OPEN LETTER TO BARACK OBAMA ON HIS AUTOBIOGRAPHY “A PROMISED LAND” Part 47 “The financial system was in a meltdown and taking the American economy with it… By 2007, the American economy was not only producing greater inequality than almost every other wealthy nation but also delivering less upward mobility. I believed that these outcomes weren’t inevitable, but rather were the result of political choices dating back to Ronald Reagan”

Former U.S. President Ronald Reagan (L) presents then, president-elect Bill Clinton (R) with a jar of jelly beans during Clinton's visit to Reagan's office in Los Angeles in this November 27, 1992

Ronald Reagan Bill Clinton with a jar of jelly beans in November of 1992. 

January 7, 2021

Office of Barack and Michelle Obama
P.O. Box 91000
Washington, DC 20066

Dear President Obama,

I wrote you over 700 letters while you were President and I mailed them to the White House and also published them on my blog http://www.thedailyhatch.org .I received several letters back from your staff and I wanted to thank you for those letters. 

I have been reading your autobiography A PROMISED LAND and I have been enjoying it. 

Let me make a few comments on it, and here is the first quote of yours I want to comment on:

The financial system was in a meltdown and taking the American economy with it.
 As I saw it, the combination of globalization and revolutionary new technologies had been fundamentally altering the American economy for at least two decades…. By 2007, the American economy was not only producing greater inequality than almost every other wealthy nation but also delivering less upward mobility.
     I believed that these outcomes weren’t inevitable, but rather were the result of political choices dating back to Ronald Reagan. Under the banner of economic freedom—an “ownership society” was the phrase President Bush used—Americans had been fed a steady diet of tax cuts for the wealthy and seen collective bargaining laws go unenforced. There had been efforts to privatize or cut the social safety net, and federal budgets had consistently underinvested in everything from early childhood education to infrastructure. All this further accelerated inequality, leaving families ill-equipped to navigate even minor economic turbulence.
     I was campaigning to push the country in the opposite direction. I didn’t think America could roll back automation or sever the global supply chain (though I did think we could negotiate stronger labor and environmental provisions in our trade agreements). But I was certain we could adapt our laws and institutions, just as we’d done in the past, to make sure that folks willing to work could get a fair shake. At every stop I made, in every city and small town, my message was the same. I promised to raise taxes on high-income Americans to pay for vital investments in education, research, and infrastructure. I promised to strengthen unions and raise the minimum wage as well as to deliver universal healthcare and make college more affordable.
     I wanted people to understand that there was a precedent for bold government action. FDR had saved capitalism from itself, laying the foundation for a post–World War II boom.

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Clinton and not Reagan was responsible for the 2008 housing bubble crisis because of home buying subsidies! Take a look at this quote from the article below:

The sordid tale begins in 1994, with President Bill Clinton and his National Partners in Homeownership. U.S. politicians long have sought to win votes with homebuying subsidies, but Mr. Clinton took the strategy to new levels. “It was unheard‐​of for regulators to team up this closely with those they were charged with policing,” observe the authors.

Book Review: Fannie and Freddie’s Bubble 

By Doug BandowThis article appeared in The Washington Timeson July 25, 2011.

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Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon
By Gretchen Morgenson and Joshua Rosner
Times Books, $30.00, 352 pages

The government did it — cause the economic meltdown. Of course, there were other factors. But in Reckless Endangerment, reporter Gretchen Morgenson and analyst Joshua Rosner point the biggest finger at Fannie Mae and Freddie Mac. These so‐​called government‐​sponsored enterprises (GSEs) used any means — fair or foul — to create a housing bubble. When it popped, economy‐​wide havoc resulted.

Although the financial meltdown lies three years in the past, we continue to pay a high price for past follies. The housing market continues to look for its bottom as the GSEs, now under direct government control, continue to lose money. Bailouts have become the new norm. America faces rising spending, continuing deficits and mounting debt.

It is time to respect George Santayana’s dictum and learn from the past. Reading Reckless Endangerment is a good place to start.

Ms. Morgenson and Mr. Rosner have done what is uncommon: produce a book that is substantive but also readable, even entertaining. The result is a Washington “whodunit” story — the authors report not only what happened, but who did what. They explain: “the American economy was almost wrecked by a crowd of self‐​interested, politically influential, and arrogant people who have not been held accountable for their actions.”

The sordid tale begins in 1994, with President Bill Clinton and his National Partners in Homeownership. U.S. politicians long have sought to win votes with homebuying subsidies, but Mr. Clinton took the strategy to new levels. “It was unheard‐​of for regulators to team up this closely with those they were charged with policing,” observe the authors.

Few paid attention to the dangerous incentives created. When Massachusetts Democrat Rep. Barney Frank, long one of Fannie Mae’s Capitol Hill champions, was asked about the risks of inflating the housing market, he responded: “We’ll deal with that problem if it happens.”

The result, as they say, is history. Write Ms. Morgenson and Mr. Rosner: “By 2008, the American economy was in tatters, jobs were disappearing, and the nation’s middle class was imperiled by free‐​falling home prices and hard‐​hit retirement accounts. Perhaps most shocking, homeownership was no longer the route to a secure spot in middle‐​class America. For millions of families, especially those in the lower economic segments of the population, borrowing to buy a home had put them squarely on the road to personal and financial ruin.”

The chief miscreant in Reckless Endangerment is James A. Johnson, chief executive officer of Fannie Mae. His objectives were money and power. He was determined, ruthless and manipulative.

The story of how Mr. Johnson bought politicians, neutralized academics and acquired partners — through generous campaign contributions, professional fees and shared profits — vividly demonstrates how Washington works. Few people have gained so much benefit by causing so much harm.

One of Mr. Johnson’s most successful ploys was to ensure that Fannie Mae was regulated by the Office of Federal Housing Enterprise Oversight rather than the Treasury Department and to keep the OFHEO — located within the Department of Housing and Urban Development — weak and underfunded. This, write the authors, “allowed Fannie to shift the power of oversight to congressional subcommittees, run by members who could be easily swayed by the company’s lobbying efforts and campaign contributions.”

For years, Fannie Mae, joined by Freddie Mac, launched nuclear strikes against any individual or institution criticizing the two institutions’ increasingly risky activities. One of the heroines of the story is June O’Neill, head of the Congressional Budget Office, who refused to back down from a critical review of Fannie and Freddie.

The villains, alas, are far more numerous. The GSEs more easily made friends among Democrats, like Mr. Frank. But House Speaker Newt Gingrich and Missouri Republican Sen. Christopher Bond were two notable Republican allies.

Others to blame include Angelo Mozilo, head of Country‐​wide Financial, which wildly and dishonestly degraded lending standards, Goldman Sachs, which steered investors into the subprime market while reducing its own exposure, and rating agencies, which followed fees rather than facts to stamp triple A on securities filled with junk mortgages.

At least this depressing tale would have been redeemed by justice being done. But no. Tragically, “the cast of characters that helped create the mess continues to hold high positions or are holding jobs of even greater power,” note Ms. Morgenson and Mr. Rosner.

That’s bad enough. However, Reckless Endangerment ends on an even more pessimistic note. The authors write: “Will a debacle like the credit crisis of 2008 ever happen again? Most certainly, because Congress decided against fixing the problem of too‐​big‐​to‐​fail institutions when it had its chance.”

Those most deeply involved in nearly wrecking the American economy ended up writing “reform” legislation that did not even mention the two GSEs that did so much to spark the crisis. Such is the way of Washington.

Books often are called “must‐​read.” But Reckless Endangerment really is “must‐​read” for anyone who wants to understand the crash of 2008 and why more government‐​created economic crises are likely in the future.

Media Name: bandow-cropped.jpg

DOUG BANDOW

Doug Bandow, a senior fellow at the Cato Institute, is the author of Foreign Follies: America’s New Global Empire (Xulon, 2006).

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733 everettehatcher@gmail.com

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