The year was 1992 and a group of ultra liberal Senators and Congressman Lead by the pompous Barney Frank decided everyone deserved a home. So that very year they mandated that Fannie Mae and Freddie Mac begin to loan money for housing to less qualified borrowers with higher debt to income ratios than ever before. Add to this both Fannie and Freddie agreed to take lower down payments from these less qualified borrowers. Lawrence B. Lindsey who was a member of the board of governors of the Federal Reserve stated in 1992 that "The regulatory issues in the 1990s will not be limited to safety and soundness, but will increasingly emphasize fairness: whether or not banks are fulfilling the needs of their communities." Sounded like a quota system to those of us looking in from the outside. Barney Frank wants to blame the conservatives on the hill for the failure of both lending institutions. However, he has spent untold number of years blocking all efforts to tighten lending requirements by both Republican law makers as well as the Bill Clinton administration. Clinton now blames these Democrats for contributing to the overall failure of the system. This has been written about extensively but never picked up by the main stream media. Frank even pushed hard to loosen requirements on two and three family homes even though the foreclosure percentage on these properties was already at two to five times the single family default rate. This has been documented as well and was recently reported on by Bill Sammon at Fox News.
Now you have people in homes they can barely or in some cases not afford. We have politicians campaigning and stating that home ownership is at all time high. Knowing the whole time it was a house of cards. The same politicians that took credit for the housing boom are now trying to blame everyone but themselves. Truly amazing isn't it? However, a lot of the people did take advantage of the much more lenient requirements to buy a home. People from all over this great country were making it work until one day energy costs begin to rise unchecked. By unchecked I mean completely out of control. Heating bills were tripling almost overnight. Gasoline was three to four times higher in less than a year. Not a single politician lifted a finger to help the American consumer, not one. We are rescuing oil producing nations from the evils of Tierney and they are latterly raping us in the market place. When we begin to look back at the increased foreclosure rate it runs parallel with the increase in the price of energy. Interesting isn't it? People who were already strapped with a mortgage they could barely afford, now had energy costs that they couldn't afford. Then the business community began to strangle under the insane energy costs. Well if you're a business owner and you have to have energy or fuel to run your business, what gets cut? That's right the worker! Now the person who was already in trouble with they're mortgage and they're own energy problems now is unemployed. Job loss accounts for most foreclosures in the market today and it was clear the energy crisis started the acceleration of the mortgage crisis as we see it today.
Now we have issues with financial institutions collapsing because they did exactly what was "Mandated" by the government. Yes some of these financial institutions got greedy and took advantage of a situation while they could, but when all is is said and done they were simply following orders set forth by our government. They then realized that they were going to be the fall guys for Barney Frank and his cronies. So they pulled all the lending they could off of the market as fast as they could. Only the very best could get a loan. It was time to cover their own butts as best they could. Thus, putting another nail in the economies coffin.
You have the Automakers who for years had been struggling under oppressive union contracts and outdated product designs reeling from high fuel prices. They now have to deal with the tightest lending practices in history. Well it doesn't take a rocket scientist to figure out that an iceberg was about to hit this titanic. Having unforgiving union contracts, high fuel costs to consumers and no available lending capitol for the buying public created the "Perfect Storm" of business disasters.
Fuel consumption was dropping as prices were rising. No longer is the price of oil ruled by supply and demand. It is a traded commodity, which increases its volatility when it comes to pricing. Our economy is based and dependent on reasonable oil prices. The entire collapse of the auto industry was tied to SUV'S and Pick-up trucks. These two products helped pay for enormous Union contracts year after year. Then with out warning fuel goes up 400% in 15 months.
Every problem we have with today's economy can be directly attributed to high energy costs and arrogant self serving government officials.
By: Terry Miller