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neosocialist-liberal "do-gooders" Jimmy Carter, Bill Clinton

Government-sponsored speculation and the housing market crash



-Mark Andrew Dwyer Abstract. This commentary identifies the root causes of the present financial meltdown. It points out the main culprits of the housing market collapse and the downfall of the stock market that followed it: the "affirmative action" in mortgage lending policies that were imposed by some neosocialist-liberal "do-gooders", most notably, by Jimmy Carter and Bill Clinton.

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It characterizes the financial upset caused by the massive subprime mortgage defaults as perhaps the largest redistribution of wealth in the history of mankind; the redistribution that was made possible by government encouragement and sponsorship of speculation by the underqualified borrowers, as well as other opportunists who took advantage of the flawed scheme that aimed at the "equality of outcomes". It concludes with a projection that if the current trend of socializing of the market and economy continues, the U.S. will evolve into a political system that may be best characterized by this paraphrase of socialist ideology: "equal poverty for all".

Immigrant fairy tale

I remember this story of a family of immigrants that came to America to pursue their American dream. He worked as a security guard at a large company making some $12 an hour. She was a housewife. They had two young kids and were barely making the ends meet. One day in year 2000, he died in a car accident. She got on the federal government dole. Then it turned out that she was eligible for HUD-sponsored home loan with low interest and zero down. So, she bought a new condo in L.A. County, Calif., for a subsidized price of $125,000, paying less for her mortgage then for an apartment rent. (The regular price was just below $200,000 but the builder was required to set aside a number of units for low income buyers at a deeply discounted price, which he did.) In about two years, the home prices went through the roof. She sold her condo for about $350,000, cashing a handsome profit of $225,000. Then she moved to a rental apartment, bought herself a fancy SUV, a collection of Louis Vuitton bags, and sent her kids to a private school. Now she had more than enough cash to go around; a handy supplement of her social security check left after her deceased husband on a $12 an hour job. Should the prices of homes collapse while she was holding her condo, she would just walk away with no losses, and start over again elsewhere. In her case, the government-sponsored real estate speculation led to a redistribution of wealth from the other buyers who had to pay more in order for the builder to sell for less to low income buyers, from the subsequent buyers who had to pay a higher price as a result of sharp increase in demand, and from the taxpayers and investors who paid for the risk of the housing market collapse. This netted her with $225,000 that she did not earn or deserve. And there were hundreds of thousands, if not millions, others like her. What a magnificent case of social justice that no liberal social engineer, not even Bill Clinton of Jimmy Carter, would have dreamt of just a few years before. The only problem was that the redistribution of wealth of this magnitude had to shake the free market and the capitalist economy that depends on it. And it did, as we all sorrily realized in 2008.

Speculation often leads to a market crash

It doesn't take an Einstein to figure the causality relation between the mass speculation and the market crash that usually follows it. In 1920-ties, multitudes of speculators were frantically buying on credit large amounts of stocks that they could not afford, in expectation of quick profits. They turned the stock market into a trivial pyramid scam that was doomed to fail (because it needed an infinite supply of new investors in order to function). Once the inflated prices begun to fall, the value of the paper "assets" that were used as collaterals for the investment loans bursted like soap bubbles, and the pyramid they built ended with a spectacular collapse that left the entire nation in misery and suffering for decades to come. (Some claim that the Federal Reserve was to blame for the crash – see [12].) In late 1990-ties, the housing market had been maneuvered into a similar pyramid scam. Underqualified home buyers, many of them with no income, no job, no assets, and poor credit payment history, as well as other unscrupulous opportunists, many of them immigrants (legal and otherwise), encouraged by federally mandated ease of mortgage credit and low (now referred to as "predatory") interest rates, were taking advantage of the new rules in clear expectation of quick improvement of their lives. They risked hundreds of thousands of borrowed dollars in an investment that they could not afford, with no collateral of their own and no assets to offset possible losses. This drove the home prices up, encouraging even more underqualified buyers, along with other speculators who just took advantage of the flawed system that was supposed to make the "playing field even" for minorities, to invest in bricks. And so the circle closed. The rising prices were translating onto speculative buying frenzy, which, in turn, caused prices to rise even higher. Some buyers sold their homes and cashed handsome profits, some others borrowed on equity and spent money on luxury items that they could hardly afford. I remember just a few years ago, when the economic uncertainty caused overall decrease in consumer spending, seeing minorities leaving shopping malls in droves with big bags full of merchandise. Somehow, I had no doubt that these were credit buyers. Who will pay for these, I wondered? Now I know. The middle-class taxpayers. Because as soon as the housing bubble has bursted earlier this year, there is no one else to pick up the tab for the defaulted mortgages and unpaid equity lines of credit. The money lent is the money spent (gone, that is) and so are the banks and the home equities that were supposed to make the loans secure. (Semi-federal Fannie Mae and Freddie Mack had to be bailed out by the U.S. government as a part of the rescue plan.)

"Equal lending" or redistribution of wealth?

I imagine Bill Clinton drafting his plan of redistribution of wealth from the most productive Americans to the needy minorities, who also happened to lag the national average in productivity but exhibit above average fertility (particularly, non-white Hispanics). He must have known damn well that working Americans would vehemently oppose any large-scale socialist model (Robin Hoodian seems like a more descriptive classifier here) of taking away from the rich and giving away to the poor. But he also must have hypothesized that should the wealth be redistributed "temporarily" in a form of credit, no one, except, perhaps, for the lenders, would object. And then the idea that if the credit paid off "by itself", as a result of speculative investment in highly demanded commodity, then no one at his right mind would ever notice (never mind objecting it) that the wealth was actually redistributed, might have completed the Clinton's plot. The banks, backed by the federal government (HUD) and quasi-federal Fannie Mae and Freddie Mack, would lend money to underqualified minorities (the so called "less fortunate" buyers) who then would gamble it on hot housing market. Before anyone could realize its magnitude, the largest redistribution of wealth in the history of mankind would have been accomplished. And it largely had. It was like lending lottery tickets to the poor: those who won just cashed the profits, and those who lost could not pay and walked away. A brilliant strategy that fooled all except a few who suspected that one day someone would have to pay for those profits, and these would not be the "less fortunate" who picked up the tab.

A fool and his money will part soon

Remember the Rodney King beating in 1991 that resulted in $2.7 million awarded to him in compensation for violation of his civil rights? Guess what, he has wasted all the money he’s got and lives in poverty, again. (It must have been that past slavery/discrimination thing.) King’s example illustrates what is going to happen to the redistributed wealth, eventually. The lion share of it will end up in the pockets of those who cater to the "less fortunate" (the fortunes of rap "artists" and professional b-ball players will skyrocket, though) and prey on their naïveté. After all, poor judgment, expectation of instant gratification, and a lack of personal responsibility are typical prerequisites for poverty in the U.S. (The typically poor judgment of underqualified borrowers turned real estate speculators made the housing market collapse even more inevitable.) But part of this redistributed wealth will also lead to accelerated population growth of those who cannot or will not subsist themselves (never mind their numerous kids), up to the point where the West will get stuck, again, in the Malthusian trap: the overwhelming number of the highly fertile but lowly productive poor will drag us all into ultimate poverty, and the "social justice" that will be a likely result of it will have just one major accomplishment to claim: equal poverty for all.

The culprits

The culprits of the current meltdown have been already identified, and I don't have much to add, except for summarizing the evidence and its analyses that are readily available on the Internet (see The Evidence section below). Let's look at them in anti-chronological order of their "contributions". The last nail into the coffin was driven in mid-2000’s by various groups, politicians, and officials, most of them left-leaning Liberals, but also some "compassionate conservatives" (neurons seems like a better characterization here), as well as corporations and their lackeys, who made sure that massive lending to credit unworthy borrowers was not obstructed by "discriminatory" standards that would reverse the "progress" and "move the clock of the history back". President Bush, by many referred to as a neuron, with his elitist disregard of the majority opinion of rank-and-file Republicans, was about as unwilling to resist the government mandated and backed subprime mortgage lending to underqualified minorities as he was unwilling to secure the American border and immigration laws. A group of Democratic federal lawmakers, most of them - it seems - members of ethnic caucuses in the U.S. Congress, as well as various government officials, like Clinton's HUD Secretary, Andrew Cuomo, vigorously pushed for keeping the lending standards ridiculously low and fiercely resisted any meaningful attempts to put Fannie Mae and Freddie Mack under Congressional control. A clear indication of what they were trying to accomplish there were their repeated charges of "racism" against anybody who would question sanity of the disastrous mortgage lending system that was in place. (Now we know what was the main reason of saturating the government and its agencies with the "underrepresented” minorities.) Just in 2007, Barrack Obama, probably, out of racial solidarity, vocally defended "the idea" of lending and selling to underqualified minorities that could not afford to buy a house, and that sentiment went along well with President Bush's quest for the "ownership society". A blogger wrote: "Obama sees [minority] America as one [that is waiting for] gigantic subprime loan that needs to be bailed out with our tax dollars." Obama confirmed his receptiveness for the redistribution of wealth in his recent comment made to a plumber concerned with Obama’s "tax the rich" plan; he said: "Spreading wealth around is a good thing." He seems to perceive the often quoted phrase "it’s the economy, stupid" as is the "economy" were synonymous with the "handouts to the poor". The hints along these lines he already gave us at several occasions are particularly disturbing in the context of already humongous American subsidies to Africa and mass transfer of wealth and technology to such traditionally Third World countries as China and India; the trends that did not help to avoid the financial meltdown that we are experiencing now. ACORN, the "grass-root organization" to which Barrack Obama owes his executive experience as a "community organizer", intimidated several major banks into lending to risky borrowers of color (to which the ACORN refers to now as "predatory lending"). The milestone in that intimidation was a lawsuit against the Citibank the ACORN filed and won. Several banks, as well as other corporations, welcomed the new revenue and fat profit opportunities created by the new financial order. Lending to underqualified borrowers looked like a steal when the federal government assumed all the risks. Moreover, the "less fortunate" were much less careful with the free money they got from the system than those who worked hard for it, so the wealth redistribution translated onto a sharp increase in spending, to the delight of the manufacturers and distributors. I remember how the parking lots of companies with "diverse" workforce looked like some 15 years ago: old civics, tercels, and escorts, along with rusted road cruisers of the 60-ties, set the tone. Today, new SUVs, camrys, accords, and European imports took their place. If you don't see what I see, try to find out what percentage of home equity borrowers used their loans on actual home improvements or capital investments, and what percentage of them spent their money on fancy cars and luxury items that they could hardly afford? The answer to this question should give you a hint why so many corporations welcomed what the (mostly) Democratic wealth redistributors in the U.S. Congress and Executive Branch (not that the federal courts were objecting it) were doing. None of the above "contributions" would have been possible if it weren't for the Community Reinvestment Act (CRA), signed into the law by President Carter in the first year of his presidency (1977), and rejuvenated by President Clinton's executive order in 1995. It penalizes lenders that dare to not lend a specified quota of dollars to "underserved" communities (usually, low income black of Hispanic). CRA would have no chances of being enacted by the Congress and sent to President Carter’s desk if it weren’t for the sweeping civil rights legislation of 1960-ties signed by President Johnson, and the "war on poverty" that he launched after the signing. In particular, none of the CRA’s main objectives could have been spelled out without imposition of the neosocialist concepts of “equal opportunity", "affirmative action", and similar "anti-discriminatory” measures based on an invalid assertion that any inequality of outcomes proves the inequality of opportunities. Virtually all Democrats were claiming in the 1960-ties that the draconian changes that they inflicted to America would not cause a market collapse, an economic downturn, or demographic tossup. And they keep repeating their mantra today, except that they now say that the demographic change is a blessing for America because "diversity is strength". (Hmm. Kinda weird blessing. Despite the "strength" that engineered diversity gave to us, Washington Mutual, a large bank with the most diversified workforce in America, was about the first among the big ones to fail.) We need to remember how futile the Democratic Party’s promises have been, particularly these days when they promise to "fix what’s wrong with America", again.

The remedies

It would be absurd to expect that the current crisis, caused by decades of the neosocialist "corrections" to free market and capitalist economy may be cured by even more neosocialism and by the party that is mostly responsible for virtually all root causes of the catastrophic financial meltdown of 2008 that followed these "corrections". (Even more absurd would be blaming the Republican Party for the idea of the redistribution of wealth that is one of the main objectives of the political left.) Any insinuation to that effect reminds me of the "remedies" that the progressive socialist governments administrated as a result of economic decay in then-socialist "people's democracies" in Eastern Europe in 1960-ties and 1970-ties. When the disgruntled masses of workers took their discontent with low and further deteriorating living standards and working conditions to the streets, their governments were quick to dismiss the demands for the abandonment of failed socialism. "The economic difficulties that we are experiencing" - they said - "are not the result of socialism. They are the result of not enough socialism." And so these governments, acting against common sense and clearly negative experience, went back to imposing even more progressive socialist ideas on their peoples and economies, until the workers' paradises they were building completely collapsed in 1980-ties and 1990-ties. Because for a genuine Marxist-socialist, things cannot function properly as long as there is even a shade of free market or capitalist economy left around. In order for us, Americans, to avoid a similar fate, we must reverse the disastrous policies of the liberal left that were imposed on our country in the aftermath of President Johnson's initiatives of 1960-ties and gradually implemented up until now. We must stop the government from interfering with the free market and capitalist economy under the pretense of administrating "affirmative action" and similar "anti-discriminatory" policies, and make it focus on fulfillment of its actual Constitutional duties, like the enforcement of the border, contracts, and immigration laws (just to name a few that they have neglected lately), instead. We must firmly resist pushing America on the one way street to neosocialism, the inevitable failures of which will always be blamed by its enthusiasts on not enough regulation, taxation, and governmental control. We must bring the current subsidies of high birth rates among those who cannot afford (or are unable to) secure proper upbringing and decent living standards for their kids to a stop, or they will drag us all into global poverty. And, above all, we must stop electing liberals, neosocialists, and neurons to positions of power, which goal may require smashing the current monopoly on mass information (mass indoctrination seems like a fairer descriptor here) held by strongly socialist-leaning public schools, the "liberal" media, and entertainment industry that openly and shamelessly sides with the political left. Defeating the most left-leaning senator in the U.S. Senate and a presumed beneficiary of Harvard’s affirmative action, Barrack Obama, who wants to cure the neosocialist errors of the past with even more neosocialism (that is what he actually means by change) seems like a logical start in that direction. Voting for a third party candidate, or not voting at all, will accomplish virtually nothing in this respect. The history of the world indicates that road to socialism is usually a one way street; all those who believe that "the worse the better" strategy will serve as a wake-up call that will eventually save America may wish to remember that. THE EVIDENCE [1] EVIDENCE FOUND!!! Clinton administration's "BANK AFFIRMATIVE ACTION" They forced banks to make BAD LOANS and ACORN and Obama's tie to all of it!!! [url=http://www.youtube.com/watch?v=ivmL-lXNy64]http://www.youtube.com/watch?v=ivmL-lXNy64[/url] [2] Subprime loans “affirmative action” - Andrew Cuomo [url=http://www.liveleak.com/view?i=763_1223644375&comment_order=newest_first]http://www.liveleak.com/view?i=763_1223644375&comment_order=newest_first[/url] [3] Obama Says That SubPrime Mortgages For Those Who Can’t Afford Them Is A Good Idea [url=http://thenewpundit.com/2008/10/11/obama-says-that-subprime-mortgages-for-those-who-cant-afford-them-is-a-good-idea]http://thenewpundit.com/2008/10/11/obama-says-that-subprime-mortgages-for-those-who-cant-afford-them-is-a-good-idea[/url] [4] Spread the Wealth [url=http://www.foxnews.com/video/index.html?playerId=videolandingpage&streamingFormat=FLASH&referralObject=3151910&referralPlaylistId=playlist]http://www.foxnews.com/video/index.html?playerId=videolandingpage&streamingFormat=FLASH&referralObject=3151910&referralPlaylistId=playlist[/url] [5] Cuomo For SEC? WTF? [url=http://raggedthots.blogspot.com/2008/09/cuomo-for-sec-wtf.html]http://raggedthots.blogspot.com/2008/09/cuomo-for-sec-wtf.html[/url] [6] Democrats Defend Fannie/Freddie from Regulation - 2004 Video [url=http://www.youtube.com/watch?v=YL36nwCSYUM&NR=1]http://www.youtube.com/watch?v=YL36nwCSYUM&NR=1[/url] [7] Democrats were WARNED of Financial crisis and did NOTHING [url=http://www.youtube.com/watch?v=LPSDnGMzIdo]http://www.youtube.com/watch?v=LPSDnGMzIdo[/url] [8] Who is Responsible - Meltdown - Fannie Mae, Freddie Mac, Wall Street [url=http://www.youtube.com/watch?v=RYz1rbB5V1s]http://www.youtube.com/watch?v=RYz1rbB5V1s[/url] [9] Barney Frank, Fannie Mae and Freddie Mac are "OK" [url=http://www.youtube.com/watch?v=OisVZFSx3Lo&feature=related]http://www.youtube.com/watch?v=OisVZFSx3Lo&feature=related[/url] [10] Immigration and the Mortgage Meltdown [url=http://www.usnews.com/blogs/barone/2008/10/08/immigration-and-the-mortgage-meltdown.html]http://www.usnews.com/blogs/barone/2008/10/08/immigration-and-the-mortgage-meltdown.html[/url] [11] The 'change' Obama brings [url=http://worldnetdaily.com/index.php?fa=PAGE.view&pageId=77634]http://worldnetdaily.com/index.php?fa=PAGE.view&pageId=77634[/url] [12] America’s Minority Mortgage Meltdown/ Diversity Recession: The Smoking Gun? [url=http://www.vdare.com/sailer/081010_meltdown.htm]http://www.vdare.com/sailer/081010_meltdown.htm[/url] [13] Bernanke: Federal Reserve caused Great Depression [url=http://worldnetdaily.com/index.php?fa=PAGE.printable&pageId=59405]http://worldnetdaily.com/index.php?fa=PAGE.printable&pageId=59405[/url] Mark Andrew Dwyer's latest commentary (updated frequently) is posted at: [url=http://www.geocities.com/readerswrite/commentaries/latest.htm]http://www.geocities.com/readerswrite/commentaries/latest.htm[/url] Links to his other commentaries can be found here: [url=http://www.geocities.com/readerswrite/List_date.htm]http://www.geocities.com/readerswrite/List_date.htm[/url]


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