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
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
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.
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
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
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
Is Obama willing to speak hard
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?
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.
CREATORS SYNDICATE, INC.
Patrick J. Buchanan
no introduction to VDARE.COM readers;
his book State of Emergency: The Third World Invasion and Conquest of America, can be ordered from Amazon.com. His latest book
Hitler, and "The Unnecessary War": How Britain Lost Its
Empire and the West Lost the World,
Paul Craig Roberts.