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Sarah Palin And John McCain On One
Ticket: She's Clueless, He's Worse |
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September 11, 2008 Ignorance is bliss, which
perhaps explains Gov. Sarah Palin being so
confidently wrong about the root cause of the
federalization of most of the nation's
mortgage market. But what is Sen. John
McCain's excuse? Both act as if the financial
meltdown of the U.S. economy has nothing to do
with the policies of the political party they
represent -- but she at least may not know any
better.
Distracted momentarily from her campaign
revelries of maverick opposition to the
"bridge to nowhere," which she had supported
until it became a public relations debacle,
and congressional earmarks for which she, as a
small-town mayor, had hustled piggishly at the
federal trough, Palin made the mistake of
dealing with an unscripted subject.
Referring to the government's bailout of
Fannie Mae and Freddie Mac, Palin opined that
the two had "gotten too big and too expensive
to the taxpayers," displaying abysmal
ignorance of the fact that only now will those
privately owned banks become a huge taxpayer
obligation, as the federal government takes
them over. Nor can the meltdown of home values
be traced to those two beleaguered
institutions, because they did not make the
original subprime mortgage commitments.
The housing bubble was the result of the
Ponzi-scheme antics of those other financial
entities: commercial banks, stockbrokers and
hedge funds, which were allowed in a
GOP-deregulated market to get into the "swap"
business. Through the rampant reselling of
loans, the obligation to collect on a loan was
divorced from the act of selling it in the
first place, so who cared if the recipient of
the loan was not at all qualified or the
appraisal of the property value was inflated,
as long as the paper was traded away, or
insured, before the moment of foreclosure?
As with any Ponzi scheme, the perps, who
included the legislators as well as the
bankers who exploited the loopholes they
provided, expected to bail long before the
bubble burst. The role of the legislators,
Republican-led but with far too many
Democratic running dogs, was critical to the
success of the scam.
The mortgage swaps distancing the
originator of the loan from the ultimate
collector were made legal only as a result of
the Commodity Futures Modernization Act, which
former Sen. Phil Gramm, R-Texas, pushed
through Congress just hours before the 2000
Christmas recess. Gramm, until recently
co-chair of the McCain campaign, also had
co-authored the Gramm-Leach-Bliley Act, which
became law in 1999 with President Bill
Clinton's signature. That gem, which Gramm had
pushed for years with massive financial
industry lobbying, destroyed the
Depression-era barrier to the merger of
stockbrokers, banks and insurance companies.
Those two acts effectively ended significant
regulation of the financial community, and no
wonder we have witnessed an even more rapid
and severe meltdown in housing values than
during the Great Depression.
Not surprisingly, Gramm was rewarded for
his service upon retirement as a senator and
as head of the Senate Banking Committee with a
top position at the Swiss-based UBS bank,
which is close to drowning in the subprime
mortgage nightmare he helped create. These
folks have no shame, as was evidenced when the
senator's wife, Wendy, was named a director of
Enron, whose roiling of the energy market had
been made possible only through yet another
provision of Gramm's Commodity Futures
Modernization Act.
While neophyte Palin can claim ignorance of
such matters, that would be particularly
difficult for McCain, who as a senator
consistently lined up with Gramm in his
deregulation crusade. Clearly McCain had not
learned much from his previous involvement
with the savings-and-loan debacle about the
risks to consumers in unregulated banking.
McCain served as chair of Gramm's abortive
1996 presidential campaign, and Gramm returned
the favor, providing critical support for
McCain with the hard-line Republican base,
including the editorial board of the Wall
Street Journal. It was assumed in the
business press that Gramm was the front-runner
to be Treasury secretary in a McCain
administration. Gramm left his role as the top
economic person near McCain only after he made
an embarrassing statement blaming the current
economic downturn on "whiners," an awkward
reference to the victims of his disastrous
legislation.
Amazingly, the turmoil in the housing
market, which has led to the socializing of
the nation's revered homeownership market in a
massive expansion of the role of big
government, has apparently not troubled
McCain's conservative supporters. As I said,
ignorance is bliss, and evidently not just for
the newbie Palin. |
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