisis, as they did with the taxpayer-provided bailout. To me, that decision remains evil, immoral, socialist, unconstitutional, fascist and un-American. But who got us here? It was Clinton. It was the hopelessly faulty economic theory of the Democrats. It is the same mentality today that guides the Barack Obama campaign – the campaign that continues to find a special advisory role for Franklin Raines, the multimillionaire shakedown artist who ripped us all off while steering Fannie Mae.

The bailout has been passed by both houses of Congress. The bill has been signed by the president. But it's not too late for the American people to wake up to the fact they have been swindled again by their federal government and the fat cats they coddle.

Wake up. Rise up. Reverse this bailout.