By: Wayne Brown

Well, here we go again. President Obama is declaring that he must address a joint session of Congress immediately in order to address the “urgent” needs of America for economic stimulus and job creation. Note the use of that word “urgent”. Remember the mantra of this administration…never let a good disaster go to waste. On that basis, one can bet that whatever the president puts forth in this speech will be so “urgent” that there will be no time for reasoning or consideration. It will be so urgent yet was not urgent enough that there was consideration given to calling Congress back in session early from the summer break. Urgency is a relative thing. I suspect if we dig deep enough we may find that the urgency has far more to do with “re-election” than any hardships the American people are currently enduring under this administration.

What could the President possibly have in mind in this new plan he promises to reveal. I can only speculate but I will promise that it will be an expensive proposition and far more so than the previous stimulus package of three years back. I estimate the President will ask Congress to appropriate between $1.3 and $1.8 trillion dollars for a second economic stimulus. This money will come from two sources: tax initiatives which will close writes offs and loopholes on both the wealthy and middle class to include home mortgage interest and property taxes, and, of course more “borrowed money”. Already the deficit spending for 2011 is projected at record levels. This program will drive that record beyond those projections.

The promise of all this new spending by the President will be job creation and improvements in overall economic conditions. I think it is likely that he will indicate that our position in 2020 financially will be the same or better with this proposed program as compared to following the downstream rate of spending cuts agreed to in the debt ceiling debate. That promise will be made on the back or more rapid economic growth as a result of the stimulus applied and by the expansion in the job market, all of course due to the actions of our great central federal government. In the short term, our national debt will jump by about $1 trillion dollars over the current level.

Remember, this is an “urgent” situation; therefore, Congress must act without thinking or questioning. The stage is set for yet another political drama. One does not have to look at what is playing out here very long to see the transparency. Obama proposes a new stimulus package which he touts as a plan that will save America. The Republicans oppose it and get labels assigned to them much like the Tea Party saw in the recent debt debate. Obama then campaigns on the promise of a plan that he was never able to implement because of the opposition. If the Republicans go along and agree to the plan, then Obama implements it slowly, even thought it was urgent, and touts his plan is in the early stages of working toward success as he approaches re-election. Either way, he does not have to run on his record which is rather dismal and unpopular at the present with American voters. One thing you can count on, there will be no promise of measurable progress until after the 2012 election cycle.

One might notice that I did not mention what might take place in the private sector of our economy during this time. I did that for a reason because I fear that nothing will be taking place. If Obama takes an approach such as I have outlined above, there will be no real reason for the private sector to respond. The tax situation for the future is foggy to say the least and will remain such it appears for the small business sector of America. The healthcare reform initiative still stands as an obstacle which is not and will not be addressed by this administration as it relates to the economics of private sector business growth. And finally, there is nothing to shore up consumer confidence to raise demand for goods and services. The promise of “government created” jobs will not do that. People are smart enough to realize that real jobs are created because there is a “business need” for them, not because the government had to money to bribe some sector into creating short term employment. Here again, we have a government attempting to fix a problem which is only resolvable by the private sector. Remember what happened when the government attempted to grow the housing market…damn near caused economic collapse.

Until we have a President willing to stand up in front of Congress and declare that it is time to knock down some of the regulation and environmental constraints to industry, we will not see any significant movement in the private sector. Until there is a resolution of the healthcare reform package, the private sector is going to remain highly cautious. Until there is significant progress made on gaining control of government spending, the private sector will remain cautious, conservative, and cash-fluid. No amount of government spending is going to shift that perspective nor will it cure the economy. In the end, the only effect will be more spending and more debt which spells more trouble for America.

Get ready, America. This speech by the President will be the opening act on new efforts to get the President re-elected. The promise of economic prosperity will be shouted at every bus stop the President makes in the future along with pointing out that his program is much better than the “status quo” of the right for it offers promise and hope for the masses. It is the one and only way we can hope to preserve our country for our children that their children’s children. Listen for the mantra…you’ll hear it.

This becomes Obama’s counter-weight to his dismal first term record. The opposition will certainly be pointing it out but the President will be out there touting his new plan as the singular element of the discussion which will be right for America. He will point out that the right has no plan except to cut spending and programs leaving Americans without any assistance from its government. Whether or not Republicans can weather those accusations is anybody’s guess at this point. Obama will not care because his campaign will be riding the wave of false hope. By the time that becomes apparent, he may well be into his second term. At that point, there will be no need to worry about a plan…it will be a waste of time.

© Copyright WBrown2011. All Rights Reserved.

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Comments 52 comments

Sam Dolloff profile image

Sam Dolloff 5 years ago from Maine

I agree in so many ways! The separation between what the president says and what he really means or is aiming for is so far off. Great Hub!

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Sam Dolloff...At some point, the public needs to quit falling for this "urgency" which becomes an excuse to push legislation through just like healthcare reform. Thanks, Sam. WB

Old Poolman profile image

Old Poolman 5 years ago from Rural Arizona

Wayne, whatever he comes up with, you can bet there will be no yardstick mentioned for measuring the results, or a time frame for problem resolution. As you said in your hub, reducing regulation and environmental constraints for at least a temporary period of time would immediately create jobs. Encouraging banks and other lenders to loan money to small business would also create jobs, but they only want to loan money to those who don't need it. A few tax breaks for small business owners would also stimulate growth. Most small business are in a holding pattern waiting to see what is going to happen with the dreaded Obamacare.

Bottom line is little or nothing is being done to encourage small business, the largest employer of people, to expand their business. Quite the reverse is true, more regulation and talk of increasing taxes does little to stimulate growth in the small business world.

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Old Poolman...Absolutely true, Mike. First we ham strung American business with minimum wage escalations driving labor costs through the ceiling versus other countries and playing right into union hands. Then, we come up with so much regulation that a business has to shut the doors instead of paying the fees and penalties. Every camel has a back which will break...given enough straws. All of us better learn how to farm and quickly because that is all that will be left when it all crashes down. WB

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

He will present another 'jobs' plan that will include new investments (read: more spending), new revenues (read: new taxes), and nothing at all to spur the private sector economic engine. He will use focus group tested words, but will present nothing new.

Obama is bankrupt, because he will not do the right thing, and no one will go along with more of the same. Congress will not authorize another massive stimulus, so Obama will blame them, rather than admit that he's the one whose leftist policies are a miserable failure, as they always are!

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@WillStarr...Yes, and unfortunately the right will get much of that blame conveniently forgetting that democrats control the Senate. I feel certain this is no more than a ploy to do exactly what you against Congress for the White House. WB

dahoglund profile image

dahoglund 5 years ago from Wisconsin Rapids

My son suggested once that Obama is a puppet for someone.There is a certain logic to that.How did a small time Chicago politician gain the highest office in the land? He has no notable accomplishments except getting elected.I've heard that in Chicago you don't get much of anywhere without the endorsement of the machine. profile image 5 years ago from upstate, NY

WB-Terrific commentary! Politics is more like a game of chess with an intricate arrangement of smoke and mirrors to hide ones intentions. Fortunately, I believe Americans are finally seeing through these charades. As you mentioned all the government can do is attempt to bribe the private sector for short term job gains but in the long run history proves that this does more harm than good because an artificial demand has been created apart from a real business need.-WBA

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@dahoglund...No doubt about it, DA...I think you can pretty well figure that George Soros is the puppeteer. Obama is playing too many things his way in terms of the off-shore drilling investments in South America and now the EPA's barrage on the American coal mining industry which will eventurally run out the smaller producers and leave Soros and company to buy up their assets which they definitely plan to sell to China in the future along with a west coast export facility already in place in California. WB you. I do not see another stimulus getting past but I do see Obama using that as his re-eletion crutch...either way, he avoids running on his record which the opposition will have to keep putting in America's face. At the same time, that can also backfire if along with it you do not have a plan to improve things...just stay at the status quo...that won't get votes. WB

50 Caliber profile image

50 Caliber 5 years ago from Arizona

Wayne voted up and hit 'em all the video made the "funny"

It is beyond me what the F americans are thinking! It was promised three days posting of bills and laws on the net for us to read prior to any vote. Has anyone seen that? I haven't, you have made good speaking points, let's stay vigilant all the way past election day! thanks, dusty

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@50 Caliber...Dusty, any worthy opponent who faces Obama must keep his first term record in the forefront of any discussion. At the same time, they must present a viable and logical plan that takes America in a new direction back toward a more democratic and fiscally-responsible country. We cannot live with what we have and we certainly cannot live on what Obama cannot deliver...Thank God! WB

drbj profile image

drbj 5 years ago from south Florida

You are so right, Wayne, it is business that drives job growth, not government. Obama seems to hate small businesses and large corporations equally. We will not get out of our debt and deficit predicament until government (hopefully with brand nw leadership in 2012) recognizes what needs to be done and begins to again support America's businesses by reducing government interference and less than useful regulations.

Voted up!

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@drbj...There are those who run for office who seek nothing but power and control. And there are some who are honest enough to want to achieve funtionality and efficiency. We have elected the wrong crowd for too long and now the price is upon us to be paid with the same crowd crowing for more. It needs to stop, Doc! WB

Tom Cornett profile image

Tom Cornett 5 years ago from Ohio

Great Hub Wayne. We have a government that throws money at problems and gives us crap excuses why it didn't work. The economy is in a tail spin...they are bailing out themselves and leaving us in the airplane.

I loved the song. :)

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Tom Cornett...Thanks, Tom. Obama's legacy will be that he woke a sleeping giant in the American public. I think the silent majority which has for so long just went along with whatever is finally ready to put a stop to all of this and get back on the road to prosperity as a nation. Obama has only one interest and that is to build a socialist empire on the shores of America. We are the only ones who can stop that from happening...Congress won't. WB

SheriKeat profile image

SheriKeat 5 years ago

If I am not mistaken the first time we heard "urgent" in recent political history was from another Texan, Bush with his crony Paulson, telling us he had to have a couple of trillion dollars to give the banks in the next three days or the world would end. While it may not seem "urgent" to you, jobs for the 9.1 % (roughly 30 million fellow Americans) or in reality the 16% (approximately 45 million fellow Americans) might be a little "urgent" to them. Think about that number a minute Wayne. 30 to 45 million people not able to feed their kids or put a roof over their heads. Not unknown Somalians, Indians, Asians, but fellow Americans. Americas' debt is not going away tomorrow no matter what is done or not done by this worthless congress. However, with some investment (yes I'm aware it's money that is invested) in infastructure and a few other programs we can help our fellow citizens immediately. Obama is not saying lets tear down that perfectly good bridge and put up a new one just to make busy work. We need this work done anyway. The borrowed dollars are at virtually 0 interest right now, labor is available. It is short sighted NOT do this now.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Hi, SheriKeat,

The problem is, government jobs produce nothing to sell, so they are not self-sustaining. They are temporary at best.

Barack Hussein Obama refuses to do the right thing, which is to ease regulations, reduce or eliminate capital gains taxes, hold up on new energy restrictions, open up all oil and natural gas fields, and halt the implementation of Obamacare for at least ten years.

That would cause business to soar and actually put people back to work at meaningful employment.

I see that you just joined and this is your only post. A coincidence?

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@SheriKeat...I have been thinking about that number Sheri...for three long years now. After three years, you really think this guy has a plan that is designed to do anything except wring more money out of the taxpayer coffers? My heart is with the unemployed but there have been a lot of common sense opportunities here to get the private sector going which this administration has both ignored and surpressed. Government do not produce jobs except for government workers...the rest are temporary as best. The best thing government can do is to nurture an environment in which the private sector can flourish. This administration has failed miserably at that starting with ObamaCare. WB

SheriKeat profile image

SheriKeat 5 years ago

Hello Will Starr,

Yes, a coincidence. Merely the first thing I read that invoked enough of a reaction to warrant a response. Cooking, how to give a party and the other posts I read just didn't do it!

Yes, rebuilding a bridge is temporary. But there are a lot of bridges that need to be rebuilt. Retrofitting schools, rebuilding the East Coast thanks to Irene, is hopefully temporary as well but it will still employ people. Part of the problem seems to be "long term" unemployed can't get hired. So if you hire them to do these jobs they are no longer "long term" unemployed. From these jobs their skills are updated and they can move on to get others.

Repairing and replacing the foundation of our country is not about making something to sell. It's about having a viable vibrant country in the future. It's about not being willing to become a third world nation.

I believe the President just refused to implement the latest smog regulations, so your comment is not exactly factual. Ease regulations? Exactly what regulations? Can and should some of them be eased? Probably. Should some of them not be eased? Most definately. The bank collapse, the mortgage crisis was about lack of regulation. In fact the original savings and loan collapse was in large part lack of regulation. Are you aware in the fifties rivers, big rivers, used to catch on fire? The rivers were so polluted from sewage and factories they would burn for days and for miles. Is that what you want for your country? Is that what you want for our future generations? I don't. So no, I am not willing to do away with regulations. Opening up oil and natural gas fields? Sure. Right after they show without a shadow of a doubt that they can do so safely. Which first of all means they have to replace that well cap they are currently using off shore that they know and have known for over 40 years is defective. Or at the very least they ADD regulations to mimic Canadas'. Make them drill a second shaft so if there is a blowout the shaft is right there and it takes them a few days and not a few months to cap the blowout. IF we could trust companies to do the right thing without "regulations" then they would already be doing this. Because it makes sense and because the expense hasn't stopped them from drilling in Canada so it is apparently not prohibitive.

Fracking? sure right after they insure the safety or all the aquifers. Assure and INSURE peoples drinking water. Not to mention has anyone looked at whether they are creating new earthquake zones by creating fractures in the earth? Companies are not trustworthy. They have to be regulated. This isn't a whim. It has been shown to be fact.

Healthcare. Do you really want to get me started on that one? This is the only industrialized country NOT providing healthcare? What are we to stupid? The rest of the world can figure it out and we can't? Give me a break! We are intelligent enough to do this. Not to mention we actually can look around and select the best of what works.

Yes, you have it. A mere coincidence, this liberal commie pinko socialist responded here first.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"The bank collapse, the mortgage crisis was about lack of regulation. In fact the original savings and loan collapse was in large part lack of regulation."


It was the exact opposite...the collapse was the result of government meddling in the housing market, with Fannie, Freddie, and the Community Reinvestment Act.

The Community Reinvestment Act was all about putting poor people in houses they could not afford. How do you get an otherwise sane banker to give such poor risks a housing loan? By promising that Freddie and Fannie will buy up the bad paper and have taxpayers foot the bill!

What happens when speculators and poor risks all start buying houses with that easy money? Demand drives up home prices! The housing bubble!

What happens when the bubble finally bursts? The market collapses, prices plummet, buyers default on their loans, and Fannie and Freddie go belly up, leaving the banks holding all that toxic debt and here we are!

Learn your history.

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@SheriKeat....Sheri, the housing bubble and the eventual collapse of the mortgage industry came on the heels of relaxed requirements by the Clinton Administration Fair Housing Act. The Bush Administration warned Congress that things were going bad and needed some change but it fell on deaf ears...the deaf ears of a Congress which had been dominated by a super majority of Democrats since early 2007. The government can certainly look at regulations and give business some elbow room. In July 2011 alone, The Obama Administration enacted regulation which amounted to over 9 billion dollars in fees for businesses in the private sector. At that rate, that is 84 billion dollars annually in new regulation fees. The government can certainly offer some assistance in the temporary job sector such as you suggest on the east coast but remember, there is only one job in that scenario and it either goes to the worker of some company or to a government can't be both ways. Either way, one man or another is out of work. The private sector is heavily stymied by the fact that Obama has increased the budget of the EPA alone by 125%...this ultimately translates into more supervision, more regulation and more compliance = more paperwork and more dollars out the door. Obamacare is yet an unknown cost factor for the private sector as there is no one to explain it. The parts which are known are not liked at all. This basically government at its best shoving things down people's throats whether they want it or not...what of the will of the people? Regardless of what action Obama takes on the part of the government, if that action does not include unbridling the private sector then he is whistling in the wind in terms of firing the economy or lowering unemployment. All we are going to do is continue a throw money at the problem when the lack of money is a problem and money is not the solution. Insanity is continuing to do the same thing and expecting different results. WB

daskittlez69 profile image

daskittlez69 5 years ago from midwest

Could this guy be any more of a joke?

SheriKeat profile image

SheriKeat 5 years ago

Sorry Wayne, Sorry Will, Clintons Fair Housing Act was but a very small piece to a very large complex issue. I was in the industry and can tell you without question it was a lot of things and the fair housing act was not a very big piece of it. I retired from the industry so it's not like I don't have several years of first hand knowledge. The Fair Housing Act is simply the whipping boy, it was way more systemic than that.

The government gives the money to companies that hire the long term unemployed from the state they are working in to do the work. Seems pretty simple to me. Ooops! There we go again, more regulations.

Heres another regulation for you. Every company receiving these federal funds, in fact all companies receiving federal funds, sign an accompanying contract that states "if the company is found defrauding the taxpayers the CEO will be prosecuted and sent to jail". Then actually do it. It will only take once or twice.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"...Sorry Will, Clintons Fair Housing Act was but a very small piece to a very large complex issue."

Nor did I say it was. That was Wayne, and he had his reasons.

I cited the Community Reinvestment Act, and the promise that Freddie and Fannie would buy up all the bad debt. That such government meddling in the market and banking led directly to the current housing disaster, and the resultant recession is now indisputable.

As President Reagan so famously put it, "In this present crisis, government is not the solution to our problem; government is the problem."

That same quote is also valid for the current crisis!

SheriKeat profile image

SheriKeat 5 years ago

Sorry, It had more to do with Realtors, Mortgage Brokers, Appraisers, and the flaws built into the system then it did with any government intervention. I'm not saying it had no effect, just that it was not the cause and effect. Based on your premise, the foreclosures would be centralized in the "reinvestment areas". It's not.

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@dazskittlez69...I assume you are speaking of Obama. For me, it's a really bad dream that we need to wake up from. WB

@SheriKeat...As you may have noticed this week, the government is suing larger banks for "fraud" in their securities packaging with the home mortgages which were made under the Fair Housing Act and the regulations it specified...basically doing away with anything sane in terms of making loans. Now the government wants to pin all the losses of Freddie and Fannie on the banking system. For a small potatoes act like you describe, it sure has garnered a lot of press and one hell of a lot of money has gone to right the ship over at Freddie and Fannie. This is a perfect example of what happens when government inserts itself into the private sector attempting to create an economy of scales which becomes both false and temporary. The crash from these boondoggles is worse than the markets that precede it. Obama and Congress has had three years to recognize that the stagnant private sector and consumer confidence have everything to do with recharging the economy. So far, everything that has been done has gone against either one moving forward. If we are not careful we'll be back to thinking that homeownership is a "right" and begin institutuing more programs to make home mortgages easier to get...the cycle can begin once again. WB

SheriKeat profile image

SheriKeat 5 years ago

WB, You will have to be more specific in the sources you are refering to. I read several articles regarding the banks being sued, not one that I read mentioned " the mortgages which were made under the fair housing act", not one article mentioned it at all. It did mention fraud in packaging, as in maybe some of those loans should not have been AAA rated.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"Sorry, It had more to do with Realtors, Mortgage Brokers, Appraisers, and the flaws built into the system then it did with any government intervention"

So explain to us then, why perfectly sane bankers would make very risky, sub-prime home loans to known losers?

They did it because they were assured by people like Franklin Raines, Chris Todd and Barney Frank that Freddie and Fannie would buy up the 'toxic debt' we have heard so much about!

Even when the far left knew that Freddie and Fannie were all but belly up, they were in complete denial:

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"The Community Reinvestment Act (CRA, Pub.L. 95-128, title VIII of the Housing and Community Development Act of 1977, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods."

In other words, encourage home loans to those who have no way to pay them back! The result was a huge surge in demand, which resulted in a housing price bubble! That, in turn, encouraged speculators, who drove prices even higher, and they also took out toxic debt.

Then, inevitably, the mountain of toxic debt caused Fannie and Freddie to collapse, and the whole, government created, house of cards finally came down, and here we are with a major recession.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Now that you have seen Democrats blatantly lying about the solvency of Freddie and Fannie, and have been given links to The CRA demands on lenders to accept toxic borrowers, do you still want to claim your opinion trumps the facts?

SheriKeat profile image

SheriKeat 5 years ago

Will, are you sure you want me to use the aforementioned source? As it more closely agrees with my findings then yours.

First and foremost it is the act of "1977". That in and of itself should tell you that it worked for a very long time before bankers, with the help of Republicans with their think tanks as in CATO got the banking regulations loosened to allow banks to engage in multiple enterprises.

Now the following quotes are taken verbatim from your source - I suggest you read them before asking me if I want to change my opinion and maybe you shhould change yours:

"however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner",

"does not require institutions to make high-risk loans that may bring losses to the institution"

"Congress included little prescriptive detail and simply directs the banking regulatory agencies to ensure that banks and savings associations serve the credit needs of their local communities in a safe and sound manner"

"Secretary of the Treasury at that time, affirmed his belief that availability of credit should not depend on where a person lives, "The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live"

"Economists, including those from the Federal Reserve and the FDIC, dispute this contention. The Federal Reserve having examined the evidence, holds that empirical research has not validated any relationship between the CRA and the 2008 financial crisis.[108] At the FDIC, Chair Sheila Bair delivered remarks noting that the majority of subprime loans originated from lenders not regulated by the CRA, calling it a "scapegoat" and declaring it "NOT guilty."[

"Legal and financial experts have noted that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA".

"Raines also cited information that only a small percentage of risky loans originated as a result of the CRA"

Based on YOUR documentation, I rest my case.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona


I quoted only the first paragraph, because it was accurate. Wiki is otherwise a very unreliable source.

Here's what happened:

The Government Did It

The financial peril of Fannie Mae and Freddie Mac--the government-sponsored, government-regulated mortgage giants regarded as instrumental in solving the nation's mortgage market problems--has one benefit. It should help expose the lie that today's financial problems are the result of an insufficiently regulated market.

For too long, the refrain has gone, Congress and the administration have been asleep at the wheel when they should have been steering the economy by expanding government control over the housing and financial markets. Economist Paul Krugman slams the administration's "free-market ideology"; he urges Bush to "reverse course now" and "seek expanded regulation."

All this overlooks a crucial fact: There has been no free market in housing or finance. Government has long exercised massive control over the housing and financial markets--including its creation of Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) (which have now amassed $5 trillion in liabilities)--leading to many of the problems being blamed on the free market today.

Consider the low lending standards that were a significant component of the mortgage crisis. Lenders made millions of loans to borrowers who, under normal market conditions, weren't able to pay them off. These decisions have cost lenders, especially leading financial institutions, tens of billions of dollars.

It is popular to take low lending standards as proof that the free market has failed, that the system that is supposed to reward productive behavior and punish unproductive behavior has failed to do so. Yet this claim ignores that for years irrational lending standards have been forced on lenders by the federal Community Reinvestment Act (CRA) and rewarded (at taxpayers' expense) by multiple government bodies.

The CRA forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?

According to one enforcement agency, "discrimination exists when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." Note that these "arbitrary or outdated criteria" include most of the essentials of responsible lending: income level, income verification, credit history and savings history--the very factors lenders are now being criticized for ignoring.

The government has promoted bad loans not just through the stick of the CRA but through the carrot of Fannie Mae and Freddie Mac, which purchase, securitize and guarantee loans made by lenders and whose debt is itself implicitly guaranteed by the federal government. This setup created an easy, artificial profit opportunity for lenders to wrap up bundles of subprime loans and sell them to a government-backed buyer whose primary mandate was to "promote homeownership," not to apply sound lending standards.

Of course, lenders not only sold billions of dollars in suspect loans to Fannie Mae and Freddie Mac, contributing to their present debacle, they also retained some subprime loans themselves and sold others to Wall Street--leading to the huge banking losses we have been witnessing for months. Is this, then, a free market failure? Again, no.

In a free market, lending large amounts of money to low-income, low-credit borrowers with no down payment would quickly prove disastrous. But the Federal Reserve Board's inflationary policy of artificially low interest rates made investing in subprime loans extraordinarily profitable. Subprime borrowers who would normally not be able to pay off their expensive houses could do so, thanks to payments that plummeted along with Fed rates. And the inflationary housing boom meant homeowners rarely defaulted; so long as housing prices went up, even the worst-credit borrowers could always sell or refinance.

Thus, Fed policy turned dubious investments into fabulous successes. Bankers who made the deals lured investors and were showered with bonuses. Concerns about the possibility of mass defaults and foreclosures were assuaged by an administration whose president declared: "We want everybody in America to own their own home."

Further promoting a sense of security, every major financial institution in America--both commercial banks and investment banks--was implicitly protected by the quasi-official policy of "too big to fail." The "too big to fail" doctrine holds that, when they risk insolvency, large financial institutions (like Countrywide or Bear Stearns) must be bailed out through a network of government bodies including the Federal Deposit Insurance Corporation, the Federal Home Loan Banks and the Federal Reserve.

All of these government factors contributed to creating a situation in which millions of people were buying homes they could not afford, in which the participants experienced the illusion of prosperity, in which billions upon billions of dollars were going into bad investments. Eventually the bubble burst; the rest is history.

Given that our government was behind the wheel, influencing every aspect of the mortgage crisis, it is absurd to call today's situation the result of insufficient regulation.

We do not need more regulation or economic "steering"--laws or bureaucrats dictating to financiers and investors the kind of innovation they may or may not engage in. If that were the solution to economic problems, then Hugo Chavez would preside over the world's healthiest economy in Venezuela. What we need to do is remove the government's power to coerce, bribe, reward and bail out irrational decisions. The unfree market has failed. It's time for a truly free market.

SheriKeat profile image

SheriKeat 5 years ago

You are thick headed. Hello, it WORKED from 1977 until the time the greedy, LESS regulated bankers created adjustible rate mortgages. The government did NOT create adjustable rate mortgages. Your own cited source showed you to be wrong. Every source I cited from your source was referenced as to which legitimare source they took the information from. Nothing that I parroted back to you was an unreferenced source, so no, it wasn't a wikipedia add on. I suggest we let the courts decide the issue as they are apparently going to do. Although the banks are already looking for a settlement as they know how guilty they are for this debacle.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

"You are thick headed."

A personal attack? You must be a liberal.

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

Here is a link you might find interesting:

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Good article Wayne, but that too will be ignored because it doesn't blame Republicans.

I guess you too must be 'thick-headed'! :-)

The point is, without the CRA and Freddie/Fannie buying up toxic debt, those loans would never have been made! Bankers may be greedy, but they are not insane!

SheriKeat profile image

SheriKeat 5 years ago

You are 100% right Will I should not have said that. I apologize.

SheriKeat profile image

SheriKeat 5 years ago

As to Waynes Money link, it is a blog. An opinion. It is not based on any more fact than anything I state or for that matter you guys state. Blogs are not facts. If the fault is the CRA as is Waynes contention, it would not have worked for so well for so long. Ah, something must have changed. So it is not the CRA, it is the changes that are the cause and effect. Now what are the changes?

Clinton expands the program.

OK we could lay the blame there but it would be shortsighted. The program was working, expanding it should not have affected it, in and of itself.

Congress loosen regulations.

Mortgage Brokers are created.

Less funding is now required to be held to support these loans, from 10% to 2.5%.

Fannie and Freddie insure them.

Do you guys see any pattern here?

What I see in the lessening of the regulations brought about the changes that caused the problems. Not the program, maybe, but probably not even the expansion.

On the other hand the lack of regulation freed them up to create the problem.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Hi, SheriKeat, and your gracious apology is certainly accepted.

I don't hold with the regulation theory simply because bankers won't make risky loans unless they are somehow assured that they won't lose that money. They don't need regulators to tell them it's very bad idea to loan money to someone who can't pay it back.

That's where the CRA and Freddie/Fannie come in. If a banker is encouraged to make risky loans, he will comply, but only if someone promises to buy up that bad paper, and that's essentially what happened.

Yes, there was also a certain amount of human greed, because bankers were making money on these risky loans, but that's human nature.

The regulations you speak of would have cancelled out the CRA and Freddie/Fannie mandates, which is why Democrats resisted Bush's call for regulations of and investigations into Freddie/Fannie, as you saw in the video.

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

BTW, there's a reason for everything, and the reason the Democrats created Fannie, Freddie, and the CRA was buy votes with taxpayer money.

People who suddenly own a home they couldn't afford will vote for whoever put them in that home...Democrats! And when they inevitably default, the taxpayers are on the hook to support Fannie and Freddie.

Neat, huh?

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@SheriKeat...Yes, that is a blog or editorial comment and it is not necessarily fact but at the same time, I am not sure what I hear on the NBC Nightly News is fact either, so that leaves us totally dependent on each other and the government for finding out the truth. Anyway, I don't disagree that the Fair Housing Act did seem to work for several years althought I am not sure it had any real impact for that time other than to act more like an Equal Opportunity oversight on the housing industry. I wouldn't say that Clinton expanded it...I would say that he more like destroyed it and any sanity that went along with regulating the home mortgage industry easing capital requirements; having Fannie and Fred push the curve to buy up the debts and to give banks confidence that they were not taking risks. There was room for manipulation and the system got manipulated and in the process a large false housing demand was created alongl with a financial bubble which burst. With regard to the "trend" side of things, I see a trend that says when government gets involved, look out! That has been true since the government started offer cotton allotments and crop subsidies way back. Many farmers got so involved in getting the susidies, they forgot to run their farm like a business and went broke. I saw a California farmer interviewed one time and the reporter asked for the secret to his success...he stated,"I never raised a crop that was subsidized by the government". Government is a necessary evil at best but that is how we need to keep it. Our present one has grown 17% in just three years and consumed more than 5 trillion taxpayer dollars in unpaid debt. At what point do we say "enough"? At what point does the government have "enough" money to function? That point will never come because the more revenue that is collected the more those in office look for things to spend it on....a circular error in the making. At some point, sanity calls for a balanced budget approach to operation and our federal government is long since past that point. The unfortunate side of that is we cannot elect anyone brave enough to lead us down that road. Both sides of the aisle want to continue on this journey of reckless spending until we no longer have a choice at all...and that day is not so far away now. Call me "Thick-Headed" but I believe that this country's only hope lies on the back of the private sector. If we cannot get government in check enough to maintain a positive business environment,how are we suppose to exist to enjoy this world that we are supposedly saving with all of the regulations we are putting into place daily, weekly? At the moment we have an administration which is excelling at shutting down American business little by little as the egos which populate Washington cannot phanthom that the private sector can turn this situation around...that wouldn't work so well politically because they can't take credit for it. Duh! WB

poppyl1 profile image

poppyl1 5 years ago from Marlton, NJ

Have any of you read this? It may give you a glimps of what's really going on in Washington.

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@poppyl1...That may be the case, Poppy, but it represents only one half of the solution to the problem. Elected officials have discovered that they no longer need tax money to spend, they just borrow and create a mountain of debt. Pledging to keep taxes low does not stop the spending insanity. We have to get to a balanced budget approach to government because our politicians on both sides of the aisle have proven time and again that the temptation to spend is just too great. There will never be "enough" money for those purposes so let's look for a saner, more logical, approach that ultimately will benefit the taxpayer. WB

kashannkilson profile image

kashannkilson 5 years ago from Portland, OR

This has been an incredibly interesting Hub to watch! First off let me compliment you all on a very civil, well thought out debate on all sides. It's nice to see reasonable adults having a discussion- I think if Washington as a whole talked things out like you folks we be in a better place as a country.

I worked in the finance industry during the 2000's and I have to tell you that you all make very valid points, but I do have to say I don't agree with "It's the government's fault" theory.

Clinton did no one any favors by expanding the pull of the CRA- the real damage isn't that it FORCED anything, but it made pushing bad paper a hell of a lot more attractive AND lessened a lot of regulations industry wide to help banks get a higher CRA rating.

So yeah, when the government encourages banks to loan more money and then gives them free reign to loan that money however they see fit, and THEN insures a lot of them against a hit, they deserve some of the blame (Freddie and Fannie are the biggest securities firms no doubt, but there were some major private firms like Lehman Bros. that got into the mortgage securities game).

However, you can't put all of the blame, or even most of the blame on the government.

Greed, greed, greed, greed, greed is what caused it.

Banks knowingly sought out bad paper. I can tell you first hand, companies knew they were pushing bad loans to people that couldn't pay. And not just the Freddie and Fannie babies either.

For that matter not even just mortgage companies. During the late 90's and especially the early 2000's credit was flowing like water out of the faucet.

Credit cards, lines of credit at department stores, auto loans, boat loans, etc. If you could fog up a mirror there was someone out there willing to help put you in serious debt.

People got greedy and started buying waaaaay more than they could afford and we were all more than happy to oblige.

I had a client that was a part time mariachi singer. Seriously. He already had a $400,000 mortgage, three car loans for about $60,000, and another 50k in credit card debt. He had no proof of income, no down payment- the only two things we got from him were a valid social security number and a 8 x 12 photo of him singing at a wedding. APPROVED!!! Bank made rate, we made commission, and the El Mariachi left with another $150,000 in debt. We all just kind of stared at each other with our mouths open when the approval came.

If there were any "sane bankers" I didn't meet any of them. They money was flying so fast and so free the whole system was literally crazy.

So while the government did have a part in it, it was the marketing executive borrowing another lump of cash for his 4th or 5th "investment property", it was the 22 year old cook making $3000/mo that got a $300,000 ARM loan and a brand new truck with no money down, it was the newlywed couple making a combined $50,000/yr that bought their first house for $1400/mo , and then a month later got a second mortgage to pay for a wedding and a honeymoon.

And more importantly, it was the places like where I worked for that gladly, GLADLY let those folks crush themselves. And I did not work for a company that fell under CRA guidelines! It literally became a horse race to push as many people through as possible as quickly as possible because we ALL KNEW it was going to come tumbling down!

The schmucks in bad ties like myself knew it, our bosses knew it, their bosses knew it, and the people that applied for the loans knew it!

No one had a gun to the heads of any of those people when they applied, and certainly no one had a gun to any of the bankers that approved them.

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@kashannkilson...Thank you for those words of encouragement. I agree with you totally. Good discourse is what made this country and it is a reality that we must face and do so effectively if we are to solve our challenges. I also think you make very good points on the entire perspective. I don't blame the government in totality but I do feel that it failed miserably in nurturing that part of the equation which was require of it. Capitalism will always have a resident greed in waiting for those who don't care how they make a profit. So certainly there are those on the business side who are to blame as well. And, the consumer of those products bears a portion of the blame although far too many of them want to claim ignorance as their excuse, that does not fly. I think there may have been a point where things went too far and some decent businesses and banking operations were pulled into the "me too" pool by the competition in the marketplace. If competitors gain significant market advantage even though it is not done on the best ethics and principles, one's business can fail as a result. So I think there were some organizations which were basically dragged into the pool by the pressures of the market more so than greed. I believe this points heavily to the role that government plays as the "nurturer" of a given environment...good or bad. We have a very stagnant economic picture at the moment and a high unemployment ratio. At the same time, the actions the government is taking is doing little to nurture an environment in which businesses in the private sector are willing to take a risk. Basically the pendulum has swung too far back the other way. Government cannot fire an economy of true significance on its own. All it can do is create false, temporary economics which eventually whither and cost the taxpayer dearly in the process. Obama's desire to put healthcare reform on the table as his firsst step was the first step in wrong direction in terms of repairing the economy. This step has left the business sector, especially small businesses, in limbo. Stir in the uncertainty of new taxes and a building pile of regulations by executive order and one has a rather unstable economic climate. As long as we have politicians who are bent on creating a legacy for themselves in history, we will have government programs and government intervention into the marketplace which will be problematic. Sometimes we have to protect the goose that laid the golden egg rather than think about using it for a thanksgiving feast one more time. Thanks for your great comments. WB

WillStarr profile image

WillStarr 5 years ago from Phoenix, Arizona

Hi, kashannkilson!

You are absolutely correct that greed caused the bubble and its collapse. However, that greed would not have been possible without the CRA and Freddie/Fannie.

If we dig to the core of that nasty ball of wax, we find government and the Democrats.

Tara_in_NE profile image

Tara_in_NE 5 years ago

I'm in the center of the political spectrum (neither a wig nut conservative nor a whacked out liberal) and a registered Independent.

Nothing about this current economic crisis can be blamed on one party, or one politician. A great deal of blame can be placed on our "can't see the deficit from my house" mentality. Funny- Americans seem to want their goodies (entitlements) but expect some other sap to pay for them.

Just saw the President's speech tonight. Just saw the Republican debates last night. And what I've concluded is THIS: so as long as there is such division and polarization among these two parties there will be a great reluctance on the part of private companies to hire and a great reluctance on the part of American consumers to spend. Think about it: would YOU want to invest in new employees if you didn't know what the economic climate is going to be from one day to the next?

Time to get rid of the hardliners (on BOTH sides of the aisle) in another fourteen months, bring our troops home from these fruitless wars, and get people in office that will act TRULY in the best interests of this country. Get rid of the antiquated tax system we have and replace it with a flat tax combined with a consumption tax. We have relied TOO much on corporate and payroll taxes to the point we're seeing nil industrial growth. And nearly half of the people in this country pays NO taxes at all.

Thus, I agree that the private sector will have to be the one to lead us out of this mess. Not sure if I want environmental standards to go back those of the nineteenth century, however- when rivers were catching fire and people died from breathing in acrid blue-black exhaust belching from smokestacks.

Another problem is education: many companies ARE hiring- but there are not enough Americans sufficiently educated and trained to fill these jobs. Such as those in the biotech industry (where I work), health care, engineering, etc. These are the jobs of the future. Manufacturing is gone. It's not coming back. Are Americans up to the challenge of pitching in funding the retraining of the unemployed?

Just my two cents. Just thought I'd ask.

Fantastic hub.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Tara_in_NE...I think what a majority of Americans are waking up to is that the game of politics is costing us dearly as taxpayers. Programs like Medicare and Social Security have been undermined and the funds have been squandered in an attempt to "buy votes" over the years. That's not what the politicians call it but that's what most social programs are really all about...buying the vote. At one time, there was so much money, the mistakes could be covered up; that's not the case today although the government is still consumed in wasteful spending in many areas. It is now obvious to most folks that we have been robbing Peter to pay Paul...nothing less than a Bernie Madoff special. As long as we have folks in Washington who want America to look to Washington for its needs, nothing will change. The federal government should not be the center of our universe...that was never the intention and we need to get back to that. Thanks for the great comments. WB

poppyl1 profile image

poppyl1 5 years ago from Marlton, NJ

I couldn't agree with you more Wayne. Complacency rules with the voters not willing to become involved as long as it doesn't effect them directly. The media buckles under ratings pressure so as to allow questions to remain unanswered. It seem that everyone is out for themselves. Yes, social security is in a deep hole because it has been used as a congressional money pot from which funds are borrowed but never repaid. It's our money. We should demand that someone at least offer to replace the funds which were taken without asking those who contributed for years and years.

If you would be so kind as to read my latest hub, (The 3 L's) and comment, I'd greatly appreciate your input.

Have a wonderful day.

Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@poppyl1...Thanks, Poppy. I appreciate your perspective. I will check out your Hub and comment. Thanks. WB

James A Watkins profile image

James A Watkins 5 years ago from Chicago

I haven't bothered to check out the speech yet. I am sure it will involve the government "creating jobs." HA HA HA!! ROFLMAO! As if!

Anyway, I suppose it will involve forcing ten milion people to join labor unions so a portion of their pay can support Democrat candidates. Let's see, probably a good chunk of the money will be spent where the polls now show a 50-50 split in the electorate. Some votes can always be bought and this has long been a Democrat speciality. I am sure community organizers will get their 10 percent cut to spread amongst those who never intend to work for a living.

Great article, by the way. We must get this marxist atheist out of our White House. Another four years of this evil and we are done for. God Bless You, WB


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@James A. Watkins...Thanks much, Jim...I appreciate the great comments! WB

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