Wednesday, October 08, 2008

The Truth About Obama's Letter to Secretary Paulson

So, I got tired of Barack Obama claiming that he had written a letter to Treasury Secretary Paulson claiming that he sounded the warning bell of the current financial crisis. Here is the quote from the first debate at the University of Mississippi.
Two years ago, I warned that, because of the subprime lending mess, because of the lax regulation, that we were potentially going to have a problem and tried to stop some of the abuses in mortgages that were taking place at the time.

Last year, I wrote to the secretary of the Treasury to make sure that he understood the magnitude of this problem and to call on him to bring all the stakeholders together to try to deal with it

Obama again said the same thing in the second debate. The key here is the context. His comments were in response to Senator McCain talking about Fannie Mae and Freddie Mac how these two GSE's were a major cause of the current financial crisis. Obama has repeatedly said he wrote this letter warning of these problems.

Well, I found the letter. Here is the link to the letter on Barak Obama's Senate website.

http://obama.senate.gov/press/070322-obama_urges_ber/

Barak did write a letter, but it has nothing to do with the context the current financial crisis. The opening reads as follows:

Dear Chairman Bernanke and Secretary Paulson,

There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.

The rest of the letter goes on to detail what he thinks should happen at this "summit" and what should be discussed. Nowhere did the letter point out how these foreclosures are at the heart of a coming financial crisis. He did point out that lower income people were losing their homes, and more would if something was not done. While it is admirable that Obama showes concern for the poor losing their homes, this cannot and should not be confused with Barack Obama sounding a warning bell about sub prime mortgages being at the heart of an impending financial crisis. The closest thing that I found to any warning is in the next excerpt:

Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short-term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation.

I have highlighted the latter part of the post to illustrate Obama's lack of leadership on this issue. He speaks of mortgage market turmoil and says that HIS COLLEAGUES will develop legislation. IF this is a reference to the problems at Fannie and Freddie, which I don't think it is, Obama leaves dealing with this issue to his colleagues. I don't know about you, but this is not what I want to hear from someone who is supposed to be leading America.


2 comments:

br said...

You:

* "Barak did write a letter, but it has nothing to do with the context the current financial crisis."
* "Nowhere did the letter point out how these foreclosures are at the heart of a coming financial crisis."

Barack:

"Two years ago, I warned that, because of the subprime lending mess, because of the lax regulation, that we were potentially going to have a problem and tried to stop some of the abuses in mortgages that were taking place at the time.

Barack's Letter:

"Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody’s interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets."

===

Now, your second argument is that Barack did not point out that how foreclosures are at the heart of a coming financial crisis in his letter. I would think that even Barack agrees with you, since he never explicitly said that he predicted the financial crisis in his letter. So I will agree that in Barack's letter, he does not explicity say word for word, "IF RAMPANT FORECLOSURES CONTINUE WE ARE GOING TO HAVE A GLOBAL FINANCIAL MELTDOWN." However, I cannot agree with your first argument -- that Barack's letter has nothing to do with the context of the current financial crisis. In fact, I think it's completely irrational.

First, let me quote John McCain from last night. This is from his first question, about the "bailout" bill that was just passed.

"You know that home values of retirees continues to decline and people are no longer able to afford their mortgage payments. As president of the United States, Alan, I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes -- at the diminished value of those homes and let people be able to make those -- be able to make those payments and stay in their homes.

Is it expensive? Yes. But we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy. And we've got to give some trust and confidence back to America.
"

So it is understood that foreclosures are the root of the financial crisis, which in Barack Obama's letter he directly states as a danger. He also directly states that having all parties sit down and deal with rampant foreclosures/predatory lending/etc will stabilize the housing markets. If this somehow is not in context with the current financial crisis, I do not know what is in context with the current financial crisis.

But really, this all just bitterness about Obama having some foresight into something fiscal conservatives would have never voted for until their free markets inevitably take a downturn and it's politically advantageous -- and I thought it was a decent talking point to bring up during the debate. I mean, do you really think in March 2007, if a bill was written to have the government come in and alleviate the foreclosure problem, that fiscal conservatives like McCain would have voted for it? Give me a break. A sizeable number of democrats wouldn't have even voted for it.

Deckard said...

I do not agree that foreclosures are at the core of the financial crisis. They are a part of the problem but not the core of it. The problem here is that we now have a president elect that says we have to stabilize housing prices. If you do not let housing prices correct themselves then housing prices will be given an artificial bottom, which means there will be another correction.

Ohh, and I thoroughly am opposed to what McCain proposed. That is not the answer. Once homes find a bottom and the excess inventory of houses are bought, only then can home prices begin to recover.

No, there is no anti-Israel Bias at the NY Times.

Recently the New York Times published an Op-Ed of a Palestinian who describes the deplorable conditions that he says exist in Israeli prison...