Why the Financial Meltdown?
by Victor Gerhard

The past week has seen a collapse of the financial markets in the US.
Stock and bond brokerage firms, banks and insurance companies have all
had some trouble, been taken over, gone into bankruptcy, or been
bailed out by the Federal Government (aka the citizens of this
country).

The center of this all is the mortgage holding corporations, Fannie
Mae and Freddie Mac. In fact, the cause of this entire financial
disaster is the lending policies of these two companies.

What do Fannie Mae and Freddie Mac do? This is pretty simple. First, a
regular bank, small, medium or large, lends money to a person or
couple to buy a house. This is called of course a mortgage. Now, the
bank could just hold on to this mortgage and collect principal and
interest payments for the twenty or thirty-year life of the mortgage.
But, if it sells that mortgage, it can take the payment and then loan
out that money as a new mortgage. This allows a bank with supposedly
limited assets (the savings accounts, checking accounts and cds of
customers) to make many more mortgages than would otherwise be
possible. Who do they sell these mortgages to? Fannie Mae and Freddie
Mac.

Now, what do Fannie Mae and Freddie Mac do with these mortgages? They
don’t hold on to them either. They roll them into bundles of thousands
of mortgages and sell them on the open market as investments for
brokerage firms, banks and insurance companies. Some of these bundles
are then also sold in part to private investors or even other nations.
These are the entities that then collect the interest and principle on
the investments.

For the past decades, the housing market more or less has been a great
investment. Housing prices moved up continuously and most people were
able to make their mortgage payments. Generally, everyone involved in
the mortgage market prospered.

So what happened? If you listen to the liberal commentators, on the
news and in the newspapers, the cause of the collapse was
“deregulation,” which allowed the original banks to make bad loans -
loans without down payments and without verification of mortgagee
income. One of the most repulsive commentators has been the disgusting
Senator from New York, Charles Shumer. He blamed Republicans and their
mantra of free markets for causing the whole problem. Generally, the
entire Left has blamed Republican deregulation and Regan-esque belief
in free markets.

But what really happened? The problem began, as far as I know, during
the Clinton era. In an effort to allow more “poor” (Black and
Hispanic) people to own homes, the Clinton Administration urged and
sometimes forced banks to make loans they otherwise would not have
made. Some of this was based on the myth of “redlining.” Supposedly,
according to the Leftists, banks deliberately did not make loans in
certain parts of their community, which were mainly Black and
Hispanic, because they hated Blacks and Hispanics. Of course, this
lack of mortgages in the inner city was based on the fact that more
Blacks and Hispanics were poor, unemployed, had crappy credit or were
without the means to make a down payment on a house. All relevant
statistics showed that this was true - the discrimination was
economic, not racial.

But because of Leftist insanity, banks were encouraged, intimidated,
or forced into making loans to more Blacks and Hispanics. These loans
were on crazy terms. No down payment was necessary - the loan was for
100% of the value of the house. Also, and you might find this hard to
believe, the mortgagee didn’t even have to show that he or she had a
job. Basically, a homeless Black street person could walk into a bank
and buy a house as long as it was in a certain neighborhood. In this
situation, many, many people purchased more “house” than they could
afford.

Well, then what happened? The unemployment rate rose. The price of
living rose. The housing market bubble burst. People who bought a
house for $100,000 with a 100%, zero-down mortgage suddenly saw the
value of their house sink to $80,000. They owed more money than the
house was worth. What did they do? They walked away from it and the
mortgage. Also, over time, all the people who were loaned money
without having jobs began to have trouble making their mortgage
payments. People who tried to sell their house ended up still owing
money on the mortgage even after giving the full sales price to the
mortgage company, money they couldn’t pay. All these problems slowly
added up, and then suddenly exploded this week.

So, who cause all the current economic problems? The Left, in its
insane desire to appease its minority pets and destroy the free
market. The free market, for all its faults, is what built this
country into an economic powerhouse. It is a success and has been of
great help to White people throughout the history of this country. It
is one of the last bastions of freedom in this country, since the Left
controls all our media, academia, government and bureaucracy. The Left
would love Marxist-style socialism, which would allow it to control
every transaction made in this country. Imagine the future of this
country if that ever happened.