In my earlier post, What Voters Need to Know, I listed the McCain and Obama reactions to the sub-prime, Fannie/Freddie situation as something voters needed to be aware of since McCain warned of the problem three years ago and sponsored legislation to prevent it, while Obama did virtually nothing. A reader responded telling me Obama “urgently sent letters.” That is a really good point. Those urgently written letters are exactly what will solve all the country’s problems. No need to sponsor legislation or actually, you know, try to DO something about a problem. Peter Wallison points out in the Wall Street Journal that Obama did the equivalent of voting “present” on the issue, since he says he recognized that there was a problem but did not find it important enough to break ranks with his party to do something about it.
If Sen. Obama were truly looking for a kind of deregulation that might be responsible for the current financial crisis, he need only look back to 1998, when the Clinton administration ruled that Fannie Mae and Freddie Mac could satisfy their affordable housing obligations by purchasing subprime mortgages. This ultimately made it possible for Fannie and Freddie to add a trillion dollars in junk loans to their balance sheets. This led to their own collapse, and to the development of a market in these mortgages that is the source of the financial crisis we are wrestling with today.
Finally, on the matter of deregulation and the financial crisis, Sen. Obama should consider his own complicity in the failure of Congress to adopt legislation that might have prevented the subprime meltdown.
In the summer of 2005, a bill emerged from the Senate Banking Committee that considerably tightened regulations on Fannie and Freddie, including controls over their capital and their ability to hold portfolios of mortgages or mortgage-backed securities. All the Republicans voted for the bill in committee; all the Democrats voted against it. To get the bill to a vote in the Senate, a few Democratic votes were necessary to limit debate. This was a time for the leadership Sen. Obama says he can offer, but neither he nor any other Democrat stepped forward.
Instead, by his own account, Mr. Obama wrote a letter to the Treasury Secretary, allegedly putting himself on record that subprime loans were dangerous and had to be dealt with. This is revealing; if true, it indicates Sen. Obama knew there was a problem with subprime lending — but was unwilling to confront his own party by pressing for legislation to control it. As a demonstration of character and leadership capacity, it bears a strong resemblance to something else in Sen. Obama’s past: voting present.This seems to me the perfect issue for McCain to run on, but so far he has failed to effectively make that case. McCain identified the problem years ago and then addressed it with legislation that was killed by Democrats. Obama says he knew about the problem, but addressed it with an “urgently sent letter” (as my reader put it) rather than any real action, which would have required he challenge the position of those in his party. That is easy enough to fit into a 30 second ad and definitely easy enough to explain in a debate.
Update: More on the subject from Peter Ferrara at NRO. An excerpt follows, but read it all because Ferrara cites many specific efforts Bush and Republicans made to address the problem, and the things Democrats did to make things worse. He includes the roles played by Barney Frank, Franklin Raines, ACORN, etc.
Barack Obama never misses a chance these days to allege that the financial crisis is due to the right-wing philosophy of deregulation, “a philosophy that views even the most common-sense regulations as unwise and unnecessary.” The charge is echoed by fellow Democrats such as House Speaker Nancy Pelosi.
They’re often unclear on specifics, and for a good reason: Not all deregulation hurts, and not all regulation helps. Republicans and Democrats alike supported a 1999 deregulation that has actually made this crisis easier to handle, for example. Also, Republicans have supported regulations that could have helped avert this problem, while the regulations Democrats enacted worsened it.
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Recently on the campaign trail, Obama said of John McCain, “[H]e’s fought against the very rules of the road that could have stopped this mess.”
This is the Deregulation Big Lie, meant to mislead and misdirect the public in covering up the role of Obama himself, and other liberal Democrats, in creating the current financial crisis.
