by Ryan Ambrose

Created on: October 22, 2008   Last Updated: October 27, 2008

Financial Crisis: There's Plenty of Blame to Go Around

If I wanted to single out a specific target in this whole mess, I certainly have the inclination to do so. My political disposition leads me to attack the Democrats, but they alone did not do this. Yes, they had plenty to do with it, but upon further reflection, it's easy to see that there's plenty of blame to go around.

The Democrats paved the way to the mortgage crisis with the Community Reinvestment Act. Carter created it, and Clinton expanded it with such brutality that banks chose to give loans to high-risk borrowers rather than dare the government's wrath. That has plenty to do with it, but that alone doesn't end the matter.

The Republicans realized this was coming and attempted reform. McCain boasts of raising alarms in 2005, but in typical Republican fashion, dropped the matter at the first sign of Democratic resistance. Even knowing what was about to happen, they made no real attempt to sell their point of view or overcome the opposition.

As for President Bush? As president, he's a favorite target, but his only sin in this matter was the Chicken Little solution. He panicked so much that he rushed through the partial nationalization of our banking system. Not only that, he didn't even bother to consider other, less socialized approaches to the problem beforehand.

Furthermore, the gigantic $700 Billion dollar band-aid with its $150 Billion dollars in additional pork and sweeteners did nothing to address the underlying problems. The Community Reinvestment Act is still in place. Fannie Mae and Freddie Mac are still GSEs. In fact, the legislation even goes out of its way to help those who had no business seeking loans to keep their homes.

No, I don't find the borrowers blameless. I'm not of the belief that they are the victims of 'predatory' lenders. Their banks were forced to make loans to them against their better judgement, thanks again to activists and the Democrats. It doesn't take much sense to realize that organizing such mortgages into fancy-sounding lending products won't overcome the very basic fact that sooner or later, you will have to pay them back.

Besides, I have more than enough vitriol left for the lenders, who are far from faultless themselves. Bad decisions, like Wachovia's (WB) purchase of Golden West Financial (GDW), folded more than a few banks. Fannie Mae (FNM) and Freddie Mac (FRE) bought tons of sub-prime mortgages, and when they went south, ran to the taxpayers for their salvation.

There are plenty of causes to our current financial tempest, and it's not over yet. It may be we might need a correction to sort through this mind-boggling mess and the economic pain that comes with it. All that remains now is to learn from the mistakes and insure they don't happen again, but given history and the quality of our leaders, I do not believe this will occur.

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