Obama and the financial crisis

The following guest article was written by Republican National Committeeman Bruce Ash. It is well written with excellent documentation.

Many investors are nervous because of the current uncertainty in the stock market, and the general lack of liquidity in the financial markets. Now, however, is NOT the time to sell. There are some unique buying opportunities in a market that has lost 20% of its value.  If you can avoid the herd mentality fueled by the same type of speculation that caused this crisis, there are good profits to be gained in the future – if you are prudent and patient. The American economy is still the strongest in the world. Success from Wall Street to Main Street, however, may have something to do with who is elected President in 2008.

The argument put forth by the Obama campaign and his media minions is that John McCain and the GOP have caused the decline in the economy and the stock market. Their endless “blame Bush” mantra seems to apply here. They want you to forget that lower incremental tax rates for individuals and businesses, as advocated by the GOP, have increased revenues to the Treasury dramatically since 2003, and are a worldwide example of successful tax policy.

The Democrats endeavor to inoculate Senator Obama from any connection to any of the current market volatility. They want you to believe that Obama and his liberal economic brain trust will change America for the better and make the improvements needed to correct the economy.  Yet Barack Obama wants to raise corporate taxes and make it more difficult for small businesses to reinvest in their own operations.  Obama’s tax policy will further slow our economy by confiscating more money from investors and decreasing liquidity in the market.

In addition, the failures of Fannie Mae and Freddie Mac were a result of crooked accountants cooking the books to make their bundled loan packages look like profitable risks to the Wall Street banks.  These same officials got away with their crimes by lavishing money on mostly Democratic legislators, including Obama, who was the second highest recipient of Fannie/Freddie money in Congress. 

Obama looked the other way when these same executives opened their golden parachutes and took off with taxpayer money.  The way he tells the story, it seems like it was everybody else’s responsibility, just not the Democrats in Congress. Now Obama and his friends are trying to cover their tracks and pointing fingers at the one man who called to reign in the government sponsored entities – John McCain.

Senator McCain has advocated for stricter oversight and regulation of both Fannie Mae and Freddie Mac — dating back to 2006. As a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, McCain supported legislation that would have curbed the greed and corruption surrounding the subprime mortgage market.  This bill was killed by Ranking Democrats on the Senate Banking Committee.

Is it any wonder why Obama would try to deflect attention from his own connections to this crisis?   James Johnson, who headed his VP selection Committee, was Fannie CEO and “Subprime Mortgage Queen” Penny Pritzer, Obama’s campaign Finance Chair, were both not only involved in this debacle but directly responsible for creating the situations that began the sub prime lending schemes and caused the mortgage collapse.

The real problem, however, is more insidious. Since the mid 1990’s, Democrats have used home ownership as a club to gain political advantage from minority groups and low-income voters, with whom they sought to curry favor across America. The Democrats, collaborating with community organizing groups like ACORN, beat up bankers, regulators, and whomever else, in order to drive their dangerous political agenda.

The result was that many hundreds of thousands of loans were made to first time homeowners with no chance of repayment. Bankers across America suffered with excessive delinquency, which resulted in the secondary mortgage industry being wrecked by these politically connected executives selfishly intent on gaining voters for their Democrat candidates. Meanwhile, the Democrats running Fannie and Freddie made untold millions. These are undisputed facts.

We face an election for the United States Presidency on November 4th and we’re still faced with serious questions about Obama’s fiscal policy.  Most importantly, can Americans trust the Democrat party to play fair in the future, on the Housing issue, or any other partisan issue, when for over a decade they only played in a way that benefited them personally and politically?  Should Barack Obama be trusted with proposing tax policy, when he has voted nine times against lowering the capital gains tax rate, seven times against implementing tax incentives for small businesses, six times against lowering the estate tax and three times against repealing a more than decade-old increase in taxes on Social Security benefits. 

When you are looking at your 401-K, or IRA, why would you ever entrust your future to Barack Obama and the Democrats?  It’s possible that the rest of the marketplace, now seeing the real possibility of an Obama Presidency, may be bailing from the market. Many observers are beginning to opine that the recent market issues have a lot to do with a lack of confidence in a potential Obama presidency. The handwriting is on the wall, and the future looks grim if Obama wins in November.

Bruce Ash
Republican National Committeeman – Arizona


Comments

  1. Both parties shoulder the blame to the extent that both have bought the neoliberal economic policy agenda.

    However, what I find ridiculous in the above narrative is how much is left out. One would think this was an issue of Fannie Mae and Freddie Mac making bad loans to poor people and this has lead to our current economic meltdown. Nice story but it isn’t true and leaves out a few points. The culprits here are the originators, appraisers and investment bankers. Fannie and Freddie didn’t originate any of these loans, guess who did – private sector entities who were trying to make money up-front on high-risk loans and then dump them.

    Did ACORN bully all these companies into making these highly leveraged investment schemes? Who were all the private companies who bought these things?

    Did the ACORN get Paulson to pressure the SEC change its rules to allow Bear Stearns, Lehman, etc. to leverage themselves well above safe levels?

    Did ACORN force private companies like Countrywide to push subprime and other unsafe loans?

    The truth is no one knows who exactly took out bad loans and why. We do know much of the outright mortgage fraud committed was by insiders. To spin this tale as our woes rest on the back of low-income people is to tell a complete fairy-tale.

    Do people here actually believe this is how it worked:
    1. Liberals push banks to give risky loans
    2. Loan income people default on loans
    3. Worldwide capitalists system falls apart.

    If you believe this you have not been paying attention or have such blinders on you fail to see the central role of the free-market private sector in this. I know, I know, market – good , government – bad. If only it were that simple.

  2. nightcrawler says

    Todd,

    You make some very valid points. The “liar loans” started at the ground level as many wanna be real estate speculators were walked down the aisle by real estate agents, mortgage brokers and appraisers all living fat of their fee and commissions. Beyond that mortgage based securities and their derivatives were gobbled up by investment houses and pension funds. Greed and ignorance ruled the day. Now it is time to pay, unfortunately those that had nothing to do with mess are left holding the bag.

    Now Bruce, as eloquent as that post was, you have absolutely no business telling people not to sell, that is far beyond your scope as National Committeemen and frankly is reckless.

    The truth is that you cannot compare this situation to others in the past. The credit crunch will stifle corporate growth and profitability for many years to come. The sad truth is the people over the age of 55 (who comprise a large share of 401K and pension funds) may never recoup their losses before retirement. That money is gone. What those folks need now is security, not more risk. The issue is asset preservation not growth.

  3. People who say “don’t sell” are generally not disinterested advisors. Usually they are locked into the market because their positions are large or otherwise illiquid. Thus they tell people not to sell only because if everyone sold they would lose more money. The whole “buy and hold” for the long-term strategy is a bunch of BS. If you look at the analysis (not a very rigorous one, but enough to prove them wrong) you will see that over the course of many 20 years periods in the last 100 years, the market has not made money. If you have a 40 year horizon, you will have made money. However, can you really trust that will continue to be true in the future? There is insufficient data to support that claim.

    Bruce Ash is being incredibly irresponsible in giving people investment advice in a political endorsement letter.

    1) You cannot just buy and hold and make money. (By this I also mean standard asset allocation, yearly rebalancing, etc)

    2) When people realize this they will buy less stocks, leading to slower market and economic growth

    3) It took TWENTY-FIVE YEARS for the market to recover to 1929 levels after the crash.

  4. kralmajales says

    The loans absolutely started at the “local” level. There was rampant fraud in companies like Countrywide and Ameriquest. They are losing lawsuits left and right as people prove that they not only sold fraudulent loans, but also forged documents to get those loans.

    You can say what you want about lawyers, but they are doing their best to stop this and make sure it doesn’t ever happen again.

    And our Attorney General settling with them makes me puke a little.

  5. kralmajales says

    Bruce’s columns always try to find a way to connect the dots so that GOPers can feel good about themselves for the America they wrecked. This crisis is definitely not about Fannie May and Freddie Mac. It is what your Presidential candidate and Sarah Palin say over and over…Wall Street greed…but coupled with a lack of any sort of regulation.

    Enron? Worldcom? Remember K Street?

    People aren’t that blind and are not that stupid.

  6. nightcrawler says

    kral,

    You should have stopped at post number 4. I hate to burst your bubble (again), but not all businessman and Republicans, if fact, many on Wall Street are quite liberal. The Executive Branch really has little to do with these issues. You can argue legislative relief if you must. Regulations exist now, the problem, as with immigration, is enforcement.

    Whether we talk stocks or real estate, sound financial management and valuation is the key.

    None of this “I’ll give you $10,000 for your cat if you give me $10,000 for my dog” stuff.

  7. kralmajales says

    You didn’t burst my bubble at all Nightcrawler. I think you are right, there are lots of business leaders that are liberal and or moderate…now…after 8 years of this. You can’t be arguing that the GOP is now a populist party, can you? If you are, then your party will never win massive amounts of votes again.

    Why on earth do you think McCain is appealing to lower taxes? It is not because it is a major benefit to the middle class, it is because he hopes to get folks like my dad and step dad back into the fold, now that they are lost.

  8. Dr. Kent Busch says

    ACORN is directly responsible for the subprime loan crisis. they began by pressuring banks to make these risky loans and then pressured congress to amend banking rules such that Fannie Mae & Freddie Mac could buy them. Once they succeded in getting Fannie & Freddie to buy them, the primary financial loaners had every incentive to grant these loans as they oculd take their profit up front and sell to Fannie & Freddie thus removing the risk they would have if they had to hold and service the loan. This sequence is clearly on the hands of ACORN and Democratic controlled congresses – not this president or any prior presidents.

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