Anyways, out of sheer frustration, I put the below document together to help explain things – it’s helped many to finally get their heads straight on meltdown. If you have friends or loved ones that only get their “news” the morning shows and comedians, the below may help them also – feel free to use.

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First, deregulation did not cause the current financial fiasco in subprime loans. In fact, quite the contrary, it was federal government intervention starting in the late 1970′s with a new piece of legislation called the Community Reinvestment Act. The purpose of this act was to provide “affordable housing” for all by simply forcing banks to lend money to people who really couldn’t afford a mortgage. The popularity of subprime loans emanates from this legislation.
In 1994, the Clinton administration decided that banks were not doing enough subprime loans so they enhanced the legislation to tighten the screws on banks. Guess what? The bankers had to make more of these high-risk mortgage loans (subprime) because the federal government threatened them with fines and potentially a lot worse. Bankers were feeling the hot and heavy breath of a group elected politicians who decided everyone deserved an affordable home and bad credit risk was not a valid concern for bankers.

The above is called government intervention (intimidation) into the free market — there was no deregulation regarding the subprime loan market. In fact, there never was a regulatory body assigned to monitor these very high-risk mortgage loans. Since there never was regulation of subprime loans, it’s a wonder how politicians and the news media have convinced so many that subprime loans were “deregulated” — never underestimate the power of the boob tube or moron news anchors or “objective” journalists is one explanation, I guess.

Because the high-risk subprime loan market became a growth market, due to politician/government intervention and negative incentives (threats), two federally chartered corporations, the only two in the world by the way, decided they had to facilitate the growth of “affordable housing” by greasing the skids. These two federal corporations, Fannie Mae and Freddie Mac, encouraged by senators and Congressmen, and having the status of being federally-backed institutions that could “not” fail, went flat-out, hog wild subsidizing these high-risk loans for affordable housing. As this quote from New York Times 1999 article reveals, even they saw the potential problem brewing.

“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”

Okay, for the record, Fannie Mae is not a Wall Street firm, it’s a government corporation. Along with Freddie Mac, it’s a Frankenstein monster created by guess who…..the government, our elected politicians. Oversight of these two monsters is done not by the free market but by guess who…..the government, specifically Congress. Want to see how Congress does this oversight when a real regulator comes to them with concerns about Fannie and Freddie, watch this:

http://www.youtube.com/watch?v=_MGT_cSi7Rs

Did you note the party affiliation of those defending Fannie and its executives from needed regulation? Did you note the party affiliation of those that were demanding more regulation? These are our great “check & balance” Democratic Party representatives in action. Why do they act so angrily against new regulatory efforts suggested for the two federal government sponsored monsters? Is it corruption? Is it greed? Or, is it total lack of incompetence? Take your pick, but one thing is for sure, money talks, as well as greasing the skids.

Ever wonder why Senator Obama and his partisan associates never spoke out for more regulation of the two government subprime monsters? Well…..besides being Senator “Present” he is also the second largest recipient of Fannie Mae contributions, after only four years in the Senate. It only took him three years to exceed the contribution levels of senators who have been supporters of Fannie Mae for two decades. Come on now, be honest….do ya think Senator Obama is the solution, or part of the problem?

The good senator did not cause this problem by himself but he is the epitome of what’s wrong with our political class and our present government. They are not the solution, nor our salvation. (Sorry if I’m bursting anyone’s balloon here, but Obama, and others of his ilk, created the subprime mess and continue to make it worse.) Unfortunately, these politicians will never be held accountable despite gross negligence, obvious corruption, and intimidating government interference in the free market.

Okay, I’m almost done here, so let me finish up with a few more points: social security, energy, health care, public education, housing, banking, insurance, transportation. What do these have in common? All are in various forms of a crisis situation, teetering on failure; all are victims of government dominance or significant intervention by government; and, all are the favorite interests of our political class and mainstream news media because of regulation, which attracts the corrupting influence of lobbyists. None of these entities or industries operates in a reasonable free market environment; they operate in a political and bureaucratic environment that has totally ruined any potential of free market solutions and guarantees corruption to prevail.

The free market or capitalism or even high Wall Street compensation is not the root cause of the recent failures or soon-to-be failures. The news media and politicians conveniently use these as scapegoats to convince the average citizen that blame lays elsewhere. Unfortunately, the truth is a little more personal. Namely, we keep electing idiots who think they’re smarter than the free-market. We keep electing idiots who think they can micro-manage huge segments of our economy without any negative impacts. These are the same idiots who promise they can provide us affordable housing, affordable health care, affordable retirement, affordable insurance, affordable energy, affordable education, affordable food, affordable child care, and affordable you-name-it. The question is, are we the bigger idiots for electing them? Can we still “afford” to keep electing them?