Obama Criticizes Bad Loans, Promises More Lending
By Robert Romano
“You see, the flow of credit is the lifeblood of our economy.”—President Barack Obama, first speech to a joint session of Congress, February 24th, 2009.
In a magnificent display of duplicity, President Barack Obama addressed a joint session of Congress, wherein he pretended that bad loans originated not as a matter of government policy, but at the discretion of bad lenders.
In doing so, his rhetoric misrepresented the actual causes of the financial crisis, and failed to live up to his own proclamation that “it is only by understanding how we arrived at this moment that we'll be able to lift ourselves out of this predicament.”
President Obama stated, “People bought homes they knew they couldn't afford from banks and lenders who pushed those bad loans anyway.” And who was pushing the lenders? Government bureaucrats intimidating banks. Stormtroopers at ACORN. Courts.
Who accommodated the housing bubble? Where did the banks get the money to lend? Specifically, the Federal Reserve through too low interest rates and incredibly cheap money.
Who sold the securitized mortgages? Fannie Mae and Freddie Mac bought up most of the loans, and yes, pushed them off as securities. They sold them all over the world using the implicit backing of the federal government. And now that they are practically worthless, those purchasers are demanding their money back, and for reasons not yet disclosed, we're paying them.
In summary, in an effort to make sure the economy stayed strong after 9/11, the Fed flooded the economy with cash. This was government policy. When housing boomed, they began to believe their own propaganda that it would continue to rise. They promoted it. For years, it was criticized as a “credit card economy,” and for years policymakers turned a deaf ear and pretended everything was okay. The most dire and urgent warnings, which turned out to be correct, were cast as the kook fringe.
Now, today, when it turns out the kooks were right, the government is still in the process of “buying” some $600 billion of rotten debt from Fannie and Freddie. Interest rates are about as low as they can go. Government is ready to force the banks to “restart lending” through the “terms and conditions” of Treasury Secretary Timothy Geithner's two-trillion dollar bank bailout; TARP-recipient banks will do what they're told.
The bailout—including appropriations, commitments, borrowing, and printing funny money—has topped $8 trillion. There are some $2 trillion in loans that the Federal Reserve refuses to account for. The Treasury still cannot fully account for the $700 billion bank bailout of 2008.
Mr. Obama would like to chalk up the failed government policies that led to this crisis as failures of the free market. In fact, it was rose-colored glasses by policymakers that got the nation into this mess, and now government's credibility is on the line as public confidence falters. The Administration believes they've got to fix it. They've got to do it right.
Fed Chairman Ben Bernanke, red glasses on display, yesterday stated to Congress that if today's policies were successful, there was a “reasonable prospect that the current recession will end in 2009.”
The truth is, no amount of wasteful spending, mortgage giveaways, bank bailouts, national health care, global warming nonsense, and funneling money to the NEA and the President's other hack union buddies will make the economy any better. And yet, as the President so boldly proclaimed last night, the tiers of the new Obama economy will be: easy money, more risky lending, green energy, socialized health care, and yet more spending for public education.
To make matters worse, the states have just been bailed out of their own budget woes with over $50 billion through the so-called “stimulus” package. In the process, state policymakers have been bailed out of their own malfeasance, saving them from bearing any responsibility for their ineptitude while severely damaging the federal system.
Meanwhile, the national debt is soaring, set to top $11 trillion this year as the budget deficit balloons to over $1.2 trillion. Under these circumstances, as ALG News has repeatedly warned, inflation is inevitable. The biggest bubble of all is government. And it is growing at a record pace, financed through deficit-spending, borrowing, and printing more Monopoly money.
The only thing more insulting than Mr. Obama's giveaway to delinquent borrowers, on display last night, was Secretary of State Hillary Clinton begging on her knees over the weekend to a band of murderous tyrants in Asia to keep lending us more money. She suggested it was to finance the trade deficit, but in truth it was to bankroll an out-of-control, irresponsible, and incompetent regime in Washington.
Mr. Obama proclaimed in his speech that through all of the troubles that led to the current financial meltdown, “critical debates and difficult decisions were put off for some other time on some other day.” He's right. And his duplicity knows no bounds.
Robert Romano is the Editor of ALG News Bureau.