Obama Says, 'Let There Be Loans!' Forgets That’s How This All Started

Congressman Price Joins Republican Study Committee Members to Introduce the Economic Recovery Act

Washington, Dec 14 - A visit to the White House is usually an exciting affair. Today, however, the bank CEOs who are meeting with President Obama might rather be somewhere else. After all, it’s not every day the leader of the free world blames you for a problem and then tells you to do the exact same thing that caused the problem. “Major Wall Street players say they are caught between the urging of the White House to lend and the equally forceful guidance from federal regulators not to lend to uncreditworthy borrowers.

It was willy-nilly lending to unqualified subprime mortgage customers, after all, that triggered the global economic meltdown.” (Politico, 12/13/09)

That’s a facepalm-worthy paragraph if ever there was one.

But these “willy-nilly” loans that helped bring down the economy didn’t appear out of nowhere. So where’d they come from? For the last century, banks had known that making these risky loans was, well, too risky. So what changed? You’ll have to pardon us for not buying the Obama narrative that it was all greed. Last we checked greed predates capitalism.

The actual series of events is too important not to recount. Here’s how to bring down the economy in 4 steps.

Step 1: Define a spectacularly unrealistic social goal – In recent years, Democrats in Congress (Obama notably included) made it a party plank that every American has an inalienable right to a home mortgage.

Step 2: Slander the obvious – To create some political maneuvering room, the appropriate response to anyone pointing out that not all people can afford to own their own home was to decry them as hating the poor.

Step 3: Concoct a way to grease the skids – To move this agenda along, they needed a way for financial institutions to lend to risky borrowers without having to worry about, you know – the risk. Of course, taxpayers will back it up!

Step 4: Put it into action – So they gave the government-created monsters Fannie Mae and Freddie Mac free reign to gobble up all the dubious loans in the secondary market. This way the implicit guarantee of the government served as a clearinghouse for bad assets.

And you know the rest of the story: bad lending leads to foreclosures leads to economic collapse leads to Obama scapegoating the banks he enabled with federal policies and tax dollars. The truth is if Democrats in Washington hadn’t created a massive taxpayer-backed landfill where banks could dump these high-risk loans, the banks wouldn’t have loaned the money in the first place. But who cares about pinpointing actual problems. Let’s bash some bankers!!

Welcome to the political economy. Once again, don’t worry about doing your due diligence to determine borrower risk, proper interest rates, yield, spread, terms. The White House says lend, you lend. Putting politicians in charge will surely work much better this time. ###

Republican Study Committee (RSC) - The Caucus of House Conservatives Congressman Tom Price is Chairman of the Republican Study Committee (RSC).

Congressman Tom Price, Washington, DC Office | 424 Cannon House Office Building | Washington DC 20515 phone: 202-225-4501 | fax: 202-225-4656