Who To Blame For the Economic Meltdown of 2008? Fannie Mae and Wall Street

From The Week (printed version) summing up the piece by David Brooks in the New York Times:

“Looking for someone to blame for the 2008 economic meltdown? asked David Brooks. It all started with Fannie Mae, the government backed mortgage giant, and it’s former chief executive, James Johnson. In a well reported new book, Reckless Endangerment, Gretchen Morgenson and Joshua Rosner reveal how Johnson, a “Democratic sage with a raft of prestigious connections,” enriched his friends and made $100 million for himself by flooding the market with risky subprime mortagages. Dispensing with the usual criteria for making loans, Fannie handed out billions in federally guaranteed dollars like candy, and “helped spread risky behavior and low standards across the housing industry.” Johnson and his cronies paid themselves lavishly, and used Fannie funding to lobby congressmen, falsify academic research, and suck in “reputable figures” such as Bill Daley, Ken Starr, and Larry Summers to defend Fannie’s scam. In the end it all crashed–bringing big banks, Wall Street, and the entire economy down with it. Yet Johnson and the other power players skated away, blameless. “This is how Washington works.” It is any wonder there’s such a growth market for angry populism?”

Print this article, put in your wallet. And next time a liberal tries the lame argument that Bush’s policies somehow caused the economic meltdown, you can direct them to the correct answer. Although Johnson was a Democrat, greed and avarice knows no party. Democrats and Repubicans alike get in bed with lobbyists, Wall Street cronies, and government contracts all the time. People were outraged over Bernie Madoff, but the government has nothing on him. Millions of people have lost their homes because of Fannie Mae and jerks like Johnson. Our country faced an economic meltdown, and yet this guy goes free? Wall street firms defrauded their investors in this mortgage sham. We should all be out in the streets protesting the fact that Fannie Mae lives on. We never learn our lesson because we aren’t paying close enough attention.

Excerpt from the book:

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Of all the partners in the homeownership push, no industry contributed more to the corruption of the lending process than Wall Street. If mortgage originators like NovaStar or Countrywide Financial were the equivalent of drug pushers hanging around a schoolyard and the ratings agencies were the narcotics cops looking the other way, brokerage firms providing capital to the anything-goes lenders were the overseers of the cartel.

Just as drug lords know that their products pose hazards to their customers, the Wall Street firms packaging and selling mortgage pools to investors knew well before their customers did that the loans inside the securities had begun to go bad.

It was a colossal breakdown in the duty Wall Street owed to its investing customers.

Just for your information, James Johnson was a long-time figure in Democratic Party politics and was asked by Obama to help him find a Vice President (that worked out about as well as everything else Johnson touched, didn’t it?)

Fannie Mae and Freddie Mac continue to suck in our taxpayer money:

Fannie Mae and its sibling, Freddie Mac, were taken over by the U.S. government nearly three years ago and have been operating under a legal process known as conservatorship. The government has agreed to inject unlimited aid to keep the companies afloat, and so far Fannie’s rescue has cost taxpayers $86 billion. Fannie has faced huge losses as a result of the housing bust and reported a $6.5 billion net loss in the first quarter.

You know how Obama and liberals are always complaining about CEO’s salaries?

Ms. McFarland will receive an annual salary of $600,000 plus bonus compensation and long-term incentive pay valued at an additional $2.6 million. She will also receive a $1.7 million signing bonus to compensate for equity grants that she will forfeit after leaving Capital One. Fannie said that its regulator, the Federal Housing Finance Agency, had approved those terms

I don’t know about you, but I’m feeling pretty queasy. The entire thing is sickening.

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