On Mar 21, 7:56*am, wrote:

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Who is to blame for the economic disaster that has befallen us?

Systemic Failure

As the U.S. financial crisis broadens and deepens, wiping out the
wealth and savings of tens of millions, destroying hopes and dreams,
it is hard not to see in all of this history's verdict upon this
generation.

We have been weighed in the balance and found wanting.

For how did this befall us, save through decisions that brushed aside
lessons that history and experience had taught our fathers?

It all began with the corruption called sub-prime mortgages.

The motivation was not wicked. Democrats wanted to raise home
ownership among African-Americans from 50 percent to the 75 percent of
white folks. Rove Republicans wanted to do the same for Hispanics.

Banks were morally pressured by politicians into making home loans to
folks who could not remotely qualify under standards set by decades of
experience with mortgage defaults.

Made by the millions, these loans were sold in vast quantities to
Fannie Mae and Freddie Mac. There they were packaged, converted into
mortgage-backed securities and sold to the big banks. The banks put
scores of billions of dollars worth on their books and sold the rest
to foreign banks anxious to acquire Triple-A securities, backed by
real estate in America's ever-booming housing market.

Computer whizzes devised exotic instruments -- derivatives, which
could soar in value, making instant multimillionaires, but also
plummet, based on rises and dips in the underlying value of the
paper.

Came now young geniuses at AIG to insure the banks against
catastrophic losses, should the U.S. housing market crash. As the risk
was minuscule, premiums were tiny. Payouts, however, should it come to
that, were beyond AIG's capacity.

In AIG's Financial Products division, based in Connecticut and London,
brainiacs were creating other exotic instruments, such as credit
default swaps to guarantee against losses and insure profits. To keep
these wunderkinds at AIG, they were promised million-dollar retention
bonuses.

Who kept the game going?

The Federal Reserve, by keeping interest rates low and money gushing
into the economy, created the bubble that saw housing prices rise
annually at 10, 15 and 20 percent.

As the economy grew, however, the Fed began to tighten, to raise
interest rates. Mortgage terms became tougher. Housing prices
stabilized. Homeowners with sub-prime mortgages now found they had to
start paying down principal. People losing jobs began to walk away
from their houses.

Belatedly, folks awoke to the reality that housing prices could go
south as well as north, and all that paper spread all over the world
was overvalued, and a good bit of it might be worthless.

And, so, the crash came and the panic ensued.

Who is to blame for the disaster that has befallen us?

Their name is legion.

There are the politicians who bullied banks into making loans the
banks knew were bad to begin with and would never have made without
threats or the promise of political favors.

There is that den of thieves at Fannie and Freddie who massaged the
politicians with campaign contributions and walked away from the
wreckage with tens of millions in salaries and bonuses.

There are the idiot bankers who bought up securities backed by sub-
prime mortgages and were too indolent to inspect the rotten paper on
their books. There are the ratings agencies, like Moody's and Standard
& Poor's, who gazed at the paper and declared it to be Grade A prime.

In short, this generation of political and financial elites has proven
itself unfit to govern a great nation. What we have is a system
failure that is rooted in a societal failure. Behind our disaster lie
the greed, stupidity and incompetence of the leadership of a
generation.

Does Dr. Obama have the cure for the sickness that ails the republic?

He is going to borrow and spend trillions more to bring back the good
old days, though it was the good old days that brought us to the edge
of the abyss into which we have fallen. Then he is going to spend new
trillions to give us benefits we do not now have, though the national
debt is surging to 100 percent of the Gross National Product, and may
reach there by 2011.

Is Obama willing to speak hard truths?

Is he willing to say that home ownership is for those with sound
credit and solid jobs? Is he willing to say that credit, whether for
auto loans, or student loans, or consumer purchases, should be
restricted to those who have shown the maturity to manage debt -- and
no others need apply?

"Avarice, ambition," warned John Adams, "would break the strongest
cords of our Constitution as a whale goes through a net. Our
Constitution is made only for a moral and religious people. It is
wholly inadequate to the government of any other."

In this deepening crisis, what is being tested is not simply the
resilience of capitalism, but the character of a people.

http://www.humanevents.com/article.php?id=31154