Sympathy for the Devil:
The Essential Barack Obama
September 2008
Please allow me to introduce myself
I'm a man of wealth and taste
I've been around for a long long year stolen many a man's soul and faith
I was around when Jesus Christ had His moment of doubt and pain
Made damn sure that Pilate washed his hands and sealed His fate
Pleased to meet you hope you guess my name
But what's puzzling you is the nature of my game.
Fannie Mae and Freddie Mac caused the credit crisis. This fact is not in dispute.
They are known as GSEs (Government Sponsored Enterprises) and they don't make home loans; they make it easier for banks and other mortgage lenders to do so.
Fannie and Freddie guarantee mortgages so that they can be packaged or pooled, sold by the lenders to Wall Street, and then used to guarantee bonds that the Wall Street firms sell to investors.
Once the lenders have sold the mortgages, their capital is replenished and they can then make more loans. They earn fees every time they make a loan.
As long as homeowners make payments on their mortgages, there is cash available to pay the interest and the principle on the bonds that the mortgages back.
The problem is that Fannie and Freddie began allowing mortgage lenders to make loans to people who could not afford to pay them back. They were called "liar loans" because the banks did not require proof of income or assets on mortgage applications.
When interest rates went up, so did the monthly payments on hundreds of billions of dollars of adjustable rate mortgages, and many homeowners defaulted.
Fannie and Freddie also raise capital by selling debt to investors. They use that capital to buy mortgages from banks and to buy mortgage-backed bonds on the open market.
When homeowners defaulted, the mortgage-backed bonds owned by Fannie, Freddie, and Wall Street became worthless or declined sharply in value.
Why, you might ask, would Fannie and Freddie make unsound loans? As always, it comes down to money and politics.
It so happens that the compensation of their CEOs was tied directly to the achievement of earnings targets, and their CEOs made substantial campaign contributions to their pals in Congress.
Click Here to Get Headline Updates and Notifications of New Editorials. It's free, and we'll never sell your information to any other party.
Click here to visit our Store.
The Securities and Exchange Commission determined in 2004 that Fannie Mae had overstated its earnings by $6.3 billion over several years, and that Freddie Mac had overstated its earnings by $5 billion.
In December 2004 the CEO of Fannie Mae, Franklin Raines, was forced out. Raines, who had been President Bill Clinton's Director of the Office of Management and Budget, had been paid $90 million based on the phony earnings statements that he filed for Fannie Mae.
Raines was later accused of improprieties by the Office of Federal Housing Enterprise Oversight and agreed to forgo compensation of about $25 million. Most of that compensation was in the form of worthless stock options, so he paid very little out of pocket.
Guess who Raines now serves as an economic advisor. Barack Obama.
That's probably natural, given that Barack Obama is the second largest recipient in history of campaign contributions from Fannie Mae, even though he has been in the U.S. Senate for less time than it takes to play an American League baseball game.
Congressman Barney Frank (D-MA), Senator Chris Dodd (D-CT)., Senator John Kerry (D-MA) and the Congressional Black Caucus pushed the banks to make ever riskier loans to their constituents, and required Fannie and Freddie to guarantee those loans.
In the case of Senator Dodd, it later turned out that he had received low-interest loans from Countrywide, another institution that teetered on the brink before Bank of America rescued it. He was number one on the list of campaign contributions from Fannie Mae, Barack Obama was number two, and Kerry was number three.
Specifically, Barack Obama received over $125,000 from the GSEs. That's a lot of money for a junior senator. What do you suppose he did to "earn" that payoff.
President Bush tried to stop these dangerous lending practices back in 2004, but the Democrats would not go along. He wanted to rein in Fannie Mae and Freddie Mac, but Frank, Dodd, Kerry et. al would not hear of it.
Watch the film clip below of Barney Frank saying at a Financial Services Committee meeting on September 25, 2003 that Fannie Mae and Freddie Mac were not endangering the fiscal health of this country, that we were not facing a crisis, and that there would not be a bailout (press the blue play arrow):
Another former CEO of Fannie who had presided over questionable lending practices, Jim Johnson, was later appointed by Obama to head his vice presidential selection committee.
Still another leading light of the Democratic Party, Jamie Gorelick, earned $26 million from Fannie Mae and she too is an advisor to Obama. She is infamous for having warned President Clinton, while she served in his Department of Justice, that it would be illegal for him to kill Osama bin Laden when we had him in our sights.
One of the Presidential candidates did try to stop Fannie Mae, Freddie Mac, and the Democrats from causing this financial crisis.
In 2006, Senator John McCain co-sponsored Senate Bill 190 to amend the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. On the Senate floor, Senator McCain said:
"Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were 'illusions deliberately and systematically created' by the company's senior management, which resulted in a $10.6 billion accounting scandal…
"The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems…
"I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S.190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole".
That was two years ago.
Guess who opposed this bill. Barack Obama.
Imagine how different things would be today if Senator Obama had reached across the aisle in 2006 to Senator McCain to do the right thing for America.
Unfortunately, it was then as it is now; Obama first, America second.
Just think, if Obama were to become president, he might put Franklin Raines in charge of the federal bail out. Perhaps he'll name it the Franklin Raines Trust, or FRT for short.
On September 18, 2008 Obama had the temerity to stand up in front of a crowd and say: "John McCain talks about cleaning up the old boy network in Washington, yet the old boy network is what you call a McCain staff meeting".
Barack Obama said that. The same Barack Obama who accepted money from and has as his advisors the men and the woman who caused and profited from the financial system meltdown that has cost the U.S. Treasury upwards of $700 billion, and counting.
Just as every cop is a criminal and all the sinners Saints,
As heads is tails, just call me Lucifer 'cause I'm in need of some restraint
So if you meet me have some courtesy, have some sympathy and some taste
Use all your well learned politesse or I'll lay your soul to waste
Pleased to meet you, hope you guess my name
But what's puzzling you is just the nature of my game.
Barack Obama would have made Joseph Goebbels (the Nazi Minister of Propaganda and National Enlightenment) proud.
If a picture is worth a thousand words, then perhaps this excellent video from TheMouthPiece is worth a million (click video number 2).