Global Financial Crisis

The home mortgage business was once the exclusive domain of the banking industry. As with nearly every aspect of our lives that were once private affairs between citizens in America, the government under President Franklin Roosevelt decided to get involved in 1933 as a part of FDR's New Deal.

President Franklin Roosevelt established the Home Owners Loan Corporation, one of the many of FDR's New Deal bailout programs, to buy troubled mortgages from banks. Within a few years this government program of President Franklin Roosevelt had a payroll of over $26,000,000 in 1936 dollars—$388,000,000 today.

20% of the loans FDR's New Deal issued ended up in default (with taxpayers' money) compared with the accepted standard rate of 3% in the home mortgage industry.

Within a dozen years 40% of all mortgages were guaranteed by the United States government with taxpayers' money. The foreclosures on these loans boomed by 500% during the 1950s.

In the 1960s, The Great Society of President Lyndon Johnson included laws to grant poor people home loans guaranteed by the government—meaning the taxpayers.

One out of five of these loans in some major cities under the Great Society of President Lyndon Johnson went to welfare mothers.

The losses to the taxpayers of this policy of the Great Society was $1,400,000,000 in 1971 dollars as they were foreclosed at an astonishing rate of 1100% higher than ever before.

President Carter signed into law the Community Reinvestment Act in 1977. The Community Reinvestment Act of President Carter was designed to force banks to issue home mortgages in poor, primarily black neighborhoods. The loans were guaranteed by the government—meaning the taxpayers—through Freddie Mac and Fannie Mae. When loans given to people who were not creditworthy were not paid back Freddie Mac and Fannie Mae would cover them with funds confiscated from taxpayers.

In the late 1980s ACORN exerted pressure that resulted in the government passing a law that guaranteed 30% of all Fannie Mae and Freddie Mac loans would go to low-income people backed by money confiscated from taxpayers.

Under President Clinton, Fannie Mae and Freddie Mac were forced to approve loans, with taxpayers' money, to people with lousy credit; who had no money down; with monthly payments up to 50% of their income—even if their only income was welfare paid to them from the earnings of working taxpayers.

Pressured by President Clinton, in 1994 regular banks soon followed these same pitiful guidelines with Countrywide Financial leading the way. Any bank that did not sign up was designated "racist" and we all know any corporation will do anything not to be branded with that pejorative moniker.

Banks were told by the Federal Reserve that they must take into account the economic culture and extenuating circumstances of poor and/or black people and disregard bad credit. Soon the Congressional Hispanic Caucus jumped on the band wagon demanding Latinos be included in these insane mortgage loan policies even if they were new immigrants or even illegal immigrants. And so they were.

Small banks, very nervous about these mortgages that did not meet sound criteria, sold them to big banks who sold them to Wall Street and other investors around the world with the express condition that they were guaranteed by United States taxpayers' money—earned by working or producing something toward the Commonweal. Meanwhile, from the 1930s until the current decade all of these new unqualified buyers caused an explosion in real estate prices—demand outstripped supply with resultant rising prices—causing virtually all real estate in America to be vastly overvalued.

When the recession hit, as it always does eventually, it was caused largely because many of these same people in control of our government during the last thirty years had shut down nuclear power plant building, drilling for oil, mining for coal, and building refineries, which made America dependent on foreign oil for energy. Millions of people were unable to pay their mortgages. Small banks couldn't pay big banks; big banks couldn't pay investors—who by now included everybody with a 401K—and the global financial crisis ensued.

There is a common thread throughout this whole sordid story leading to the recession and the global financial crisis. All of the people involved were Liberal Democrats.

So how do ignorant American voters respond to the recession and global financial crisis? They buy into propaganda that it is the fault of President Bush and give these same Liberal Democrats complete power over our lives after the 2008 elections. I have a good friend who is a banker with Bank of America. I asked him a few days ago, "What exactly is the Obama plan for this crisis?" He said, "We are going to bail out the Fannie Mae and Freddie Mac borrowers." The same mistake favoring minorities who don't pay their bills that led to this crisis in the first place. That is when I decided to write this article.