As the subprime mortgage crisis continues to wreak havoc on our economy and the stock market plummets, Barack Obama and the Democrats have consistently and relentlessly levied the blame for the current situation on the Republicans and President Bush’s economic policies.
Just last week in Denver, Obama remarked, “They said they wanted to let the market run free. But instead they let it run wild. And in the process, they’ve trampled on our American values of fairness and balance and responsibility to one another.” It would be interesting to know who Obama was referring to when he references “they.” One would assume that he is referring to Bush and the Republicans; however, the failings of the last Democratic presidential administration must be considered in order to get to the root of the problem.
At the twilight of the Clinton administration in the late 90s, the stock market was booming and the economy was thought to be in excellent shape. As a result of this, Bill Clinton’s presidency has generally been regarded as a successful one, at least in terms of economics. However, a September 30, 1999 article in the New York Times entitled “Fannie Mae Eases Credit To Aid Mortgage Lending” points to the origins of our current crisis.
The article details a plan by Fannie Mae to increase home ownership rates among low income families by easing the credit restrictions for obtaining a home loan.
“The action…will encourage banks to extend home mortgages to individuals whose credit is not generally good enough to qualify for conventional loans,” the article states. Sound familiar? The article continues, “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.”
Naturally, the deregulation and laissez faire economic policies traditionally associated with conservatives have been blamed as the main contributor to the subprime mortgage crisis. I suppose it is easy in an election year for Obama and the Democrats to blame an unpopular president for the current economic struggles, even if such criticism is inherently short-sighted. For all the talk about the failings of economic deregulation, it appears the Clinton administration’s intervention in the late 90s served as a harbinger for the subprime mortgage crisis.
Obama can attempt to distance himself from the economic agenda of the Clinton Administration, as he has done in the past; however, his political ties to former executives at Fannie Mae are dangerously contradictory to his rhetoric about the need for change in Washington.
James A. Johnson, Fannie Mae’s CEO from 1991 to 1998, was originally selected by the Obama campaign to lead his vice presidential search team and has secured over $200,000 in donations to Obama’s presidential campaign. Unfortunately for Obama, the ties don’t end there. Franklin Raines, Johnson’s successor as CEO at Fannie Mae who left the company in disgrace after a $6.3 billion accounting scandal, advised Obama on mortgage and housing policy this summer, according to a July 16th Washington Post article. Who better to advise Obama on the mortgage crisis than the man who bears a great deal of responsibility for it?
Obama campaign operatives have pointed to John McCain’s ties to Fannie Mae lobbyists in an attempt to defend themselves, as if to say, “Everybody’s doing it.” What Obama can’t argue, however, is that the two chief executives of Fannie Mae during the time the subprime mortgage crisis was in its infancy have both been linked to his presidential campaign this year.
The next time you hear Barack Obama on the campaign trail blaming President Bush and the Republicans for the economic crisis, just remember who his friends are.
Joseph Goddard is a senior political science and economics double major. He can be reached for comment at [email protected].
