Shining the bright light of Accountablility for House Speaker Pelosi

Kudos’s to Nancy Pelosi on her statement regarding the monster financial bailout, it really is too bad she doesn’t mean any of it.
"The eye now is to the future. To shine the bright light of accountability on what is happening in our financial markets so that it doesn't happen again. That accountability will tell us how we got to this place and ferret out the abuses. That accountability will honor our trust to the American people.” – Nancy Pelosi D-Cal Speaker of the house.
“To shine the bright light of accountability” implies that it is the intention of Congress to figure out what happened, what went wrong and make sure it doesn’t happen again. “ferret out the abuses” implies that Congress wants to know who’s to blame.

Except Congress already knows what happened and who’s to blame. Congress happened and Congress is to blame. Not that they will admit it of course. They will find some Executives who profited during the last few years and ‘failed to warn the American people’ or ‘failed to correct the problem’ throw them to the wolves, make up a bunch of new, even more restrictive rules and pat themselves on the backs while scrambling to take credit for it.
Let’s do a little thinking here…
Who establishes the rules and regulations for the banking industry in this country? Who manages the oversight of these rules and regulation? Congress does. So if the system was broken, whose fault is it?
Now the banking industry is part of the private sector and is responsible for its’ own profit and losses. Banking, in general, doesn’t routinely engage in bad business like making loans to people who won’t be able to pay them back. I'm not saying that banks don’t make loans that end up not being paid back, they have, they just don’t make it policy. So why did banks, and other such money loaning intuitions, make so many loans to so many people that really couldn’t afford them? Answer – because Congress told them to.
Not directly of course. Congress didn’t say to the banks "we want you to give home loans to people who cannot pay them back". What they said was it’s not fair that lower income people or people with poor credit cannot purchase their own home; we need to do something to help them. What they did was to pressure Fannie Mae to ease the credit requirement on loans it purchased from banks and other lenders. The Clinton Administration (in 1999), backed by Congress (sadly, a republican controlled congress), wanted Fannie Mae to buy loans were little or no money was put down and to buy loans where the persons who took out the loan was in a lower income bracket or had poor credit. When Fannie Mae complained that buying up worthless assets like that would hurt their balance sheets and thus their stock prices, Congress changed banking rules and accounting practices so the worthless assets would show-up, on company balance sheets, as worth the full value of the loan when fully paid off, which of course most of them would never be. This is important because the full paid value of the loan is worth a whole lot more than the value of the house the loan is based on thanks to the way mortgages compound interest over the life of the loan.
The effect was exactly what Congress wanted. Banks and other lenders were now loaning money for home mortgages to people they normally wouldn’t, because Fannie Mae was buying these mortgages from the original lenders. And because Fannie Mae, who had a history of making good business decisions and profitability, was buying these loans, other investment groups continued to purchase loans, from Fannie Mae as long-term investments.
So, Congress got to feel good about themselves because they encouraged home ownership and helped lots of low income people get the home of their dreams. The Banks were happy because they could give more and more mortgage to people to buy houses and then sell the mortgage for a profit. Fannie Mae was happy because it could buy and thus sell more mortgages for a profit. The housing market boomed which drove prices up which made both local governments happy (more property taxes) and home-building construction companies happy (more work building new homes).
And all was right with the world. Until oil prices shot-up. Then the price of everything else shot-up. Interest rates went up and adjustable rate mortgages adjusted. The houses that a lot of people bought were now way too expensive for them. Because the monthly payment on the loan went up and the price of necessities (you know, gas, food, that kind of stuff) went up they could no longer afford the monthly payments on their home. They didn’t have a lot of money invested in the house and because the loans weren’t even close to being paid off, and they put no money down, they have no equity in the house. Thus the loan defaults. Suddenly the assist owned by whomever is no longer worth the full value of the loan; it is now worth only the value of the house. A house whose value is falling because the housing market is suddenly over-priced and the poor economy means no one is buying.
Enter $700,000,000,000 of taxpayer money to buy up these loans (not the houses, the value of the now or soon to be defaulted loan). Money that will never be recouped unless the loan is paid or house is resold (hopefully when the housing market is back up and prices are as high as when the house was bought the first time) by the government and they can re-sell the mortgage at full price.
Enter Nancy Pelosi looking for accountability. The question we need to ask is; did the market fail and make bad business decisions or did the government interference in the market cause/force bad business decisions?
Let’s face facts. With the current economic problems, lots of folks have problems making ends meet. The home foreclosure rate would be going up one way or the other (usually does when the economy goes south). Would it be this bad? Well, the market wasn’t making loans that were all but guaranteed to default in hard economic times until the government got involved. So no, not even close to this bad. Once again, we see good government intentions backfire because it didn’t understand the market or the real problem.
So Nancy, you want to know who’s at fault, next time you bang the gavel and call Congress to order, take a look around the chamber, you’ll see all the nice people who abused their power and caused the problem. Is the light bright enough for you?