Question: Are Republicans Really Responsible for the financial crisis of 2008?
If not, why hasn't Republican nominee John McCain come out and said so?
Answer: Good questions! Let's answer them separately:
- While there is plenty of blame to go around, it appears the real impetous for the housing collapse, which led to the failure of several corporate giants can be traced to the waning days of the Bill Clinton administration in 1999.
The real cause of the financial collapse, as most people are beginning to understand, was greed. Banks were extending mortgages to homeowners who they knew would be unable to repay the loans. These lenders felt safe that they could turn a quick buck on the intial deal, then sell the bad loans to an after-market mortgage company (the biggest of which were Fannie Mae and Freddie Mac)and avoid any negative ramifications when the buyers were unable to make their payments. The problem would then be someone else's when the foreclosures occured.
As the mortgages began to fail, after-market lenders attempted to make up the lost revenue by buying up more and more mortgages. The idea was that a large volume of small profits would eventually offset the money lost from the failing mortgages and the market would, over time, correct itself.
The problem, we know now, was that there weren't enough profit-making mortgages to offset the failing ones. After-market lenders simply grew larger and larger, bloating themselves on failing loans and hemorrhaging more and more money. As homeowners began to declare bankruptcy on a massive scale, insurance companies, credit-card companies and other lenders began to suffer as well.
What allowed all this to happen, were "no doc" loans. As long as a buyer had enough money to put down on a property (a minimum of 25 percent of the sale price), lenders didn't require documents that proved the purchaser could repay the loan (payment stubs, W-2s, etc.).
According to this article in New York Times, the beginning of the problem actually began when the Bill Clinton administration began pressuring lenders to ease loan restrictions so low-income borrowers could obtain mortgages. [blockquote shade="yes"] “In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. Democratic presidential nominee Barack Obama has again and again laid the responsibility for the housing collapse at the feet of John McCain and President George W. Bush, despite the fact that McCain is on record warning Congress that there were fundamental problems with the housing market and that Fannie Mae and Freddie Mac were getting too big. Even more damning, are the videos that have surfaced showing Democrats in 2004 denying that there are problems with Fannie Mae and Freddie Mac. - McCain's problem with placing blame where it rightfully belongs is much simpler to understand, but no less difficult to manage:
McCain could very easily point out where the real problem started (Bill Clinton's administration), but in doing so he would alienate the Clintons.
McCain has actually received a number of compliments from both Bill and Hillary in the final weeks before the election. Over and over, the Clintons have called McCain their "friend" and touted his bipartisan savvy. In fact, some Democratic (and even Republican) conspiracy theorists have postulated that the Clintons are actually attempting to subvert Obama's candidacy. At a critical time when McCain and Palin are doing everything they can to attract former Hillary supporters, the last thing they want to do is drive a wedge between their campaign and the Clintons.
McCain has said over and over that he's not interested in playing the blame game, anyway. He has said he'd rather work on solving the problem than trying to figure out who was right and who was wrong.
"That's for the American people to sort out for themselves," he said in a recent interview.
- What do conservatives think about the federal government's $700 billion plan to bail out the financial market?
- Was the $700 billion corporate bailout necessary?
- What did John McCain hope to accomplish by returning to Washington to work on the Wall Street bailout?
- Is the Bush Administration responsible for the financial crisis of 2008?
