Right on Walter.

do people want to vote in a democratic president when it sounds like the demos have bankrupt the country?

It is ironic that the party that is most culpable in this debacle is going to be rewarded by the voters with total controll of the Gov. Makes you wonder who is the dumbest.

What malarky! First, when he says that, “The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans.” He is saying something that is unequivocally demonstratedly as false. We KNOW that lending institutions in a free market *would* take on high-risk loans because they *did* do just that.

The crisis was driven by mortgage brokers who were not subject to the Community Reinvestment Act and made loans which they sold to *investment banks*. These loans were created and sold in an unregulated environment. These investment banks packaged the mortgages into securities that were intended to isolate the risk. It was the free-market demand for these securities that which drove this. The problem with Fannie and Freddie is that they followed the rest of the market and purchased these securities.

That’s the real cause. Rating agencies thought these were safe securities which is why there was a demand for them.

And as publicly traded companies, they are in fact subject to GAAP accounting.

Couldn't have said better myself. This is the best analysis of how we got here. Now the question is what comes next? Do the American people have the will to throw the bums out, or will it be business as usual when the next Cogress reconvenes. The only reason fraud and deception perpetuate is because these corrupt Congressmen and Congresswomen are virtually untouchable in their various districts and their constituents continue to send them back to Washington election after election. You just watch -- the same cast of characters Walter specifies in this article will be right back at it in their familiar chairs in January. The Republicans have no one to blame but themselves for losing control of both houses of Congress. They demoralized their base with their own corrupt judgments and lost the faith and trust of the American people. They got tossed out on their ear. Now with Congress's approval rating less than 10% after this bailout fiasco, who wants to bet that they will be back in power under Speaker Pelosi for the next session. Somehow the public mind set is that this is all George Bush's fault. Stay tuned for a referendum on America's willpower.

Anonymous | 9:44 a.m.:

"We KNOW that lending institutions in a free market *would* take on high-risk loans because they *did* do just that."

BS!! Have you not heard of illegal redlining? Lending institutions were told they were required offer loans to all comers regardless of financial circumstances... or suffer legal action. They could not cordon off the poorer parts of town.

Walter is right.

And three of the Democrats Dodd, Frank, and Waters should not only resign for their stupidity, they should be sued, and made to forfeit their government pensions to help pay for the debacle they helped create.

Just wondering ... since Congress was controlled by Republicans in 2004, and President Bush was seeking more stringent control of Fannie Mae and Freddie Mac, how is Barney Frank to blame for it? Shouldn't part of the blame be placed on the Republicans who did not enact the controls Bush was requesting?

Moving beyond finger-pointing over how we got here, Mr. Williams' thesis would seem to be fatally undermined by the mess we're now in.

There's *tons* of money available. There's so much money available that, when I try to "rent" my money to the financial industry (by depositing it in an interest-bearing account), my "rent" is so puny that my purchasing power doesn't keep up with inflation! If I deposit the price of a dozen loaves of bread, after a couple of years my deposit -- with interest! -- will only buy ten or eleven loaves. And that's before taxes!

Yet the totally free "free marketeers" won't lend anybody the money they have sloshing around, much of which they have borrowed from us (via Our Noble Politicians) at bargain-basement rates.

Sounds like a total failure of Mr. Williams' beloved "free market."

And, as near as I can determine, the only "fix" "free marketeers" have come up with is socialized banking.

-*sigh*-

wrz | 11:38 a.m. Oct. 8, 2008
Anonymous | 9:44 a.m.:

"We KNOW that lending institutions in a free market *would* take on high-risk loans because they *did* do just that."

BS!! Have you not heard of illegal redlining? `
~~~~~~~
It was illegal for BANKS to redline, but MORTGAGE BROKERS were free to lend to whoever they wanted. At least half of the problem were "Alt-A loans" which were mortgages in GREAT neighborhoods made to people with GREAT credit who lied about their income.

Banks didn't need to worry about redlining because people with shody credit could get better deals from the mortgage brokers anyway.

To Boyd @ 12:07 p.m.

The Democraps led by Frank and Dodd blocked it. Have you not heard of filibuster or the threat of one?

Let's get this straight - an act in 1977 bankrupted the country! The same country that was running in the black just 8 years ago. Hmmm, I wonder what happened 8 years ago. Oh, yea, I remember, as WRZ noted, it's because we tried to rid the country of REDLINING and allowed those pesky minorities to own land. Of course it had nothing to do with 8 years of devaluing the dollar via Shrub's tax increases. That's right, tax increases. That is the only thing you can call the trillion plus in unsecured new debt George created with a spend happy Republican Congress. Yep, you're right. I've listened to those mortgage brokers advertising on the radio for 8 years and each time it breaks my heart to hear them as they describe the torture those evil Democrats have put them through forcing them to loan money to everyone on equal basis. I sure wish the good old days would return soon, when money was only available to clean living, hardworking, honest white folks. Oh, wait - with the bailout, it looks like the good old days have returned, just like all the conservatives wanted!

@Anonymous 9:44: I don't think I have ever seen such a mish-mash of misunderstanding of the capital markets, actually put in writing.

To Red:

You are spot on. The big boys got tired of sucking money out of the common folk through manipulation of the stock market. It was just too cumbersome and slow. So they went after us ordinary folk using the credit market. They tried inventing new toys such as tranches, mortgage backed securities, and default credit swaps. But soon decided to forget all that hocus-pocus and go right to their trusted friend, Secretary Henry Poulson for a $700 billion direct handout.

Look, the secret that they don't want out is that 90 to 95% of all mortgages are paid on time and current. One would think that the ordinary lender could live on a mere 5 to 10% bad paper.

I agree totally with you; people do deserve what they get. No one on the left or in the middle is listening these days. They have made up their minds and no matter how stupid his course of action Obama can do no wrong.

Certainly there is blame enough to go around, I hope though that if there is another round of tax cuts, they don't go to the super rich, they are too badly behaved. the CEO's and the like.

What wrong with for once trying a trickle up approach that Obama is advocating? Thats what I'd like to see.

Has everyone forgotten congress has been controlled by Democrats for almost two years now and nothing changed.