-Published in Hurriyet Daily News on March 10th, 2009-
-Hurriyet Daily News'te, 10 mart 2009 Tarihinde Yayinlanmis Makalem-
In America, amid worsening economic signs and increasing unemployment rate, the worst since 1983, such anticipation has geared up the American people that they started to call for ‘real’ and ‘big’ changes louder than ever. Consequently, these deafening calls were heard by the Obama Administration to drive through its agenda even harder, larger and more revolutionarily than even the most liberal lawmakers expected. Two Tuesdays ago, Obama presented sort of a State of the Union stump speech to the joint session of the American Congress packed with optimism, hope and ‘we can do’ rhetoric following a couple of calamity centered bitter tongued talks. The beautifully delivered speech was much liked by a majority of the American people, though since then the economic picture has grow even more grim and the stock market further tumbled to the lowest point since 1996.
Obama told the fretful Congress and American people in that speech: “History reminds us that at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas… It is time to set a new course for this economy, and that change must begin now.” The Secretary of State, Hillary Clinton said last Friday during her Europe tour that: “never waste a good crisis,” and Obama’s Chief of Staff Rahm Emanuel pre-elaborated: “This crisis provides the opportunity for us to do things that you could not do before.”
So the escapade started. The $787 billion stimulus package was signed into law by President Barack Obama after $700 billion for a financial markets bailout, and $410 billion for a proposed end-of-2009 spending plan (omnibus), which includes 8500 earmarks to give hand-outs to Democratic constituencies, that have been on the table to seize such a ‘good crisis’ for a long time. Earmarks have been around for so long, and it is considered a part of the Washington, DC politics. However, it just doesn’t suit an administration that got voted on the very idea of promising to ‘change’ this way of politics and works to negate the whole idea of Obamania. Another $1 trillion is projected to go for universal healthcare. A total of almost $4 trillion deficit forecast is looming for the American Congress and many legislators are not happy with this picture, including many prominent Democrat ones.
The Obama administration’s huge spending spree budget has shows elements of redistribution of wealth patterns that would shift “much of the tax burden from middle- and low-income families to the rich.” It is a very serious budget proposal, and you can bank on it that it has made many Americans angry. Unsurprisingly, Wall Street is getting more agitated and frustrated by it, along with seeing every day one of their goddess bankers is getting grilled, ridiculed and accused of everything that went wrong with the economy, next to innumerable hard working men and women of the sector. “We’ve seen a carnival of greed here, and we need strong financial reform,” Senator Byron Dorgan said; “It can’t shut down all risk, but it certainly must prohibit the greed that we’ve seen.”
Greed is a human nature, and if it is allowed to relish, it will do so, regardless of one’s religion, nationality or country. I suspect, everybody agrees that the Wall Street CEOs and financiers have been voracious in recent years, and they deserved to be punished. What I don’t understand is how they can exclude the lawmakers that have allowed and nourished this terrain. The history of Fannie Mae and Freddie Mac alone shows enough evidence of these legislators’ self-indulgence and ravenousness.
Former President Bill Clinton said, on Sept. 25, 2008: “I think the responsibility the Democrats have may rest more in resisting any efforts by Republicans in Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.” Though it is known also that the Bush White House, during these years, encouraged home owning policies for everyone, including those who do not have enough money to start with.
HOW IT ALL STARTED
As I started research to write this article, I was angry at Bush’s economic policies, and I was more than ready to dump all of the blame on them. I have been very! critical of new President Obama lately, and had some early admonitions about it from my dear friends. Thus, I must have been unconsciously leaning towards blaming Bush over this jumble to show my objectiveness. Though as I researched more, the color of the story also has changed.
This subprime crisis, which is considered to be the cause of the current economic meltdown, seems to have started with the regulatory changes to the Community Reinvestment Act, that “makes possible for banks to make loans to people that were clearly unqualified to receive them.” The place was Chicago, years between 1990-1995, organized by ACORN, the largest community organization in America, defended by lawyers, including Barack Obama. The story is long; what needs to be known is that ACORN won the battle, and across America, this act pushed banks to give these risky loans aplenty, with Fannie/Freddie leading.
And then the story comes to Freddie/Fannie’s spending spree to make sure that there is no one to regulate and impede their great enterprises. To do this, these institutions spent over $200 million hiring firms to lobby the lawmakers and giving campaign donations to these same lawmakers. Apparently the effort was not wasted. There is abundant evidence out on You Tube, web and newspapers archives that would prove “the [lawmakers] have repeatedly fought back [any] efforts to reform the two mortgage banking giants” during the 2000s, and repeatedly denied any problems with these institutions.
“A review of Federal Election Commission records back to 1989 reveals Obama in his three complete years in the Senate is the second largest recipient of Freddie Mac and Fannie Mae campaign contributions, behind only Sen. Christopher Dodd, D-Conn...” who has been in the House for decades. Next we see that former Fannie Mae and Freddy Mac top executives were being hired as top advisers to Obama’s campaign and the transition team.
And there are other well-known actors who helped to deregulate the industry. Before the inauguration, democraticunderground.com had threads to beg Obama not to hire Bob Rubin and Larry Summers. In 1998, today’s Obama’s top economic advisers, Rubin and Summers, along with FED Chairman Alan Greenspan, “[were] proponent[s] within the Clinton administration of the Gramm bill to deregulate the banking industry, and as such, bears responsibility for [today’s] economic failures”. In addition, the new Treasury Secretary Tim Geithner, former head of New York FED, was the man in charge of Wall Street since 2003 and during the meltdown. So America has an economic team, which was formed by some of the biggest economic actors behind the current catastrophe. It would be very unfair to blame these actors ‘only’, though I cannot stop thinking that their mistaken policies should have at least stopped them from being promoted to steer the country’s economy, once more. If I were to be drawn in by the conspiracy theories, I would have said the bankruptcy of Freddie/Fannie and other giant banks was long ago projected and the chief architects of them were being rewarded by the Obama campaign.
So my analogy goes like this: if you leave a little boy in a room filled with chocolates and candies, without any kind of supervision for a long time, it is hard not to imagine of the damage that kid would do to himself. Wall Street, left alone so long, with almost no regulation, and encouraged by the Government, created mortgage institutions to play with risky loans.
Responsible Wall Street executives starting with Fannie/Freddy should be punished, harshly, but as the new president says: ‘Day of reckoning’ is here, and everybody should have a piece of it, no exceptions to those legislatures who oversaw the melting down phase. They, too, should say sorry, and better to leave the theater now. Enough damage has been done already.
If the responsible politicians at the beacon of democracy do not show enough ‘audacity’ and accountability to leave the scene, I am not sure how the citizens of countries like mine, Turkey, with its new and young democracy, lacking watchdog institutions and many transparency regulations would have hope of having conscientious politicians and accountable times. It is time for America to guide and set an example, so the rest of the world would follow, and to tell their own selfish politicians that their ‘days of reckoning’ also have come.
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