Home > Obama, Politics > Housing Meltdown Clarified

Housing Meltdown Clarified


I keep seeing the Democrats blaming Bush and then the Republicans blaming Obama. The truth is, there is enough blame to go around… and it starts with Clinton.

Clinton signs into law the incentives for banks to loan money for houses to people they know full well will never be able to pay it back. They can do this by packaging the loans with good loans and then they pay a ratings agency (like Moody’s) to rate the loan package. Shockingly, the ratings agencies rate them quite well as they were paid to do.

Next, Bush’s administration lowers the interest rate to create further incentive for banks to lend money to people that can’t pay it back. It is in his era that it becomes apparent that these packages, or “derivatives” are hot potatoes that will explode in debt when they become due. To cover their losses today, banks make more of these things to sell – even though they know that these will pose a problem tomorrow. In this manner, the bubble grows and pops.

Finally, Obama comes in and blames Bush for what Clinton started and proceeds to keep interest rates low and instructs Fannie Mae and Freddie Mac to keep buying bad debt with Taxpayer funds in an effort to keep house prices as high as possible so that banks can maybe make some money on them. This, in turn, puts all players in the market in a state of paralysis. They don’t know what will be changed tomorrow, so they hang on to their cash today. Obama accuses them of being “fat cats” and blames them for his horrendous policy not working.

Video Time!

 

My favorite part in all this is that socialists use this meltdown as an example of how the free market and capitalism has failed; when in actuality, it was never something that was created by the free market or capitalism.

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Categories: Obama, Politics
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