So, who's to blame for the current mortgage mess?  If you believe the current media narrative, capitalism itself is to blame.  Not content to blame just the GOP or Bush, Democrats are going after the big prize - the conservative ideology that advocates free markets.

Progressive socialists like Barack Obama and Bernie Sanders are absolutely giddy about this crisis.  This affords them the perfect opportunity to shove the word FAILURE in the face of any conservative that ever advocated for de-regulation, including John McCain.

Here's Obama declaring this mess is the "Final Verdict" free markets failed:

Just a month ago, Democrats were worried that American voters might be souring on their Progressive/socialist agenda like the French and Germans did when they recently elected pro-U.S., pro-market leaders like Sarkozy and Merkel, respectively.  U.S. voters were beginning to blame Democrats for the struggling economy when they saw Democrats clinging to their extreme environmentalism and denying even a vote on lifting the ban on offshore drilling.

This anti-democratic posture by Democrats helped the GOP blame Democrats for the bad economy.

What a difference a month makes.

Now, capitalism itself is on trial and it's losing badly.  I will stand up and defend free markets and, using the Audacity of Reason, remind voters of the facts:

1. In 1977, Democrat President Jimmy Carter and the Democratic Congress passed the Community Reinvestment Act (CRA).  This act forced banks to "provide credit, including home ownership opportunities to under-served populations".
2. In 1993, Democrat Bill Clinton asked his Treasury Secretary to come up with reforms to increase the expand the CRA.
3. In 1997, Democrat Bill Clinton increased the market share of these CRA loans from almost zero to almost 15%.  Fannie's and Freddie's combined portfolios went from about $200 billion to over $1 trillion during Clinton's term in office - a five fold increase. 
4. In 2005, Bush attempted to reform Fannie Mae and Freddie Mac (GSEs) but he was rejected along party lines despite warnings by Federal Reserve Chairman Alan Greenspan. 

I urge everyone to read all of Chairman Greenspan's Senate testimony on April 6, 2005, but I'll include his prescient conclusion below:

"Without restrictions on the size of GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership."

Still, Bush was President.  Why didn't he do more?  Let me explain.

Bush's #1 priority, after 9/11, was keeping U.S. safe.  Because Democrats chose to undermine the War on Terror and the Iraq War, Bush had to sacrifice other priorities to win support from Democrats to get national security legislation passed and keep us safe.  Had Democrats chose to support the President on national security matters, as was the custom in years past, we would have had real changes at Fannie and Freddie to limit the risk to our overall economy.

Why did Clinton, back in 1993, seek to force banks to lend to people that our banks would not have otherwise lent money to?  Here's how Clinton's Comptroller, Gene Ludwig, described how the Clinton team decided to "reform the CRA":

"Before we made a single decision on proposing reform, we...walked through South Central Los Angeles, in a predominantly minority neighborhood in New York City....we talked with representatives of the Navajo Nation; to bankers, large and small banks, inclusive; to poor people in rural North Carolina and elsewhere. (What) we saw and what we heard shaped this reform package."

How did Clinton seek to enforce compliance?  In 1993, Treasury Secretary Lloyd Bentsen explains:

"In a nutshell, what we're proposing to do is to make it easier for lenders to show how they're complying with the Community Reinvestment Act. ...the changes we're proposing are important because banks now have a very clear, quantitative standard by which their compliance can be judged. And that is very important to banks when it comes to ask regulators to approve mergers, new branches and the like."

Under Bill Clinton and his Democratic Congress, the CRA was reborn and inserted into the very fabric of our financial markets.  Yes, some institutions were happy to make money doing CRA loans but they would not have made them if the Clinton Administration hadn't forced them to in order to get new branches and mergers approved.  We know this because before Clinton, CRA loans were almost non-existent.

A $1 trillion mistake by the Democrats has finally come home to roost.

Now, there is a $700 billion plan to bailout financial institutions that are having a hard time pricing all the bad CRA mortgage-related assets on their balance sheets.  It could cost a $1 trillion or more.  Whatever the cost, it's not a failure of free markets or capitalism - it is a failure of the "mixed economy" that Ayn Rand warned about 40 years ago.

It is the socialist ideology that Democrats want to shove down your throat with stealth and guilt all wrapped up in the purposely ambiguous euphemism "Change We Need".

Yes, substandard lending had some GOP support along the way but make no mistake - it would have never have happened if Democrats didn't push for it.  Conservatives advocate smaller government and merit-based financial decisions.  Liberals advocate more government and financial decisions based on "fairly spreading the wealth".  For 12 years, during Reagan and Bush 41, the CRA was meaningless.  During 8 years of Clinton, CRA-related sub-prime mortgages increased five-fold.

If the banks and Wall Street were so greedy, why didn't they pursue substandard lending before Clinton?

Because it did not make business sense - they would have lost money.  Only after the Clinton Administration "made it easier" to prove compliance with the CRA and back up the loans with implicit guarantees from Fannie and Freddie, did private banks jump on board.  Banks were asked to demonstrate they were doing "their share" of substandard lending to minorities or else the feds would not approve mergers or new branches.

Of course, it was a mistake to package these loans into financial instruments traded around the world but can you really blame a German or Japanese bank for buying a product that had the allure of "U.S. Mortgage Obligations"?  It probably never occurred to the German banker to ask if some of the mortgages were made without verification of income???

Congress did everything it could to grow Fannie, Freddie and CRA loans.  This was a whopper of a mistake.  A $1 trillion mistake by Clinton and the Democrats.  The question is will the public hold them accountable or believe Obama's propaganda that evil-unregulated-free-markets is to blame for this mess?

According to Dana Perino, White House Press Secretary, no matter what rescue plan Congress gives him to sign, Bush “would look to his Secretary of the Treasury and …the Fed Chairman,” and ask them if this plan will save our economy. 

Wow, so even if 20% of the plan’s profits would go to ACORN, the massive corrupt leftist got-out-the-vote-for-Obama group, the President is going to sign it because Hank Paulson gives the thumbs up??  So who is this unelected man that the President has granted authority over $700 billion of our money?

I count myself among the better informed.  However, I did not know Hank Paulson was a Democrat, attended Harvard and lives near Chicago.  Isn’t Obama a Harvard grad who lives in Chicago?  I have nothing against common folk from Chicago but looking into Obama’s background gives me pause. 

Let’s take a quick review of the more famous Chicago power players:

In addition, it turns out that ACORN had a remarkable role, with help from Congressional Democrats like Chris Dodd and Barney Frank, in creating the toxic paper that our financial markets are now choking on.  

Section 8 of Paulson’s plan states: “Decisions by the Secretary pursuant to the …this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”  No review by a court of law or administrative agency?  So I can’t even “trust but verify”?

So, how are you feeling about trusting Hank Paulson with the largest rescue plan in U.S. history? 

We haven’t even talked about Paulson’s conflicts of interest given that Paulson was Chairman and CEO, after 32 years, at Goldman Sachs - which happens to be the last independent investment bank standing.  It’s been reported that despite “…bailouts and managed liquidations of Goldman competitors Bear Stearns, Merrill Lynch and Lehman…in which shareholder value was largely wiped out, Goldman’s stock could rise under the Paulson plan…”.

Lastly, thank God, are the recent reports that many of Paulson’s former executives at Goldman are “bundlers” for Obama’s campaign - going so far as to email, to Obama’s campaign manager, details of the “private” discussions between the Secretary and House Republicans.

THAT’S IT! 

Paulson must resign, along with the leading Democrats still pushing the toxic paper that’s crippling the world’s financial markets.

Before any rescue plan…Fire Dodd, Frank & Paulson!

Originally posted on June 27, 2008.  This is my fourth revision.

Here’s my plan:

1. Sell 1% of the SPR, per month, until oil is < $100 barrel again.  
2. Spend the SPR money, about $1 billion / month, to jump-start alternatives like Picken’s wind project, solar and hydro. 
3. Make a 9pm EST Primetime announcement that the U.S. will begin drilling in the OCS and ANWR effective immediately.  Make it a national priority to help oil companies get rigs out to those sites!  Use military when necessary, interrupt shipping lanes - rally the nation - this is important & urgent!  Let's act like it!
4. Offer $100 billion for the first person or company to invent an inexpensive  way to retrofit existing cars to get > 100 mpg.  It’s great if auto makers offer new cars that get high mpg but for every new car sold there are thousands already on the road. 
5. Build the largest nuke plant in the world in the Nevada desert, right next to the Yucca Mountain Repository, and plug into the national grid.  Why risk transporting the nuke waste any farther than necessary?
6. Identify the 10 worst users of energy, efficiency-wise, make them famous and use carrots and sticks to make sure the list is completely different next year.
7. Abandon all efforts at biofuels - that was a really stupid idea.  Not only is producing food energy-intensive but we need all the food we produce to feed people, not cars.  USE FOOD FOR PEOPLE.
8. Remove regulatory burdens preventing new oil & gas refineries from being built and existing ones from being expanded. 

So why do we need an energy plan?  Is there a crisis?  Some prominent Democratic leaders, including Barack Obama, would like you to believe high energy prices are punishment for 5% of the world’s population using 25% of the world’s oil or bitter medicine necessary to force us to finally do the right thing:  conserve. 

This explains their lack of action. 

Others, including myself, have a different take on things:

America does great things with the energy it consumes!

The U.S. economy produces over $13 trillion of goods and services  - more than Japan, Germany, China & the U.K. combined!  We create most of the world’s great inventions.  We produce most of the world’s food - food is energy-intensive.  We use lots of energy to help maintain a fantastic military that helps keep the world safe.  Our incredible economy creates lots of wealth, a big chunk of which is donated to help feed and clothe the rest of the world. 

We also produce most of the world’s medicines, music, movies and manufactured goods.  Does that surprise you?  You may have been misled into thinking the U.S. has lost all it’s manufacturing to China.  Actually, in real dollars, American manufacturers produced $1.53 trillion worth of goods in 2005—up from $900 billion in 1992.  Let me repeat, we manufacture 70% more goods than we did in 1992 in real dollars - that takes energy, lots of it. 

So, why shouldn’t we use the most energy?   We create the most goods and services (and inventions, music, film, food, medicines, aircraft, etc..)  In addition, we’re extremely efficient using our energy.  In 1999, we were able to produce all the goods we did in 1972, and then some, with 74% less energy.  In other words, Mr. Obama, we already conserve, have been for years, we just call it being “efficient”, and we do it to save our companies, and families, money. 

We should celebrate our economy and what we produce, not feel guilty about much energy we use to produce it!

This plan has huge benefits for the United States:

1. Selling SPR oil and opening up the OCS and ANWR sends a huge message to world oil markets that the U.S. is finally serious about using all it’s available resources to meet it’s energy needs.  Although the OCS/ANWR oil will not be delivered immediately, speculators trade on trends and the trend for oil prices will finally start heading down. 
2. Exactly how much will prices drop?  Oddly enough, a Democrat in Congress may have answered that question.  Peter Welch (D-VT),  sponsored H.R. 6022 to stop adding oil to the SPR.  He says that, not purchasing 70,000 barrels per day, “may reduce gas prices 5 to 24 cents per gallon”.  Every Senate Democrat voted for it, including Obama and Hillary, and Bush signed it.  So, Democrats have agreed, on record, that 1) supply and demand affects gas prices (I had doubts Democrats believed the science of modern economics) and 2) exactly how much the price of gas drops (21 cents) for every 100,000 barrels of oil.  Remarkable!
3. Using Congressmen Welch’s math, just selling SPR oil should save another 49 cents / gal.  Do you know anyone that wants to save 49 cents a gallon?  I DO!!  As far as OCS/ANWR, we looked at the 2006 OCS Assessment and the 1987 ANWR report, which indicated, OCS/ANWR may yield 2 to 4 million barrels per day.  Again, using Rep. Welch’s math, the OCS/ANWR oil may push the price of gas to below $1 per gallon.   It may not be that dramatic but the more U.S. oil we produce, the lower the worldwide price - it’s economic science.   
4. This should drop not just the price of oil, but nearly all U.S. consumer items.  Lower prices and a solid plan should help calm consumer fears about the future of the U.S. economy.  Right now, the Democratic Congress stands in the way of a solid drilling plan and that stalemate’s making consumers very uncertain, and increasingly, more angry.  
5. The SPR has about 700 million barrels of oil so 1% is 7 million bbls.  At $142 per bbl, selling 7 million bbls from the SPR will produce about $1 billion dollars per month for investment in alternative energy .  Oil, gas, coal, natural gas and nuclear will meet our near term needs (next thirty years) while we transition to alternative energy (wind, solar, hydrogen, liquefied coal).
6. Aggressive domestic drilling replaces foreign oil with domestic and that prevents hundreds of billions of US dollars from going to countries hostile to our interests, lower our trade deficit,  and creates hundreds of thousands of US jobs.
7. The more oil produced in the U.S. the more control we have over how it is produced.  For example, U.S. deep sea drilling standards minimize damage to the environment if there’s an accident.  Right now, we have no control over how a well drilled off the coast of Nigeria is regulated.
8. Abandoning bio fuels will reduce pressure on food prices and help get food to those who need it most.
9. This plan generates billions of dollars for alternative energy research without any money from the federal budget - this helps keep our deficit down, interest rates down and the dollar up - all good for U.S. consumers.
10. One nice side benefit of increased domestic production is that all our allies, Europe, Japan, Australia, South America, Afghanistan, will also benefit from lower worldwide oil prices after we increase US output.  They will be grateful that we have finally taken pressure off not just gas price but prices overall and avoided a worldwide recession, if not depression.