John McCain offers President Bush an answer to the economic puzzle: The Mexico solution

President Bush's declaration this morning that "Congress must act" brought along this question: Really?

John McCain says not necessarily. The president can take care of a big chunk of the nation's economic problem if he just acts "creatively."

McCain, who has been nudging into the issue and backing out since last week, came up with the idea that the president can take one giant step toward calming the economy with the stroke of a pen.

His idea showed up in the Huffington Post, courtesy of the Associated Press.

It goes like this:

The Treasury Department, under Bush's instructions, can "use its exchange stabilization fund 'as creatively as possible' to backstop the market crisis," the AP reported on McCain's comments to a business roundtable in Des Moines.

An interesting idea.

As the Wall Street Journal points out, that's the same obscure fund that was used in 1995 when the Clinton administration stepped in and helped bail out the Mexican economy.

-- James Gerstenzang

Photo credit: Charlies Neibergall / Associated Press

Comments

[Big Daddy]

Good for Senator McCain...! That is a jolly right brilliant idea...!

That is exactly what is needed in the interim...

[Mtobias]

“Senator Obama and his allies in Congress infused unnecessary partisanship into the process,” Mr. McCain said, before adding in almost the same breath: “Now is not the time to fix the blame. It’s time to fix the problem.”

Why does he have no shame?

He is a dishonorable person. POW or not.

[chris]

Come with me here and let us take a trip through time...

Ok, Jimmy Carter and the democrats passed the Sub-Prime Mortgage loans in the 70's to help low-income familys get houses. It was called the (CRA) Community Reinvestment Act (google it) which wasn't a bad idea if done right. It helped alittle but in 1995 Bill Clinton expanded the CRA by placing more requirements on it that forced banks to offer $1 Trillion in "Sub-Prime" loans or face penalties (Goverment Sponsored Security).

Bear Stearns, Fannie Mae would guarantee mortgages then sale that debt to Banks and investors. So, the more mortgages issued the more money Fannie Mae makes. They would tell the banks to issue the "guaranteed" loans with 'no money down' 'no credit' or even 'bad credit', as long as they paid the interest.
-----------------------------
So, home owners started to grow and so did the price of housing. BIG PROBLEM!! Between 2004-2005 interest rates shot up and so did gas prices so paychecks got squeezed. Borrowers stopped paying so banks stopped lending and the sub-prime market collapsed in 2007. Foreclosures piled up, no buyers, only sellers. Home prices started falling and even more borrowers stopped paying and Fannie Mae "guarantees' became worthless because they kept over stating their assests.

Banks collapsed due to worthless Government Sponsored Securities issued by Fannie Mae. So, here we are today....
---------------------------

Why is the Community Reinvestment Act to Blame? Before CRA expansion home prices increase with inflation but, after the CRA, home prices became unhinged from inflation. CRA caused home prices to rise too fast which caused this 'bubble' everyone was talking about.

Did this have to happen? NO! Someone tried to stop it in 2003 and you will never guess who....The Bush Administration wanted "...regulatory overhaul of the housing finance industry which would create a new agency withen the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are two largest players in the mortgage lending industry." But, the Democrats stopped it, siting "...it would diminish their ability to finance loans for lower-income families."

Someone else tried to stop it in 2005 and you will never guess who...John McCain ...LOL!!! He co-sponsored a bill called "The Housing Enterprise Regulatory Act of 2005" (google it please www.govtrack.us Bill S-190). The bill would regulate Fannie Mae and Freddie Mac yet once again, the Democrats blocked it. It came back in 2007 but still no luck, because Fannie Mae had Friends in the Senate....

Chriss Dodd (D-CT) and Barack Obama (D-IL) covered Fannie Mae's backside and you will never believe who Obama selected to help choose his VP running mate, Jim Johnson - [CEO of Fannie Mae (1991-1998) etc...] who quit Obama's campign in June 2008 after he came under-fire. And you will never guess who Obama gets economic advice from, Franklin Raines - [Carter Administration (1977-1979 when CRA was first enacted) Vice Chairman Fannie Mae (1991-1996 when CRA was first expanded) CEO of Fannie Mae (1999-2004)] who resigned due to accounting irregularities.

Obama recieved FOUR-TIMES more money from Fannie Mae per year than any other senator over the last 20 years (49 Times less than John McCain). And you will never guess who worked at a law firm (Miner, Barnhill & Galland) that sued banks for not issueing enough Sub-Prime loans....Yes, Barack Obama.

[ObamaBidenNOW]

In a few weeks we will make a choice that will decide our future. I follow a economist named bob proctor who has called the top and bottom of every market crash since the 70s correctly. He perfectly predicted the current real estate market meltdown ,and the picture he paints about what will happen in the next couple years Is terrifying. He thinks it will be worse then the great depression. Banks in the US are going under one after the other. Country wide the largest morgage bank in the world Bear Stearns and Lehman brothers , and Merrill Lynch which are 3 out of the top 5 wall street firms. And now Fanny and Freddy which hold 50 percent of the home loans in the United States. The goverment took them over because they are essentially bankrupt. If they didn't the entire financially system would virtually shut down, the stock market would crash And we would suffer beyond what any of us have seen before The future of these companies will fall into the hands of our next president
Bush just like Mcain doesn't understand the economy.

That not just my opinion its his own words. Not only does he not understand how to fix it
He does not understand exactly what is broken. Its no surprise that he doesnt. The people that make up these
securities use complex math models very few people understand.
Bush and mccain both can take the credit for this mess since they helped deregulate the laws that were protecting us.

Bush's economic advisor Phil Graham wrote the deregulation bill that allowed banks take risks with all of our future.
Now Phil Graham is the head of mccains economic policy ,and mccain wants to make him the next secretary of the treasury.
No one in this country can afford for that to happen. The last time bush met with his economic advisors was in march. He either didnt realize or didnt care that anything was wrong. Phil Graham had the guts to say we are in a mental recession after he helped create the worst economy in our lifetime.
It will take the best and brightest minds in the world to get us out of this nightmare. As bad as bush has done mccain would be
incredibly worse because things are in much worse shape. The next president will not inherit a surplus like bush did but a tanking economy and a 11,600,000,000,000 deficit. Most of Bush created and it will take decades to pay it back.
If you do what you have always done then you will do get what you have always __________

When it comes to policy bush and mccain are the same 90 percent of the time.
So why are the polls even close then ?

The chairman of mcains campaign recently said that people don't vote on issues

they vote on a personality composite which means. He is trying to sell you personality instead of results.
He believes people will vote against there own self interests.

Lets teach him we are smarter then that .
Hold them accountable now while it will still help
Elect Obama Biden 2008

[Alec]

Well here you have it from the horse's mouth. Note the date below!

NEW YORK TIMES

September 30, 1999

Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES

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.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime m arket went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings

[RRG]

John McCain says not necessarily. The president can take care of a big chunk of the nation's economic problem if he just acts "creatively."

Hasn`t this administration been creative enough with their accounting?

He would unilaterally solve the largest "perceived" economic crisis in modern history with one stroke of the pen.

This is not a leader`s perspective.

"He sidestepped one interviewer during the day who asked whether he would suspend his campaign once again. "I'll do whatever is necessary and whatever my Republican colleagues and the administration and others ask me to do," McCain replied"

Where is the American people in that comment?

[John D.]

So, Sen. McCain is suggesting we bypass that pesky little thing known as the will of the people. Just use the power of the president to take a giant step toward socialism? I used to think there was a difference between McCain and Obama. Now I'm not so sure.

[Catherine A. Piraino]

JUST A THOUGHT: As opposed to trying to solve the problem from the top, i.e., giving money to large organizations to trickle down throughout the country with all the corresponding complexities, has the thought occurred to anyone to distribute the money directly to taxpayers. The taxpayers will then pay taxes on the money, payoff their home loans and credit card debt, invest the money, improve their properties, go to school, etc. All of these things will help the economy and change the taxpayer's life forever.

It is so simple that there must be something wrong with it, but I can't think of any reason why it wouldn't work. Distributing money to each taxpayer would be a daunting task, but we get mail from the government every day. Because of the complexity of this issue, I can only hope that all of the confusion and complexity of the problem is such that the simple solution is right before our eyes, but we are not prepared to see it.

I do know that, if it is tried and if it works and there isn't something inherently wrong with the plan, whomever suggests it will be loved and adored by the people of this country. I doubt that the public would be against such a plan, unlike big money makers who see a perfect opportunity to become more affluent at our expense pulled out from under them and they would be very angry.

[Stan2008]

Media conservatives baselessly blame Community Reinvestment Act for foreclosure spike

The law for minority lending did not cause the current economic crisis. It was mostly caused McCain's financial adviser, "Foreclosure" Phil Gramm. Traders were betting (futures trading) that subprime loans would or would not end up in disclosure.

Goldman Sachs made 4 billion in 2007 by betting on foreclosure, most bet the opposite. (see below for more)

The media have blamed the Community Reinvestment Act (CRA) for the current financial crisis -- when, in fact, the CRA does not apply to institutions making what some experts have estimated to be the vast majority (80%) of troubled loans underlying the crisis.

The president of the Federal Reserve Bank of San Francisco earlier this year said the CRA has actually increased the volume of responsible lending to low- and moderate-income households, as Center for American Progress senior fellow Robert Gordon noted in an American Prospect blog post.

http://tinyurl.com/3sjcfj

"Lurking in the background of this weekend's collapse of two of Wall Street's biggest names, is a $62 trillion segment of the $450 trillion market for derivatives that grew huge thanks to John McCain's chief economic advisor, Phil "Americans are Whiners" Gramm. That's because in December 2000, Gramm, while a U.S. Senator, snuck in a 262-page amendment ("The Commodity Futures Modernization Act") to a government re-authorization bill (7,000 plus pages) that created what is now the $62 trillion market for credit default swaps (CDSs)." CDS is futures trading.

http://tinyurl.com/56rkcb
http://tinyurl.com/48bnvc