Lehman and the mortgage crisis-Obama points finger...at himself.

We have all heard Barack Obama tell the world that he is a new kind of politician who "doesn't accept special interest money". That claim has always been dubious to me as fundraising statistics clearly show this to be untrue. But I figured that maybe he doesn't include unions and other organized labor donors in his definition of "special". But that apparently isn't the entire story. This morning, Barack Obama said this(from the AP):

Democratic presidential nominee Barack Obama said Monday the upheaval on Wall Street was "the most serious financial crisis since the Great Depression" and blamed it on policies that he said Republican rival John McCain supports.

"This country can't afford another four years of this failed philosophy," Obama said after the shock-wave announcements that financial giant Lehman Brothers was filing for Chapter 11 bankruptcy while titan Merrill Lynch was being bought by Bank of America for about $50 billion.

So, it's greedy CEO's, John McCain and Republicans that are the problem? Maybe not as this report from the Heritage Foundation makes perfectly clear:

In what some observers are calling a reshaping of Wall Street, two of the world’s largest investment banks, Merrill Lynch and Lehman Brothers, are set to disappear. Lehman has announced it will file for Chapter 11 bankruptcy protection, and Merrill Lynch was bought by Bank of America. For all the complicated financial instruments and relationships involved in the current financial turmoil, the underlying cause is still relatively simple: the bursting of the housing bubble.

Ok. Step one is for Mr Obama to understand that the mortgage crisis caused this problem. But what drove the mortgage crisis?

When President Bill Clinton took office, Fannie and Freddie were viewed as “key” to Clinton’s plans to expand home ownership. The Washington Post reports: “The result was a period of unrestrained growth for the companies. … The companies increasingly were seen as the engine of the housing boom.” As the companies grew, conservatives repeatedly warned that their size posed a systemic risk to the financial system. As Sarah Palin put it, thanks to the implicit federal guarantee of their debt, Fannie and Freddie had become too big and too expensive to the taxpayers.

So, this clearly had double benefits for the Democrats. It drove economic expansion and allowed politicians to say more people owned homes (whether or not they could afford them is a different story). But how did this problem keep brewing for so long?

But Fannie and Freddie pushed back hard, turning to friends on the left for protection. Former Walter Mondale and Barack Obama campaign adviser James Johnson led a fierce lobbying campaign to fight reform of Freddie and Fannie. Clinton administration OMB director Franklin Raines told investors when he was Fannie Mae CEO in 1999: “We manage our political risk with the same intensity that we manage our credit and interest rate risks.” Fannie and Freddie’s lobbying power over the left continues to be strong to this day. According to the Center for Responsive Politics, the top three recipients of campaign donations from Freddie and Fannie’s PACs and employees are all Democrats. From 1989 through today, Sen. Chris Dodd received $165,400, Barack Obama $126,349, and John Kerry $111,000. The Washington Post concludes: “Blessed with the advantages of a government agency and a private company at the same time, Fannie Mae and Freddie Mac used their windfall profits to co-opt the politicians who were supposed to control them.”

Barack Obama should shut up for two reasons and avoid sticking his foot into his mouth on this topic. The first reason is that he and his fellow Democrats have their hands deep in this mess. As a matter of fact, to date the one person who has had to accept government settlement terms to avoid being convicted of defrauding investors is Franklin Raines (Clinton's former White House Budget Director). The second reason Obama should refrain is that to keep talking is to show what a complete hypocrite he is on the special interest issue. It took Chris Dodd 20 years to get his share of the loot. Obama almost caught up in three. It is Obama himself whose hands are not just dirty, they are filthy. McCain for the record received less than 1/6th the amount Obama did from this quasi-government mortgage and lobbying entity.

Again, who is at fault here?

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