Occupy Wall Street poses election year liability for Democrats

Occupy protesters celebrated May Day, the traditional labor and communist holiday, with spasms of violence across the country on Monday. According to Buzz Feed, “Black Bloc” protesters in New York, the cradle of the Occupy movement, attacked photographers and tried to take their cameras. The New York Daily News reports that the NYPD arrested 86 protesters on charges “ranging from disorderly conduct to assaulting cops.”

On the West Coast, there was even more violence. In Oakland, police used tear gas and “flash bang” grenades to break up demonstrations and arrested at least 25 protesters according to CBS News. In Seattle, the violence seemed to be the worst as Occupiers dressed in black broke windows, vandalized cars, blocked traffic and did extensive damage to the federal courthouse MSNBC reports.

In Cleveland, protests were canceled after five members of Occupy Cleveland were arrested by the FBI for plotting to blow up bridges. The Plain Dealer reports that the men are anarchists who were part of the Occupy encampment on Cleveland’s Public Square. One of the men had been arrested with others in the Occupy movement for disrupting a Cuyahoga County foreclosure sale in March.

As the Occupy movement reawakens, it is becoming more of a liability for Democrats. A Quinnipiac poll from November 2011, the end of last year’s protest season, found that registered voters disapproved of the Occupy movement by a margin of 39 to 30 percent. A further 30 percent were undecided, but if the violence becomes more pronounced it is likely that more voters will turn against the Occupiers.

The problem for Democrats is that President Obama and many other prominent party members have backed the movement since its inception. Democrats have defended the movement as similar to the Tea Party, which has been linked to virtually no violence, and expressed support for the Occupiers and their goals. Democratic support for the movement continued even after protests turned violent in New York and elsewhere across the country.

In an ABC News interview from October 2011, President Obama responded to the protests saying, “The most important thing we can do right now is those of us in leadership letting people know that we understand their struggles and we are on their side, and that we want to set up a system in which hard work, responsibility, doing what you’re supposed to do, is rewarded.”

The president also noted in the same interview that “In some ways, they [Occupy Wall Street] are not that different from some of the protests that we saw coming from the Tea Party.  Both on the left and the right, I think people feel separated from their government. They feel that their institutions aren’t looking out for them.”

On another occasion, after being heckled by Occupy protesters, President Obama responded “Families like yours, young people like the ones here today — including the ones who were just chanting at me — you’re the reason that I ran for office in the first place.” A video of the incident is linked by the Weekly Standard.

Similarly, Vice President Joe Biden said in an interview quoted on Talking Points Memo, ““What is the core of that protest, and why is it increasing in terms of the people it’s attracting — the core is the bargain has been breached with the American people. The core is the American people do not think the system is fair or on the level….. That is the core of what you’re seeing on Wall Street.” Biden went on to compare Occupy Wall Street with the rise of the Tea Party.

Even congressional Democrats stated support for the Occupy Movement. Senate majority leader Harry Reid said that “the gulf between rich and poor… has motivated thousands to occupy parks across the country and make their voices heard” according to Politico. Former house speaker Nancy Pelosi told ABC News “I support the message to the establishment, whether it's Wall Street or the political establishment and the rest that change has to happen.”

The Democratic Congressional Campaign Committee posted an online petition supporting Occupy Wall Street. The website says that the petition is a response to Rep. Eric Cantor’s (R-Va.) comment that he was “increasingly concerned by the growing mobs” of protesters. The petition begins, “As Democratic Leader Nancy Pelosi told reporters, ‘The message of the American people is that no longer will the recklessness of some on Wall Street cause massive joblessness on Main Street….’”

The Occupy movement has not returned the Democratic love. Anger at President Obama’s corporate bailouts has been a central pillar of the Occupy movement since its inception. An informal survey of Occupy Atlanta protesters last summer on Examiner.com revealed that more were aligned with Ron Paul than with Barack Obama. As noted earlier, Occupiers also harassed and heckled President Obama at speeches. When Rep. John Lewis (D-Ga.) tried to address Occupy Atlanta last year, he was turned away because the movement was “not about one individual” and recognized “no hierarchy” according to Creative Loafing.

All of this puts Democrats in a difficult position with respect to the November elections. The Democrats have publicly aligned themselves with a movement that is physically attacking businesses and spawning domestic terrorists. As the movement becomes more overtly violent, it is likely to lose even more support among the American people.

If the Democrats continue to stand with Occupy Wall Street as it becomes more violent, they risk alienating independent and moderate voters. If they reject the Occupiers and their violent tactics, they risk alienating the left-wing Democratic base, which is already unhappy with many of the president’s policies. To win their elections, President Obama and threatened Democrats in the senate need to win the majority of independent voters while maximizing the turnout of their base.

Much of the damage to the Democratic base may already be done. A video posted by the Washington Free Beacon shows Occupiers in New York expressing their dissatisfaction with President Obama this week at the May Day gathering. The protesters say that President Obama betrayed them and call him a liar. One man (not on the video) said, “I feel that Obama, especially on the civil liberties perspective, has raped me in the a–.” Another says that he will “never again vote for a Democrat for anything, not even dogcatcher.”

 

Read this article on Examiner.com:

http://www.examiner.com/article/occupy-protests-pose-election-year-liability-for-democrats

Occupy Atlanta back in Woodruff Park

Four months after Atlanta police evicted Occupy Atlanta protesters from Woodruff Park, they are back. With apparently little to no fanfare, a small number of Occupiers and less than ten tents have again taken up residence the downtown Atlanta park.

The new encampment is a far cry from the group that was evicted in October. In mid-October, the activists had set up a thriving hamlet within the confines of what they called “Troy Davis Park” in a nod to the convicted cop-killer who was executed by Georgia in September. At that time, the activists in the park easily numbered more than 100 and scores of tents filled the park. There was a “free store,” a medical tent, and a “free child care” tent. Signs proclaiming “we are the 99 percent” littered the grounds of the park. Visitors were welcomed at tables under a large canopy. The sound of drums permeated the air and protesters marched up and down the sidewalks at intervals. (View photos from the October occupation here.)

In contrast, the new encampment consists of only a handful of tents and three visible occupiers, all men. Two occupiers talked while another played with his dog on the grass. The only sign in evidence, other than scribbled notes on the tents, was one with a rambling message about a “Jewish rebel,” an apparent attempt to link the encampment to Jesus Christ.

One of the occupiers said that he had been a protester during the Vietnam War. The man said that he believed that the U.S. did “need to be in Afghanistan,” but offered his belief that that the City of Atlanta discriminated on the basis of economic status as justification for the presence of the protesters.

As justification for this belief, he said that an Atlanta police officer allegedly arrested him for jaywalking while he was dressed shabbily and had his long hair down. He said that he later did the same thing in front of the same police officer while wearing business clothes with his hair tucked under a hat. On that occasion, he said the officer simply waved at him.

The man said that he had been camping in the park for several months although he did not live there full time because he “like[s] to be indoors.” He did not offer a specific date for when the protesters returned to the park after the Mayor Kasim Reed had them evicted in October. He did say that the current group was very different from the idealists who inhabited the park in the fall. He said that fights now occurred frequently. In October, both police and protesters said that there was no trouble from the Occupiers.

A downtown ambassador wasn’t sure how long the Occupy Atlanta encampment had been back either. He confirmed that the new group was not as peaceful as the original encampment. According to the ambassador, 80 to 90 percent of the new Occupiers were homeless people who spend their time in the park drinking. This often leads to violence. The larger encampment in October prohibited the use of alcohol and drugs. The ambassador did not know if the mayor plans to order the new Occupiers evicted from the park as well.

A spokesman for the mayor was not aware that Occupy Atlanta was camping in the park again. He stated that the group was allowed to be in the park until it closes at 11:00 p.m., but that no overnight camping is allowed. He planned to have Atlanta police officers investigate.

This article was first published on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/occupy-atlanta-back-woodruff-park

Occupy Wall Street’s “One Percent” myth

One of the pervasive myths of the Occupy Wall Street movement is that one percent of the population controls 99 percent of wealth. Conversely, the occupiers, who claim to be among the other 99 percent, are left with only one percent of the nation’s wealth. The truth is available in online data from the U.S. government.

According the IRS, there were 2,196 people with a net worth of more than $1.5 million each in 2004, the most recent year for which data was available. Their combined net worth was $9.7 trillion. According to the 2004 edition of the CIA World Fact Book, the GDP of the United States in 2004 was $10.9 trillion. This works out to only about 88% of the GDP for the top seven percent of the population (using a census estimate of 308,745,538 Americans in 2004). This is a far cry from one percent controlling nine percent of the total American wealth. This is even assuming that all of the wealth of the top seven percent is in the United States when in reality much of it is probably international.

The census data also lists individuals with more than $1.5 million in net worth by state. The 2004 data reveals that Georgia was home to 56 of these high net worth individuals. Ironically, most of the states with the largest numbers of high net worth residents are blue states. Of the states that were home to more than 100 high net worth residents, three states, California, New York, and Illinois are reliably Democratic. One state, Florida, is a swing state, and one, Texas, is an established red state.

The statistic is harder to disprove when it is applied to the world at large because many countries simply do not generate reliable statistics. However, a World Bank poverty report from 2008 shows that poverty rates around the world have been falling since 1980. If the world's poor are getting richer, it would seem that they would also be controlling a larger share of the wealth.  The report also shows that most of the world’s poor live in underdeveloped and authoritarian regions of the world, particularly Africa, central and southeast Asia, and the former Soviet bloc countries of Europe.

Similarly, in the United States the poverty rate has remained consistently between 12 and 15 percent for the past half century according to census data. In most cases, Americans do not stay in poverty. As the St. Louis Fed pointed out in a 2010 article, there is ample movement between income classes in the United States. Americans might be in poverty after graduating from college or while changing jobs or careers, then quickly move to an upper income bracket. Ironically, the U.S. poverty rate was at the highest level in 20 years as the Great Recession, slow economic growth, and high unemployment took their tolls.

The protesters at Occupy Wall Street, Occupy Atlanta, and the other encampments around the country also ignore an important fact: That the top one percent of income earners pays more than their share of taxes. According to IRS data from 2008, the most recent year available, the top one percent of income earners pays 38 percent of all income taxes. The top ten percent of earners pays 70 percent of all taxes. The bottom 50 percent of earners pay only three percent of taxes. By this measure, the U.S. tax system is one of the most progressive in the world.

If the occupiers believe that millionaires are the root of all that is wrong with America, then they should be encouraged by statistics reported in the Wall Street Journal on August 17, 2011. The number of millionaire tax filers declined by 39 percent from 2007 to 2009. The number of filers with more than $10 million declined by 55 percent. The tax contributions of these demographics declined accordingly as well as the recession hit the wealthy. There is some speculation that the number of millionaires may be on the rise as stock markets recover, however.

In the end, even if the one percent statistic is false or unverifiable, it is still a potent propaganda tool. It is easy to understand, easy to communicate, and ubiquitous. As one of the Occupy Atlanta activists put it, regardless of whether the statistic is verifiable or not, he believes it because it should be “obvious” from “what you see.”

As published on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/the-occupy-movement-s-one-percent-myth

Atlanta occupiers look to GOP

On a recent visit to Occupy Atlanta in Woodruff Park, the Atlanta Conservative Examiner recently discovered that many of the activists there are so dissatisfied with President Obama that they are considering Republican presidential candidates in 2012. Although not a statistically valid sample, the candidate who was mentioned the most by the activists was libertarian-leaning Republican, Rep. Ron Paul. Several also expressed interest in pizza executive and talk show host Herman Cain.

The anecdotal data from Occupy Atlanta reflects the same disappointment with President Obama that was recently reported in a poll by Douglas Schoen in the Wall Street Journal. Schoen posted the complete results of the poll on his personal web site. The poll of Wall St. occupiers reveals that the New Yorkers disapprove of President Obama’s job performance and that many may stay home from the polls in 2012 even though they are politically active progressives.

Unlike their fellow occupiers on Wall St., the Atlanta occupiers seem more moderate. Several of the signs around Woodruff Park point out that the activists there aren’t against all corporations or capitalism in general, but that they do oppose the collusion of business and government at the expense of taxpayers.

These reports confirm the earlier polling showing that President Obama’s support is eroding badly. Obama is losing ground in the three demographic groups where he held a heavy advantage in 2008: blacks, Hispanics, and young voters. Two of these groups, blacks and young voters, were heavily represented at Occupy Atlanta.

It is unsurprising that people are becoming disillusioned with President Obama and the Democrats. The president’s vaunted stimulus bill and subsequent economic initiatives failed to budge the unemployment rate and the economy has remained sluggish even though the country technically emerged from the recession in 2010.

Two of Obama’s core demographics, blacks and the young, have been disproportionately hurt by the high unemployment rate. According to CNN, black unemployment, which is over 16 percent, is at its highest rate since 1984. Youth unemployment is at a staggering 48 percent according to the Bureau of Labor Statistics. Both are much higher than the national average.

Far from being an outpouring of support for the Democrats, the occupation movement is an expression of disillusionment in both the Democratic Party and President Obama. Many of the activists realize that it is the Obama Administration that has pursued the majority of the corporate bailouts and even institutionalized “too big to fail” in the Dodd-Frank financial reform law. Likewise, Obama’s numerous connections to Wall St. are well known among the left.

It seems that President Obama has succeeded in unifying America only on the notion that the country is on the wrong track. A new Rasmussen poll shows that 85 percent of Americans no longer believe that the United States is headed in the right direction. That is about as close to unanimous as any poll is likely to get and it reflects deep discontent on both the right and the left.

The path to victory for Republican candidates in 2012 is to focus on economic issues. Virtually the entire country agrees that the U.S. is headed in the wrong direction. Most of these people also believe that President Obama’s policies are not working. Republican candidates should focus on the issues where most people agree rather than on social issues where public opinion is more evenly divided.

Read this article on Examiner.com:

http://www.examiner.com/elections-2012-in-atlanta/atlanta-occupiers-look-to-gop-candidates

A visit to Occupy Atlanta

Protesters on Peachtree (David W. Thornton)

As Occupy Atlanta entered its second week, I decided to see for myself what was going on at Woodruff Park. With my three-year-old daughter in tow, I set out for downtown Atlanta to find out if the local occupiers were as rowdy as the Occupy Wall Street crowd in New York.








My first brush with the activists occurred as I was driving down Peachtree St. toward Woodruff Park. Appropriately enough, as I approached Peachtree and Wall St., I heard drums and saw marchers parading up the sidewalk, accompanied by a bicyclist who was somewhat reminiscent of Grizzly Adams. I snapped a couple of pictures as they passed by and then continued toward the main encampment.







Woodruff Park, a small green space located in the midst of downtown Atlanta, was mostly quiet early in the afternoon. As I approached, the site of scores of tents was contrasted with a light jazz music that seemed to be emanating from speakers around the park. The activists, who probably numbered between one and two hundred, were almost equaled by curiosity seekers and locals enjoying the tables by the fountains or playing chess with oversized pieces. There were also a number of people who appeared to be homeless and may or may not have been connected with the occupiers.



A large tent at the entrance to the park beckoned visitors. Another sign proclaimed the rules: “Love everybody, no alcohol, no drugs, [and] no weapons.” An American flag fluttered in a tree behind the welcome tent. Other facilities including a tent offering free child care, a first aid tent with a sign on the adjacent trash can warning “do not pick from this trash can it is right by the medic station.” A “free store” was a large tarp in the center of the encampment with a few clothing items arrayed. Wal-mart, it wasn’t.







In contrast to reports from other cities, Woodruff Park was not covered with litter. There were protest signs scattered on the ground, but the area seemed clean otherwise. A number of porta-potties were set up on a street beside the park. Police officers and downtown ambassadors, both of which were present in force, said that the protesters had not caused any trouble.







There seemed to be relatively few activists around. Many were sleeping or lounging in the shade. One played plastic bucket drums. On the other side of the park, another activist painted designs on more bucket drums. One small group sat under the trees listening to a young man strum a guitar. Few seemed to pay attention to the sight-seers wandering in their midst.







One of the first activists that I spoke with was a black Marine Corps veteran. He offered one of the few concrete reasons for taking part in the protest. He was upset that his mortgage rate was over seven percent after Congress had given trillions of dollars to bail out Wall St. investment firms and provide capital for banks. Even after President Obama’s mortgage modification program was enacted, the man had still not been able to get his loan refinanced in spite of being charged numerous fees to apply for a new loan.







One man, Logan, held a sandwich board that read, “Close your account now.” I asked what he suggested that people do with their money after they closed their accounts. “Try a credit union,” he suggested. That’s hardly radical. I am a longtime credit union member myself. Mainstream consumer activists like Clark Howard and Dave Ramsey would probably approve as well.







Another sign that the activists were not totally sour on corporations and capitalism was the presence of an ice cream vendor just outside the encampment. Although not exactly doing a brisk business on the pleasant afternoon, Bo, the operator of the stand, said that the occupiers were friendly and recognized that he worked for a small, local company. One might wonder how big and successful or in how many cities a company must be before it becomes evil and greedy.







Signs hinted at a smattering of progressive causes. A hand-lettered sign proclaimed the park to be “Troy Davis Park,” a reference to the convicted cop-killer executed by Georgia recently. Another sign said “MARTA cop killed Joetavius Stafford.” Yet another decries “four years of education [and] ten years of debt.” Anti-war messages were sprinkled throughout the encampment, as were signs requesting donations.







A tall, black man who wore a paramilitary uniform drew my attention. I recorded a video of him talking to several people and explaining what the activists believe. Later, he said that his name was Wilgeens Rosenberg. Rosenberg said that he was general in Haiti Sovereignty Initiative, which opposes U.S. and U.N. involvement in Haiti. Indeed, a common thread among all the activists was an isolationist bent, opposing the war in Iraq and Afghanistan as well.







I asked Rosenberg, the most outspoken of the activists, if he knew the origin of the occupier statistic that one percent of the population controls 99 percent of the wealth. He acknowledged that there was probably no factual basis for the claim, asking me what agency would compile such data for the U.S., let alone the world, but said that he believed it nonetheless because it seemed “obvious” from “what you see.”

The Atlanta occupiers seem somewhat more moderate than their Wall St. counterparts. Two signs seemed to capture the mood. One said, “I’m not against corporation[s] just greed.” The other read “separation of corporation and state.” Most of the activists that I spoke with did not seem to be angry at capitalism itself. Rather they were angry at the collusion of government and capitalism, what John Stossel calls “crony capitalism.”

The activists were not campaigning for Obama. In fact, most of them seemed to feel disappointed in President Obama. They were aware of Obama’s numerous connections to Wall St., and did not seem placated by his health care reform, which was not even mentioned. To my surprise, more often than not they expressed interest in Republican candidates for president in 2012. In particular, several seemed interested in Ron Paul and Herman Cain.

I only witnessed one altercation while at the encampment. This was between a conservative visitor and another man who identified himself as a Democrat. Much of the exchange was captured on video. Even this was not violent, but merely a spirited discussion.

On economic issues, the activists at Occupy Atlanta seem to hold views similar to the Tea Party. On social issues they remain left of center, which probably explains the fascination with Ron Paul. Paul melds conservative economics with libertarian social policies, which are similar to leftist positions in many cases.

By and large, the occupiers are not a pro-Democratic Party group. Their existence is symptomatic of the failure of the president’s policies to resolve the economic crisis. While they are a left-leaning group, many of them seem open to new ideas and new faces. Even though many, perhaps most, of the occupiers will vote Democratic, the occupation movement signals dissatisfaction among the Democratic base and is a harbinger for the party of problems to come.

Read this article on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/a-visit-to-occupy-atlanta

Slideshow of pictures from Occupy Atlanta:
http://www.examiner.com/conservative-in-atlanta/occupy-atlanta-picture-1

Occupiers vs. the Tea Party

The recent movement to “occupy” Wall St. and various American cities is being likened to a progressive Tea Party by many on the left and in the media. There are important distinctions between the three-year-old Tea Party movement and the three-week-old occupations.

The most obvious is that the Tea Party is a right-wing movement made of conservatives and libertarians. These are people who do not normally take part in demonstrations. Conversely, the left-wingers that make up the occupation movement will typically demonstrate at the drop of a hat. Over the years there have been leftist demonstrations to save the whales, encourage a nuclear freeze, end global warming, save the spotted owls, and end whichever war is going on at the time, among many others.

Along the same lines, the Tea Partiers go home. Most of them have jobs and families to go home to. Many of the occupiers seem to be young people who recently graduated and have not been able to find jobs. This explains why they are able to stay in their occupation zones for so long. The occupations started on September 17, approximately three weeks ago, and they show no signs of going home.

The Tea Party also offered concrete ideas for reform in contrast to the occupiers, who don’t seem to know what they want, other than to rail against Wall St. and capitalism. The Tea Party advocates cuts in government spending and a return to a more limited role of government. In particular, they opposed the passage of Obamacare and press for its repeal.

The occupiers have yet to find a voice, however. The Occupy Wall St. web site itself contains a discussion titled “Occupy Wall St. demands are abstract.” The “about” section of the site says that “our species and our world are in crisis” and that the “U.S. has an important role to play in the solution,” but it doesn’t say what they imagine the solution to be.

Ominously, another difference in the Tea Party and the occupiers is the propensity for racism and violence. Arrests at Tea Party events were rare if they happened at all. Already, however, there have been arrests at the sites of many occupations including Wall St., Des Moines, San Francisco, and Seattle. Although there is an Occupy Atlanta encampment in Woodruff Park, thus far no arrests have been reported there.

The hacker group Anonymous has threatened to attack financial company computer systems on behalf of the occupiers after violence between protesters and police broke out when the occupiers decided to stop traffic. There have been more direct threats of violence as well. Politico reports that state legislators in New York received an email message that threatened to “kill the wealthy.” The email, which contained talking points from the Occupy Wall St. movement such as the claim that one percent of the population controls 99 percent of the wealth, said that if New York did not renew the surtax on millionaires that “I’m going to pay a visit with my carbine to one of those tech companies you are so proud of and shoot every spoiled Ivy League [expletive] I can find.”

Racism at Tea Parties was an oft made charge, but there was very little evidence to back up the claim. On this the occupy movement is also different. Several videos have surfaced of occupiers making anti-Semitic comments and voicing conspiracy theories about how the “Jews control Wall St.”

There may be racism against some minorities as well as anti-Semitism. At the Occupy Atlanta encampment, the protesters refused to allow John Lewis, a U.S. congressman and hero of the civil rights movement, to speak. In fairness, this might not have been racism as much as disenchantment with the political process and political parties in general. Regardless, the video of the incident, with occupiers repeating the words of each speaker en masse, is amusing to watch.

In general, while the Tea Party is largely mainstream in their composition and beliefs, the occupation movement is made of left-wing radicals that most Americans would find out of the mainstream. While Tea Partiers typically say the Pledge of Allegiance and sing the “Star Spangled Banner,” the occupiers seem to feel ill at ease in America. This is an obvious explanation for the phrase “occupy Wall St.” They are in the midst of an ideological war against the rest of the country. This includes the current Democratic administration, which is probably fooling itself if it thinks that the occupations will help its reelection campaign.

Oh, and by the way, about that claim that one percent controls 99 percent of the wealth? It isn’t true. You can look it up for yourself here.

Read this article on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/occupy-movement-vs-the-tea-party

Why the Wall Street Bailout Is a Waste of Money

On October 3, 2008, President Bush signed into a law the Economic Stabilization Act. This $700 billion law was touted as the only way to rescue the US economy from certain collapse. Instead, President Bush and Congress have likely only delayed the inevitable. The law does nothing to resolve the underlying problems that are threatening our economy.

Candidates from both parties have been quick to condemn Wall Street greed for the implosion of a growing number of banks and investment firms. These companies made billions of dollars in the subprime lending market for years before the bubble of inflated real estate prices began to burst. If we look deeper into the history of subprime lending, an industry in which I worked at one time, we find that while greed certainly played a role, it is not the only factor in the crisis.

Subprime lending as we know it today did not exist prior to 1977. In that year, Congress passed the Community Reinvestment Act, which was signed into law by Jimmy Carter. The law was intended to prevent racial discrimination in lending and to prevent the “redlining” of low-income neighborhoods. Activist groups used the law to challenge regulatory approval for new bank ventures when banks did not comply satisfactorily with the CRA.

The act was significantly strengthened by President Bill Clinton in the 1995. His administration stepped up enforcement of the act by setting performance-based goals. The Clinton Administration also encouraged banks to relax rules for income verification of borrowers and provide for lower down payments. The new CRA also allowed banks to bundle mortgages into securities, which could then be sold to other banks instead of being held by the original lender.

The Clinton Administration also pressured Fannie Mae and Freddie Mac, quasi-governmental companies, to buy more of these mortgage backed securities. In 1999, Fannie Mae CEO Franklin Raines, now an Obama advisor, told the NY Times “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.'' Fannie Mae further reduced the credit requirements of the mortgages that it purchased as it increased its share of the mortgage market.

The US government directly encouraged the banks to make risky loans with the implicit guarantee that they would be bought by Fannie Mae and backed by the government. Community groups pressured banks to lend more money to low-income borrowers under the threat of bad publicity. Banks did not resist when they found that money was too easy to make in the subprime market in a time of rapidly rising real estate values. By 2007, Fannie and Freddie owned or guaranteed about 40% of the US home loan market. Many banks were heavily invested in Fannie and Freddie stock as well as mortgage backed securities.

The fundamental flaw of the Economic Stabilization Act is that while it includes money for the US Treasury to buy bad mortgages from troubled banks. What it does not do is to remove the impetus that sparked the subprime frenzy in the first place. The Community Reinvestment Act is still law and many of the same people, in both government and banks, are still wielding power.

The Democratic Party is heavily involved in the crisis due to their goal of providing more affordable housing for low-income families. Chris Dodd, chairman of a senate committee that oversees banks, resisted attempts to reform Fannie and Freddie in 2003 and 2005. Dodd also received the most money of any congressman from Fannie and Freddie employees and PACs. Barack Obama, the second highest recipient, includes former Fannie and Freddie CEOs, Jim Johnson and Franklin Raines, among the economic policy advisors to his presidential campaign. Obama also worked with ACORN, one of the community activist groups that pressured banks to lend more money in low-income areas or be harassed under the CRA.

On the other hand, the Republicans did halfheartedly attempt to reform the system. President Bush noted as far back as 2001 that the size of Fannie and Freddie was “a potential problem.” In both 2003 and 2005, Republicans introduced the Federal Housing Enterprise Regulatory Reform Act. In both cases, Democrats threatened a filibuster over the ability of the GSEs to contribute to groups like ACORN. In spite of a Republican majority in both houses, the bill went nowhere.

With the Democrats virtually certain to regain control of both houses of Congress and likely to capture the White House as well, it is highly unlikely that there will be any meaningful reform to the CRA. If the government continues to pressure banks to make loans to people who cannot repay them, then we will certainly revisit the mortgage crisis. More bailouts will be required until the Treasury has no money left. Higher taxes to generate revenues would likely cause the economy to slow further.

As in Ayn Rand’s Atlas Shrugged, the government and the community activists essentially became parasites that attached themselves to the financial sector, which willingly went along with the scheme. Money was sucked from the banks until the bubble burst and they started to fail, resulting in the present crisis.

To further complicate the situation, two other bailouts are already appearing on the horizon. Medicare is projected to be bankrupt by 2019. Social Security will follow it into insolvency in 2041. Either large tax increases or large benefit cuts will be required to keep the programs solvent. These bailouts will be on top of additional spending proposed by congress for programs such as universal health care.

If we are to avoid an economic collapse, there must be fundamental change in the attitudes of Americans. We should, to paraphrase a great president, ask not for handouts from our government, but ask that our government put a stop to spending on programs not authorized by the Constitution. We must return to the days before the New Deal and the Great Society when Americans did not look to the government to provide for their financial security.

Sources:
http://www.answers.com/topic/community-reinvestment-act
http://www.dollarsandsense.org/archives/1997/1197campen.html
http://www.heritage.org/Research/Economy/HL516.cfm
http://pajamasmedia.com/rogerkimball/2008/09/29/who-caused-the-biggest-financial-crisis-since-the-great-depression/
http://query.nytimes.com/gst/fullpage.html?res=9c0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=all
http://www.marketwatch.com/news/story/text-economic-rescue-bill-official/story.aspx?guid={6945E610-2654-4C44-87ED-3DA763EE0200}&dist=hplatest
http://faustasblog.com/?p=6567
http://www.liveleak.com/view?i=ae3_1222100943
http://wharrison55.newsvine.com/_news/2008/09/20/1890073-bush-and-mccain-tried-to-reform-freddie-fannie-democrats-declined