The more than difficult economic environment in the USA has its roots starting with the perversion of Fannie Mae initiated by the New Deal and Freddie Mac chartered in 1970 by President Nixon. President Carter signed the Community Reinvestment Act to boost lending in poorer communities. Congress enacted the Financial Institutions reform Recovery and Enforcement Act. This helped Acorn in influencing lending practices. In the 1990's, community organizer Barack Obama worked with ACORN to get financial institutions to make risky loans to poor and minority communities. The GSE's (Freddie and Fannie) resisted buying these loans but they were instructed by the Clinton administration to increase these loans in their portfolio.

      Republicans won control of Congress but before they could reform the CRA (Community Reinvestment Act) Barney Frank, Ted Kennedy and Maxine Waters directed HUD Secretary Cuomo to inject GSE's in the subprime mortgage market. In September of 1999, the Clinton administration eased credit requirements on loans that it would purchase from lenders. In March of 2000, Richard Baker, Republican from Louisiana, proposed a bill to reform Fannie and Freddie with a House subcommittee. Barney Frank dismissed the idea stating that concerns were "overblown". In July 2003, Senators Hagel, Dole, and Sununu introduced legislation to address regulation of Fannie and Freddie and democrats blocked the effort. John McCain addressed the Senate stating that the company's (Fannie) regulator reported that the quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created by the company's senior management". In September 2007 President Bush called on Congress to pass legislation that strengthens independent regulation of GSE's. In 2007-2008, the housing bubble began to burst, bad mortgages started to default and the portfolios of Freddie and Fannie were found to be in collapse. Finally on September 2008 Representative Arthur Davis, Democrat from Alabama, stated "Frankly, I wish my democratic colleagues would admit when it comes to Fannie and Freddie - We were wrong".

      It became clear to the banks that they could be sued if they failed to meet the credit needs of low-income borrowers. Fannie and Freddie ended up holding over 90% of these questionable loans. To make matters worse, the Federal Reserve kept interest rates at all-time lows. In my opinion, this scenario of poor oversight and bad political decisions by mostly Democrats in positions of authority has led to the current disaster. It started like a virus and ended up like a cancer.

      With the above background in mind, let us examine the past election and some thought on what caused the huge move to the democrat party.

• The most important criteria to the African Americans in determining how they voted were that Obama was black. I heard very little from them on real issues such as tax policy, abortion, school vouchers, defense and Iraq, energy policy that certainly affects many lower income voters and appointment of Supreme Court judges. The black voters give no credit to republicans and they're past contributions to them. Even George Bush who made possible more funds to black colleges than any other past president received no credit.
• The Jewish vote was in favor of Obama despite his connection with Muslim groups with anti-Israel agendas. The republicans have supported Israel much more than democrats in the majority of times when Israel has been chastised by the Palestinians and George Bush came to Israel's defense. The overwhelming support of American Jewish voters for democrats will always be a mystery to me.
• The Hispanic vote was largely in the Obama camp and was a result of large solicitations by democrats at the local levels and media coverage by Hispanic radio and TV. Did these voters understand any of the issues involved in the election despite their Catholic roots and the Church's position on abortion and gay marriage? How about Obama's position on NAFTA, which was helping the Mexican economy and permitting Mexican trucks to freely, travel on our Highways? The democrats have done nothing on immigration but they blame the republicans and it sticks in the Mexican mind.
• The Catholic vote generally favored McCain probably because the Catholic Bishops questioned the pro-abortion agendas of Obama and Beiden. Both democrat candidates were against school vouchers and for embryonic stem cell research. (Please see my blog on How Catholic Representative in Congress voted on issues that the Catholic Church supports).

      In my opinion, the factors that "sunk" McCain and many republicans was the massive decline in the stock market and the negative perception of George Bush. He gets no credit for the success of the "Surge", the 8 million new jobs created from 2003-2007, the strong economy and low employment until 2008 and the absence of additional attacks since 9/11. A recession was not out of the question for the nation but what should have been a normal business cycle turned into a cataclysmic event precipitated by the collapse of the mortgage market and compounded by Fannie and Freddie with incompetent individuals like Barney Frank, Maxine Waters, Ted Kennedy and others who started this fiasco.

      Much of the above information was obtained from Investors Business Daily November 3, 2008, the Wall Street Journal and Forbes Magazine. There is more to the collapse of many stocks in the market decline. In particular, the mark-to-market rules which affect balance sheets of banks in a negative way and the elimination of the uptick rule in regard to short selling and failure to consistently enforce the rule against naked short-selling. The large problem with the financial distress of our domestic auto industry and its lack of liquidity is partly due to the huge liabilities of the past labor settlements with the unions that require funding past benefits to those who are no longer working. The states where there are problems are states with democrat governors like Michigan, Ohio and Pennsylvania. Foreign producers are locating to states like Texas which permit non-union workers and generally have lower taxes and no "job-banks". The emphasis on global warming by the democrats will only increase costs to our economy as we close coal plants and wait for "alternative sources" of energy to replace existing sources in 10-20 years. The stock market will eventually recover from the current low valuations and a further cut in capital gains tax and corporate taxes could help a lot. Let us hope that Congress gets the message.

Gary E. Marsella

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