RUSH: Okay, as to the bailout here, folks, a lot of people over the e-mail are very confused about this, even some of my closest circle, because they think, ‘Well, the bailout’s a bad idea, but what if we don’t? Is everything going to crash around it? This is more nuance than, you know, just cut-and-dried, up-or-down, liberal-versus-conservatism.’ I think, folks, a lot of people say, ‘You know, we’re beyond the point of assigning blame here. That’s not the problem. What we have to do is understand what to do in the future.’ Well, you can’t understand what to do in the future unless you properly assign blame, and there is so much blame here. All of this could have been avoided, were it not for liberal social engineering brought about by the Clinton administration. It actually started with Jimmy Carter, but it intensified during the Clinton years, and the whole purpose of it, of course, was to play the race card, to get into class envy, and to go out and buy votes.
There’s a piece at Bloomberg.com today by Kevin Hassett. Kevin Hassett is director of economic policy studies at the American Enterprise Institute. He’s also a Bloomberg News columnist, and he is an advisor to McCain. Let’s be up-front in this presidential campaign. ‘How the Democrats Created the Financial Crisis.’ He says it’s not complicated. It really isn’t complicated. ‘Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally. Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools.’
Now, there’s no… AAA subprime (laughing), uh — Well, it’s a little bit of an oxymoron. ‘[I]n 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ‘continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,’ he said. ‘We are placing the total financial system of the future at a substantial risk.’ Fannie Mae and Freddie Mac. What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
‘If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed. But the bill didn’t become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn’t even get the Senate to vote on the matter….’ And it goes on to mention here ‘many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.’
It’s interesting, too, you’ve seen the list of donations that have gone to all the Democrats of Fannie Mae. At the top of the list of course is Chris Dodd; number two is Obama. However, if you reorder that list and look at the people who have received the most in the least amount of time, Obama is at the top of the list by far and away. He’s been in the Senate two and a half years, and he’s the leader. Dodd got his money over the course of many years. So you have to ask, ‘Why in the hell was Obama given so much money by Freddie Mac so fast, so quickly?’ The tentacles, my friends, the tentacles here — and I say this with all candor — reach deep into the Democrat Party. Let’s talk change for a moment. The most important and far-reaching change needed has been brought home definitively by all this turmoil in the financial markets, precipitated by the subprime mortgage crisis.
There is a singular culprit here, and that is it — and there’s a great idea at stake here, too, and the idea is that the free market measures itself and handles itself better than the government running. The great idea that we’re about to throw away with this bailout is that the government can run things better. The government can take care of you, the government can insure you, the government can protect you, the government can provide for you. This is an idea which has been shown to fail around the world. We are about to incorporate it here if this bailout goes through as designed. This should not be a mystery anymore to anybody because the Drive-By Media refuses to do its job. Last week the roots of this crisis were explained, and its authors were identified. Long-serving congressmen and senators, overwhelmingly Democrats, working in concert with the liberal allies in the bureaucracies and the management of these so-called companies — really government agencies, Freddie Mac and Fannie Mae. They’re government agencies, they always have been — and liberal special interests and advocacy groups hijacked federal housing policies and turned them into patronage programs. The quasi-governmental entities were at the root of this problem because what they did forced the hand of genuine private mortgage companies to conform to the same irresponsible lending policies as Fannie and Freddie had adopted if they were to survive. And it also fostered creation of sleazy mortgage companies whose business model was making lousy loans in the expectation of being able to dump ’em later through new financial instruments that had been created just to do that, and I have just gotten started.
RUSH: This bailout crisis, my friends, it is crucial I think here to understand the truth. The policy perversions that led to this mess began with the active connivance of the Clinton administration and were perpetuated by leading Democrats in the House and Senate. There were some responsible Republicans supported by the Bush administration time and again attempted to avert the disaster they saw coming. They wanted new regulatory agencies and so forth, but their reform efforts were defeated in the House and the Senate. Barney Frank in fact said, ‘There’s nothing wrong.’ (doing Frank impression) ‘There’s nothing wrong,’ is what he said. Now, this emergency bailout friends can go either way. It can fix the underlying problem or merely represent another opportunity for another leftist hijacking, and Obama and Pelosi are out there saying, they want oversight over this. You know what that means?
Whenever this kind of money is going to be spent by the government on something, Democrats are going to get their hands in it, and they’re going to reward people like ACORN. They’re going to try to. They’re going to try to build on their social programming and networking here with this kind of money outstanding that is supposedly aimed at shoring up the US economy. Now, McCain and Palin can claim to recognize the problem, and they can commit themselves to fixing it. But they can’t deliver the needed change on their own. They need support in the House and Senate to do that. Right now, there is no prospect of them getting that help, not with Pelosi and that odious and compromised Barney Frank, Henry Waxman, Chuck Schumer, Christopher Dodd in the House and Senate leadership. The names I just gave you have their fingerprints all over this. Plus names that you were told of last week and identified last week: Franklin Raines, Jim Johnson, Janet Reno, Jamie Gorelick.
It is a stain, it is a stench, and it is directly traceable to liberal Democrat policies and desires. We know who caused the problem! We know that we can only expect the change we need by replacing them with congressmen and senators pledged to a different course with a fundamentally different concept of how the federal government can best serve the interests of the American people. That’s the change we need. The change we need is bye-bye Barney Frank. The change we need is get rid of Chris Dodd, get rid of Nancy Pelosi, get rid of all of these Democrats, Chuck Schumer. Get rid of all of these people. That’s the change we need, pure and simple. Isn’t it interesting that the mortgage debacle and the resulting impact on our financial markets is said to have begun with deregulation? Ha! And isn’t it interesting that no one in the administration challenges this, and of course nobody in the Drive-By Media challenges it, and McCain doesn’t even challenge it.
The reason is that we are witnessing the biggest nationalization of our economy since the Great Society and the New Deal, and we are all on the sidelines as it happens, and this is what I’m talking about this very important idea — an idea that defines the greatness of this country — on the line. And that idea is that government is not the provider, the guarantor, the protector, and the redeemer for every living soul and institution in the country, particularly in this case when the problems can be traced back to people in government. Now the very people who created the problem have set themselves up to be in charge of the whole program, now blaming capitalism, blaming the private sector for this. The fact is this: When Jimmy Carter was elected his first year, 1977, he and the Democrat Congress put in place the Community Development Act, and the purpose of this account was to pressure private financial institutions to make risky loans to poor people.
That was the purpose. These loans would not have been made based on any commonsense business model, but the Carter administration decided to hell with business models and use the law to pressure the issuance of these loans for the typical reasons liberals do these things: to buy votes, to create dependents, and to create love and respect and devotion to the Democrat Party. Groups like ACORN — which exist, by the way, in ACORN’s case — exist for the express purpose of committing voting fraud. That’s one of the groups that Obama, you know, worked with as a street organizer in Chicago. Groups like ACORN and others were also behind this. They allied themselves with the Democrats and the administration and Congress. Now, ACORN is a ‘grassroots’ group that is backing Obama for president, they’re close to him, they were close to him when he was a man of the street agitating things in Chicago. But none of this was good enough for the Clinton administration in 1995.
A renewed and more vigorous emphasis was made on making these loans. Janet Reno and Roberta Achtenberg (who was a former radical member of the California board of supervisors and an assistant secretary of HUD, Housing and Urban Development), put enormous pressure on financial institutions to make more and more risky loans, and they began accusing banks of redlining when they didn’t meet the level of risky loans that they had imposed on them. They then prevented these financial institutions from expanding and merging unless they met a certain level of community redevelopment loan making — and they threatened these institutions with government action. Reno herself said, ‘There will be investigations if you do not follow these regulations. If you don’t make loans to these people who essentially can’t pay ’em back, we’re going to investigate you, and we’re going to tie you up.’
We got the quotes, from a Cybercast News Service story. Subprime mortgages and things like them, are mortgages given to people who can’t afford traditional mortgages. They can’t afford down payments. They can’t afford to make the going rate of interest payments. So new types of loans were invented to get these people into homes but which were extremely risky. There were no down payments, low introductory rates, in some cases no closing costs. Fannie Mae and Freddie Mac, in order to show ever-increasing assets on their balance sheets, would buy up these subprime loans, but the greater the asset, the executives at these government-run companies would show more assets, but they’re worthless. One of the problems now is you’ve got a market, but nobody knows what the market is. There isn’t a market right now. It’s tumbled. Some people are saying that there’s an outside chance that the market is so low that the taxpayer (i.e., the Treasury) could really win big with this bailout, given how little they’re going to have to spend to buy up all these assets.
But the way it worked inside Fannie Mae and Freddie Mac was this. They loaded up on these worthless assets; they would put them, predate them into prior years so they show fantastic asset growth. It was on the asset growth that their bonuses were determined, such as Franklin Raines and Jim Johnson and all the other people, Daniel Mudd who worked at these places who walked out of there with anything between 75 and 90 and a hundred million dollars. Now, this is the short story behind much of the debacle that we’re dealing with today. I mean, there are other issues out there, but this is the systemic underpinning of the crisis. All roads three-day Fannie Mae and Freddie Mac, contrary to what they’re trying to make you believe — and this is what really infuriates me and makes me passionate to get through to everybody I can.
The issue is not a runaway, unregulated free market. The issue is not the failure to regulate. The issue is not stupid and crooked executives throughout the banking industry doing stupid and crooked things, although there was some of that. There’s some of that in every area of life. But that’s not the cause. What you need to understand, my good friends, is that this situation has occurred and is occurring as a direct result of government policies: liberal government policies that were used to force the issuance of trillions of dollars in risky loans that people could not pay back. And when they couldn’t pay them back, people couldn’t get the asset value that they had sold and packaged the mortgages for, and everything crashed, everything crumbled. And about this bailout, I want to call your attention to something.
How many times in the last six months have we read stories about the Fed adding to liquidity here or helping this institution there? We’ve already had a bunch of bailouts. We’ve already had a government stimulus package to help the US economy, and now Obama’s talking about wanting another one. These things have a history of not working. They may show short-term relief, but over the long haul, world history is replete with example after example after example that centralized economic planning does not work. The Democrats on Capitol Hill, and primarily I’m talking here about Chris Dodd and Barney Frank, were in the middle of this from day one. They supported the Carter and Clinton administrations when they pressured the private sector to make these risky loans.
They protected Fannie Mae and Freddie Mac when they bought up these risky loans — and in 2003, when the Bush administration attempted to impose some accountability on Fannie Mae and Freddie Mac when they tried to force them to accept outside auditors, require better capitalization. You know what the leverage rate was? They only had to have a dollar of cash on hand for every 30 bucks they had borrowed. That kind of leverage is just obscene. So they wanted to change that; they wanted more capitalization. But guess who blocked it? Good old Barney Frank and Chris Dodd stood right smack-dab in the way. When, in 2005, Republicans in Congress tried to do the same thing, they were obstructed as well. In fact, Chris Dodd and Barney Frank said there was nothing wrong with these government-run companies and the Republicans were trying to scare people.
We have, now, ladies and gentlemen, a clear definition of affordable housing, according to Barney Frank. Affordable housing is giving people houses that you and I pay for. That’s affordable housing — and I’m not talking about, you know, tenements and housing projects. I’ve heard Barney Frank talk about this enough times. Every time he would talk about this he said, ‘We can’t get rid of the affordable housing, affordable housing.’ ‘Affordable housing’ to Barney Frank and the liberals is making sure that every liberal Democrat in this country who can’t afford a house gets one. And then affordable housing, after they have been given the house — under the pretext of buying it, of course — but when they can’t pay it back, guess what Barney Frank and Chris Dodd want: Let ’em stay in the house. In this new bailout legislation, Barney says, ‘You can’t kick them out of the house, and we want limits on CEO pay.’ Any precondition on this bailout must include Barney Frank and Chris Dodd resigning.
RUSH: Now, wait, folks. This gets even better. Welcome back to the Rush Limbaugh program, meeting and surpassing all audience expectations on a daily basis. So now we have Hank Paulson, the Treasury Secretary, ex-Goldman Sachs and a Democrat appointed by President Bush, an old buddy of Chuck-U Schumer, by the way — and who isn’t in this mess a friend of Chuck Schumer’s? Schumer was involved in all of this as well. And now we got Hank Paulson in charge of, not elected, the most far-reaching government takeover of a huge chunk of our economy ever.
One little aside here, folks, one little aside, and I promise not to lose my place. This amount of money that we’re talking about, 700 billion — and let’s just admit it’s going to be a trillion before it’s all done with, okay? Even that will pale compared to the cost of Algore’s global warming plans if Democrats get their hands on that. Global warming tactics, their plan to fix global warming will cost more than even this. I’ll have more on that in due course.
This is the most far-reaching government takeover of a huge chunk of our economy ever, and it still isn’t enough. It’s still not enough for Barney Frank. Paulson wants a slush fund. He basically wants $700 billion to buy up bad loans as he and only he sees fit. Now you have Obama and Pelosi saying they want oversight. Ha. That means ACORN is going to get 500 mill here, some other little Democrat group, teachers union is going to get some money here, Maxine Waters is going to get about a thousand dollars for each of her constituents to pass around out in California. I mean none of this is official, but this is the way these things work. Now, keep in mind these are bad loans in the sense that they were risky. But the loans have not actually defaulted yet, so unlike the savings and loan failure, this would be far more reaching. The government’s going to buy up loans before they default. That’s called affordable housing, the way the Democrats define it. Barney Frank, among other things, says that this is unacceptable unless even more money is spent helping more people facing foreclosure. Barney Frank’s definition of affordable housing is that if they’re about to be foreclosed on for not being able to pay, they get to stay in the house.
So one of the main individuals responsible for the current financial problem, wants the American taxpayer to subsidize not only the buyout of bad loans that have yet to fail, but he wants to spend even more money to shore up these individuals who, in many cases, shouldn’t have bought a house in the first place. The left sees this as their opportunity to change the nature and identity of this economy. And the Republicans are going right along with them, including the president, including McCain. There’s no way around this. I mean neither of them, and no one in the party seems capable of exposing what’s going on here, and opposing it. It’s not enough to say that you’re against the latest bailout. You need to explain why. You need to stop with the populist left-wing rhetoric about needing more regulations, you gotta stop beating up on Wall Street, you gotta stop pandering, you gotta realize, Senator McCain, you are running against Obama. You’re not running against George W. Bush and Wall Street. You are running against Senator Obama.
Sarah Palin understands it. She pulled your irons out of the fire and you’re about to throw ’em back in. This idea that Andrew Cuomo should be Securities and Exchange Commission chairman, that’s what McCain said last night on 60 Minutes. I kid you not, McCain would appoint Andrew Cuomo. From The Village Voice, ladies and gentlemen, in August 5th of this year, a whole story: ‘Andrew Cuomo and Fannie and Freddie — How the youngest Housing and Urban Development secretary in history gave birth to the mortgage crisis.’ Andrew Cuomo is up to his neck in this. This is a 16-page printed story on a computer printer from The Village Voice. Cuomo jacked up low income, low mandates on Fannie and Freddie, and he is at the head of the line, too, with other Democrats on this whole crisis, and McCain talks about putting him in the — (sigh).