RUSH: I want to explore the subprime issue for just a second. There is an upside to it, but it’s a typical upside that I notice, and that is an opportunity for people of this country to learn something. I would not advocate this kind of mess as a teaching moment, but it has happened, and so it is a teaching moment. It lets you see how Congress fixes problems, or, more precisely, makes them worse. Okay, so we’ve got the subprime issue, and it’s a mess, folks, and no one, no observer, no insider can tell how messy it is. Barney Frank, et al, have put together the latest mischief known as the Mortgage Reform and Anti-Predatory Lending Act of 2007. Now, to call what happened here predatory lending is absurd, because the lenders are taking it in the shorts here, and who was it that made them extend these kind of loans in the first place? Once again, you have Barney Frank leading Congress, acting like a bunch of innocent bystanders and spectators, so they had no clue this was going on, when they ordered lending institutions to be more inclusive of people who actually couldn’t afford them. It was fairness, and it was equality, and it was to be anti-discriminatory, and all of these things.
The predators, if there were any, were in Congress, and they prey on every business in this country that they put in their target sights. That’s the real predator. Having helped create the mess, here comes Barney Frank with a solution. Now, this is the teachable moment. Lenders, the predators, are writing off billions in bad debts. That’s billions with a capital ‘B.’ You have heads falling, financial stocks are taking hits, and what does your Democrat-led Congress do, what do they want to do? They want to turn tort lawyers on them with charges of predatory lending. That’s the Mortgage Reform and Anti-Predatory Lending Act of 2007. These people are already, as you know, in the banks and the investment houses, the subprime market, people are getting canned, these companies are writing off billions and billions of dollars in losses, they’re downsizing in a lot of ways, and so here comes Barney Frank throwing a bone to one of the biggest Democrat contingencies and constituencies out there, the trial lawyers, the tort lawyers. He wants to turn lawyers on the subprime market with charges of predatory lending lawsuits, class-action suits, seven-figure, eight-figure lawsuit.
He wants to enable the people who were not suitable to receive a loan in the first place to be able to sue the lenders for taking advantage of them and causing them to lose their homes and so forth. They’re literally trying to wreck the economy. In the process, you know what’s going to happen here? They’re going to turn off the whole prospect of lending to those with the lowest credit ratings, because when you turn the tort lawyers on to these people who are already really getting beat up — now, they may deserve to, who knows, I’m not making a moral judgment here. I’m talking economics. I still say that most of this — or quite a bit of it — can be laid at the feet of Congress for demanding that these unqualified borrowers be made qualified simply by the stroke of a pen in order to extend fairness and equality and opportunity and blah, blah, blah, blah, blah. I mean, markets are markets. If you can’t afford to pay something back, you shouldn’t get the loan. Congress comes along and tells people, ‘No, you gotta lend it to people who can’t pay you back. You gotta do it,’ and then you can’t foreclose on them either. If you start foreclosing on them when they can’t pay we’re going to really come after you. So now the so-called predators, if Barney Frank and Congress get their way, are going to have the John Edwards plaintiff’s bar turned against them after they’ve already been losing their jobs and already taking the hit for a bad decision in the first place.
Now, please note. One other point here, and this is key. This is one of these unintended consequences, like the liberals never study the dynamics of any of their actions. They continue to look at things in a static way, as though actions do not have reactions and actions do not have consequences. So if, after this mess that is the subprime mortgage market, if the people involved in that business are now going to be subjected to class-action suits of seven figures and eight figures, what is their natural reaction going to be? They’re going to tighten up on loans more than they have ever tightened up before. If you have even a hair’s worth of being unqualified, if you just have one tiny little thing, like you put down the wrong middle initial in your application, you’re finished. They’re going to see to it that it’s going to be tougher and tougher and tougher to get a loan. Now, another thing, and a teachable moment, Congress did not anticipate this. Congress did not realize it was happening. Congress did not prevent it. They caused it, in fact, now they want to politicize it.
The Democrats want to politicize it for an election advantage because what they hoped to do with all this is to send this message to the beleaguered middle class that we’re not going to let these evil Wall Street people screw you, we’re going to let you get back at them. This is going to keep campaign contributions flowing from the trial lawyers, which is a huge bunch, and this is your Congress at work, folks. What they’re doing to banking, they want to do to your health care and they want to do to Big Oil. It’s going to get to the point you have a headache, you gotta call Barney Frank, ‘Dr. Frank, I have a headache.’ Remember the watchword for doctors. First, do no harm. The one thing Congress can do to fix this mess is try not to fix it, to stay totally out of it. The markets work. Let the market handle this. Look at what Citigroup has to give away in order to get the cash from Abu Dhabi. Eleven percent interest in the firm. Well, that’s a good measure of how bad this is. To give up 11% interest in the firm for seven and a half billion, we’re talking Citigroup? They’re going to give up 11% interest in order to get the cash? That’s just a good indication of how bad the mess is. But markets work, Congress doesn’t in the market. When Congress starts meddling in the market then you’ve got big, big problems, and that is where we’re headed, if this ever becomes law.
RUSH: Fritz in Springfield, Illinois, welcome to the EIB Network.
CALLER: Well, hello, Rush, and kudos from the land of Senator Turban, I’m sad to say. And, no offense taken, Rush, we could have won the Vietnam War. I participated in the air raids in ’72. I was calling because I’m a real estate broker, and I wanted to share with you, I’ve got great news for half the country, because the Drive-By Media, as you say, likes to emphasize the negative. Well, in our marketplace, our prices are up 4.7%. And real estate is local, and if everybody would look around at their own local market and look and see what they have going on in their own particular market, nearly half of the markets in the United States are up. Now, we’re sorry here in Springfield, Illinois, that the bubble’s burst in California and Florida and the East Coast.
RUSH: Well, but wait a second, wait a second. Even if it has burst a little bit in California, it wouldn’t hurt anybody if home prices in San Francisco fell 4%.
CALLER: No, not at all.
RUSH: It would only hurt people who want to sell right now. But if this is happening, it’s going to make more people eligible to get into the market.
CALLER: Absolutely. And you just hit the nail on the head, talking about this legislation that Barney Frank is trying to introduce.
RUSH: Oh, ho-ho-ho.
CALLER: It’s going to kill the housing market. Right now we need to make money affordable, but they created their own trap, you’re exactly right, by making these loans, by bringing in people that could not afford them, and it’s just ludicrous to blame these lenders for this big debacle because do you know how many disclosures these people had to sign acknowledging what they were getting into? These individual borrowers had to sign at least a half a dozen disclosures.
RUSH: Yeah, yeah.
CALLER: They knew exactly what they were getting into.
RUSH: Right, as far as Congress was concerned, they’re still victims of the rich real estate industry and the mortgage banking industry. And we’re going to get even — no matter how many disclosure forms, no matter how many lawyers they had read the disclosures, no matter how many times they signed them —
RUSH: — they were still victims. You gotta understand — you do understand. As far as Democrats are concerned, they gotta make as many victims as possible. Barney Frank coming out and turning the tort lawyers loose on these lenders, I’m going to tell you — if that ever happens, you realize how few people you’re going to be able to qualify for a loan?
CALLER: Oh, we know exactly, we’re having a difficult time now. In our marketplace, our sales are down slightly as far as the number of homes sold by about 6%, but that’s 6% off the all-time record, it’s still a great market here locally.
CALLER: What really infuriates me is the local media, the print, the radio, the TV, they jump on all these national stories, and they just blast it day in and day out.
RUSH: Well, of course, because it’s like I said once, these guys that run these Wall Street newsletters and so forth, their subscriptions skyrocket when they talk about the coming crash and the crisis, and this is what people in the news business think will get ratings.
CALLER: They do, and I have so many people walk up to me and say, ‘How bad is it?’ I say it’s great for me so hop on my wagon.
CALLER: By the way, there’s no whining here, even though I am a Cleveland Browns fan, I have to share that with you, and to show that conservatives are positive and upbeat, I overlook the fact that you’re a Pittsburgh Steelers fan, and you’re exactly right, that was one of the greatest games I ever saw last night.
RUSH: All right, we’ve come to a mutual agreement. You’re also right, because real estate prices where I live, I don’t even want to tell you.