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Explaining the Mortgage Meltdown

BEGIN TRANSCRIPT

RUSH: Eric in Wilmington, Delaware. Welcome, sir. Great to have you on the EIB Network. Hello.

CALLER: Hi, Rush. How you doing?

RUSH: Very well, sir. Thank you.

CALLER: All right. Hey, I'm calling up -- I know this is off topic. It's about the Community Reinvestment Act. You said that was the cause of the meltdown in the '08 election. It was actually -- and you don't see many reports on this -- the run on the money market, the reserve bank money market fund was they broke the buck, and if you remember, there was a congressman, Kanjorski, that was on C-SPAN that said that there was a run on the money market account, and it was in a day the US economy was being collapsed and the world economy in 24 hours, and I haven't seen many people look at it. But I have like Chuck Schumer in July... I'm saying this is all my Sum of All Fears conspiracy theory here. Chuck Schumer, he had a run on IndyMac to help tilt the election for Obama, then you had Reid calling for an insurance company failing to help tilt the economy to go bad. And I don't know if... I can't prove it, but --

RUSH: We played that sound bite from Congressman Paul Kanjorski. He was from Pennsylvania. We played the sound bite, then we started looking into it, and he walked that back. It was a bogus report. We found that there was no way there could have been a meltdown like that and nobody in the financial markets would have known about it. Somebody got hold of Kanjorski -- and this is not the first time for him -- you're really off the trail here. You get the mule back on the road and walk that back, which he did. It sounded good. I'll admit it to you out there, Eric, it sounded good. And it was very confusing because, you're right: He said it was a run on money market funds.

And then said not the kind of money markets you think of when you hear money market funds, like consumer private money market, something entirely different. So we looked into it and found out that that was not the case. They were claiming $500 billion had disappeared overnight and nobody would notice it. Now, this is not possible. It didn't happen. The Community Redevelopment Act, in and of itself, was not at fault. It was years and years and years of implementation of that after it was well known that it was causing all kinds of problems. The Community Redevelopment Act worked in direct contravention of common economic sense: Loan money to people who can't pay it back; knowingly forced to do this by do-gooder Democrats, under the guise of fairness and the concept of affordable housing.

So these lending institutions, who all had stockholders, had to come up with creative ways to make all that worthless paper worth something -- and they did it by creating all kinds of strange, weird financial products that amounted to insurance policies for the eventually default, and they were bought and then kicked down the road and repackaged and repackaged until finally they couldn't kick the can down the road anymore. And then we were told we needed TARP and we needed $2 trillion lent from the Fed that nobody knew at the time where that money went, and it was all because -- Fannie Mae and Freddie Mac were involved in this. It's not the sole reason, but there is the foundation. There's the reason we're still in that economic mess today because of that.

Democrat policy, liberalism gave us the current climate. It's really no more complicated than that. You know, the "derivatives" is what they're called. How they protected themselves from these bad loans. Derivatives were just spreading the risk around. The Community Redevelopment Act put the rot in the market. Think of a staircase, a wooden staircase. You inject it with rot, the Community Redevelopment Act. Finally people couldn't walk up the staircase anymore. They had to get to the top somehow. So they started building alternative routes, all of those equally worthless with no value because the thing at the beginning of it had in value.

How in the world can a loan that will never be paid back have any value at all no matter what you do? The Bush administration tried 17 times to stop this and to reform it -- and each time the regulators, when brought before committees chaired by or membership-ed by people like Barney Frank -- were just raked over the coals for being cold-hearted, mean-spirited, cruel. It was much like what we're seeing now about the governor of Wisconsin. He's called cold-hearted, mean-spirited, and cruel. This guy's got a similar problem. You can't pay what people are demanding. It's liberalism. Look, I guarantee you... Here it is: Any time there's a problem in this country, two things, look for 'em and you'll find 'em: Liberalism and unions.

That will explain 90% of what's wrong.

END TRANSCRIPT

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