The CFMA accelerated the exposure and ultimate collapse of the market. BUT the CFMA did not cause the issue, lax consumer credit processes are the root cause. These processes are based on federal policies enacted during previous administrations. The rot started with the Community Reinvestment Act of 1977 (Jimmy Carter).

The goal of these liberal sponsored acts was to increase home ownership to people who would normally be rejected. (Rejected for GOOD reason – inability to pay)

The problem with these (and the root cause of the collapse) is they placed more importance on the entitlement to own a house, overlooking the ability to pay the mortgage. These soft lending practices, while initially aimed at home ownership, spilled over into other lines such as credit cards and auto loans.

Here are some facts: over the past 10 years Freddie Mac has given 57% of its lobby dollars to republicans, the other 43% went to democrats. I can’t verify the figures for Fannie Mae, but it’s something like 52% democrat 48% republican over the same time frame. Now, before you argue that in recent years democrats like Obama received a larger slice of the pie – remember this: the democrats are now the majority. If the republicans were still the majority, the money would have continued to go in their direction. These corporations are smart and they’re not going to buy influence from those who don’t hold sway. They want to make money, stay unregulated, and have government protection when they collapse – no matter what party is in power. Neither party has said “oh no, please stop giving me money.” Even John McCain, who took in a paltry amount from these companies in the past couple years didn’t say “stick it” – which he should have done on principle, not to mention it was such a small sum that he really could have gone without it – but he didn’t he’s just as greedy as the rest of the politicians and will take whatever he can from whoever is handing it out.

McCain did try to take some initiative for regulation, I agree:

“I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If CONGRESS does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”

However, the original bill S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005, that McCain cosponsored stalled in the 109th congress (which was republican), specifically the last action taken on the bill was on Jul 28, 2005 by the Committee on Banking, Housing, and Urban Affairs – which was at the time chaired by Richard Shelby (R). Democrats aren’t wholly unresponsible, but the power did lie with the republicans and stalled in a republican chaired committee.

The bill was reintroduced as S. 1100 in April of 2007 and is still active; however, John McCain’s is not one of the cosponsors this time around. This time Democrats are the party in power and I fully expect the same thing to come out of this as came out of the republican congress: nothing at all (besides it a moot point now).

The last piece of actual legislation that people point to as part of the blame is the COMMODITY FUTURES MODERNIZATION ACT of 2000. “This important new law creates a flexible structure for regulation of futures trading, codifies an agreement between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission to repeal the 18-year old ban on trading single stock futures and provides legal certainty for the over-the-counter derivatives markets.” Certainly this piece of deregulation didn’t help things out and it was sponsored by republicans and passed by a republican congress, but and signed into law by democrat Bill Clinton.

The truth of the matter is that we don’t really have anyone willing to stand up to these companies. Both sides are making bad decisions and we’re getting stuck with the bill – as usual.

wrench

“But remember, it had ‘NYTimes” in the url – surely you must have expected a bit of bias.”

“But remember, ATG, Harvard is not exactly an unbiased institution – so anyone with a diploma just might have been exposed to a few unsavory principles, in my view.”

I’ll state it simple – an article is either biased or not based on its content. It’s our responsiblity to be critical readers.