All Episodes
Previous Next
Sept. 8, 2008 - Rush Limbaugh Program
35:32
September 8, 2008, Monday, Hour #3
| Copy link to current segment

Time Text
All right.
Keith Olberman, Barney Frank, Larry King.
You need me to repeat that?
Keith Olberman, Barney Frank, Larry King.
The envelope, please.
Name a pawn, a queen, and a king.
How about that?
A little carnac for you to get this third hour going.
Welcome back, everybody.
I'm Jason Lewis.
You can think about that for a moment if you like.
1-800-282-2882.
El Rushbow taking a well-deserved day off.
He's going to recuperate, as they say, rejuvenate and back at it right through the election season.
Some great shows he's had the last couple of weeks.
But it's great to be back behind the golden EIB Mike once again in the Attila the Hun chair at the Limbaugh Institute for Advanced Conservative Studies.
Great to talk with all of you once again.
Speaking of Barney Frank and the Fannie Mae, Freddie Mac enablers, we need to get to this issue because you are now on the hook, my friends, for so much.
We don't have an idea what the Treasury's books are going to look like with this bailout bill.
We don't even have an idea.
And think of the number of bailouts we have engineered over the last few years.
I mean, we've, as you know, the SNL crisis going back, what, 18 years, we should have learned our lesson over that.
When the government guarantees something, when the government insulates people from their own economic decisions, when the government privatizes profits but socializes losses or risk, you end up with taxpayer bailouts.
But we didn't learn it.
So in the ensuing years, we get a number of bailouts.
And as of late, because of the Federal Reserve's ill-guided monetary policy, which gave banks through easy money more money than they knew what to do with, they took on more risk.
The mortgage brokers took on more risk.
The mortgage lenders.
And somebody had to buy up all that junk paper.
Somebody had to bail them out.
And it was Freddie Mac and Fannie Mae.
And they've been doing it with an implicit guarantee that the government would bail them out.
Well, today or this weekend, as you know, Treasury Secretary Paulson said just that we, the taxpayers, will be bailing out these mortgage giants.
They're really secondary mortgage operations that buy up mortgages from lenders, freeing up their capital to lend more.
But this could be the tip of the iceberg.
We've bailed out Bear Stearns or J.P. Morgan, whatever you want to look at, however you want to look at it, to the tune of $29 billion.
We got the FHA taking on all these rotten mortgages.
All they have to do is write them down to 90% of the loan, and the taxpayer will guarantee those mortgages.
That was part of the housing bailout bill.
Now we got Freddie and Fannie on the hook.
We've bailed out the student loan program.
Congress in 2007 took away the profit yield on making student loans.
The paper turned into junk.
Nobody would buy it.
Nobody would make loans.
You had a credit crunch and student loans.
You know what the Congress now wants to do?
Have us give loans to students who may or may not pay them back directly without even going through risk evaluation that a bank might go through.
We've got the FDIC waiting in the wings.
You know, the Federal Deposit Insurance Corporation has now said they don't have enough capital.
They may have to tap Treasury for some money real soon here.
So what is the Democratic response to all this?
They want to bail out Detroit.
What, $40 billion or $25 to $40 billion, something like that for Detroit?
Everybody wants a bailout, folks.
It is an economic axiom, or axiomatic anyway, that you cannot privatize profits.
They say, well, if you make profits, we believe in capitalism and socialize risk or losses.
Well, if you have a loss, then everybody becomes a socialist.
They want the government to bail them out.
Now, the usual Freddie Mac and Fannie Mae crowd that have been insulating the corruption and the horrible policies at these two mortgage giants have been the Democratic Party, or has been the Democratic Party.
There's been their little affordable housing slush fund all these years.
Chuck Schumer and Chris Dodd and Barney Frank have all stemmed off or staved off the regulators for years and years and years.
There have been a number of people looking at this saying, this is unsustainable.
And it's unsustainable for a simple reason.
For years and years and years, these mortgage government-sponsored enterprises, quasi-private, which is the worst kind, had an implicit backing from the United States government.
So they would go to banks all over the country and they'd get a short-term line of credit, in some cases longer than that, but they'd get credit from all these banks.
So the banks loaned them the money.
They loaned them the money at a lower interest rate than they otherwise would because they knew the Treasury, the taxpayers, would bail these mortgage giants out.
And so what do they do with this money?
They went out and they bought up mortgages.
And, you know, your favorite mortgage banker loves this.
Countrywide financial, giving sweetheart deals to Kent Conrad and Chris Dodd.
Why, they loved Freddie Mac and Fannie Mae.
Why?
Because they bought up all their junk paper.
And so then you had the politicians that were staving off the regulators, I should say, and the capital requirements.
You know, if Freddie Mac and Fannie Mae had to have real capital requirements, they would have been shut down years ago.
So they had all this line of credit from all these banks.
They took all that money and they bought up mortgages.
Now, to some extent, they sliced up those mortgages into mortgage-backed securities and resold them.
And if they would have taken the proceeds from selling those mortgages in packages and paid off their line of credit, it probably would have been a wash.
They didn't do that.
They kept the loans from all the banks and started buying mortgages for their own portfolio.
They started to hedge to arbitrage.
So they were borrowing short, say at, oh, I don't know, pick your favorite percentage.
Who knows what it was, 3%, 4%, 5% maybe.
And then they'd go buy a 30-year fixed mortgage, which may or may not have been properly vetted.
It wasn't due to predatory lending.
It was due to the requirements of Congress and the Fannie Mae apologists who told these mortgage brokers, you've got to go lend and give people who have bad credit a house.
And they did.
So you had this subprime lending going on.
And Fannie Mae and Freddie Mac bought up all these bad pieces of paper, all these mortgages.
The problem is they had short-term credit at an interest rate, 4%.
They thought, well, if I get 4%, I can buy a mortgage at 5%.
That'll keep the price of mortgages down, the interest rates down.
That was the ostensible reason for this nonsense.
The problem is, if the interest rates then went up, the value of mortgages goes down.
If you know anything about investment, you know that the price of a bond moves inversely to the interest rate.
So as interest rates went up, if somebody wanted to resell a bond or a mortgage in the secondary market, they had to discount the paper value or the face value of it.
So they took a big risk and they bought all these mortgages.
They had short-term credit, let's say at 4%, from all these banks.
And then they bought a mortgage worth of 5%.
Interest rates go up to 6%.
The value of that mortgage plummets.
All of a sudden, Freddie Mac and Fannie Mae's assets are going down the tubes.
Oh, guess what?
Their short-term line of credit comes up and those rates are raised.
So all of a sudden, they're paying more in debt obligations to the banks than they have in assets and what they're earning on interest.
Not to mention the fact that half the paper defaulted.
Half, I'm being a little bit facetious there, but you get the point.
So they bought up a bunch of bad paper.
They arbitraged with your money, and now we've got to bail them out.
Now, a lot of conservatives naturally are saying, why on earth should we bail out Freddie Mac and Fannie Mae, which has been a playpen for Democratic politicians?
Remember the former CEO that was forced to resign of Fannie Mae, Franklin Raines, the former Clinton administration official, took home more than $52 million while he was chief executive from 1999 to 2004.
I told you about the sweetheart loan deals that Kent Conrad and Chris Dodd were accused of getting from countrywide financial.
And their CEO went to bat for Freddie Mac and Fannie Mae.
We shouldn't lay off those people.
They're just fine.
Yeah, Freddie Mac and Fannie Mae would buy the miserable paper that some of these big lenders were creating.
So you get a lender make, you know, maybe they give a mortgage to somebody who's a bad credit risk.
They just sell it to Freddie Mac and Fannie Mae.
They dump it there.
And so this whole incestuous thing was Wall Street and these lenders and Freddie Mac and Fannie Mae.
Why should we bail them out?
And by the way, let me reiterate.
The Fannie Mae Foundation gave Acorn 800 grand, Congressional Black Caucus 600 grand, the Center on Budget Policy and Priorities, Uber Liberal Think Tank, 400 Grand.
This was the Democrat playpin for over a decade, if not longer.
The CEOs who got the bonuses, the individuals who are making six figures, many of them Democrat hacks, the people who were defending Freddie Mac and Fannie Mae from the regulator, whether it was HUD or the new regulator, were all Democrats in Congress.
Republicans were trying to say, look, we've got to raise the capital requirements on Freddie Mac and Fannie Mae.
Their assets are declining.
They are in big, big doo-doo.
Some writers in the media, Wall Street Journal editorial page primarily going after this.
The Democrats prevented it.
Regulators are no match for politicians.
So now they finally collapsed.
And we don't know whether the bill to you and me to literally bail out all of these bad mortgages.
I mean, essentially what you've got are these two government-sponsored enterprises who are allowed to reap billions in profits and keep them and hand out bonuses and goodies for affordable housing nonprofits and Acorn and the like.
But when they have losses, we were on the hook.
And now we're on the hook for anywhere from $50 billion to $200 billion.
We don't know because somebody's got to pay back the quote-unquote lenders.
And that gets to the larger point.
All right, Jason, why on earth should we even bail them out?
Why did Paulson this weekend decide to put the taxpayer at risk?
Because all the banks I told you about that lent money to Freddie Mac and Fannie Mae, that bought their mortgage-backed securities, all the banks are at risk too.
If you let these guys fall, then the banks tumble and you get a run on the banks.
And you get the real big, the real big gorilla in this equation, the 800-pound gorilla, the FDIC on the ropes.
You get a run on the banks.
Because if you let these two mortgage giants fail, then all of a sudden the banks may fail, not just one.
And this is really the essence of the credit crunch.
You've got banks with bad mortgages.
You've got Fannie Mae with bad mortgages.
You've got banks who loaned money to Freddie Mac and Fannie Mae who aren't getting repaid or wouldn't get repaid.
Therefore, if you're a bank and you've got declining assets, you're not making new loans.
You're calling in old ones.
That's the essence of the credit crunch, why nobody can get credit?
Because nobody wants to lend anybody else in fear of more bad assets.
And they don't have the capital to do it as their asset base declines.
I know it's all very complicated, but suffice it to say that the single biggest problem here was right from the get-go.
The idea that the federal government would ever give them the implicit guarantee that if you're in business to make money and you're buying mortgages on the secondary market, by God, if you buy bad mortgages, you will suffer the losses.
And we never told them that.
We made them quasi-governmental.
You know, Paul Krugman loves this garbage.
Barney Frank loves this affordable housing slush fund.
Now we're paying for it.
Here's where McCain has a real opportunity.
I frankly do think to avoid a run on the banks, he probably had to do this.
But never again ought to be the mantra.
And we ought to take this particular companies in the conservatories, the conservatorship that we're doing, and we ought to slice them up into small secondary mortgage buyers and make it clear to everybody on Wall Street, the day of the bailout is over.
From now on, if these people, the new companies we create out of this bailout, if they buy mortgages, they are on their own.
The days of government guarantees for any of these folks, any of these businesses, are over.
That makes John McCain and Sarah Palin look like, guess what?
They're not part of the old Wall Street big business bailout crowd.
They're one of us.
And McCain essentially is saying this.
Now, Barack Obama, Joe Biden said, well, you got to bail them out.
But they're not offering to redo the companies.
They want to bail them out and then let them do the same thing again.
18, after the hour, Jason Lewis in for El Rushbo.
Don't go away.
Your call's coming right up when we return on the Rush Lumbaugh program.
1-800-282-2882.
I'm Jason Lewis in for Rush.
El Rushbo back tomorrow to set the world right, having more fun than a human being should be allowed always when I sit in for the big guy.
My thanks to everybody involved.
Mike Kitts, Rush, and Jess Meyer here trying to get the engineering going from our particular situation in the Northern Command, as we like to call it.
Let's go to Joe in Richmond, Virginia.
Your first tub this segment.
Hello, sir.
Hi.
Hey, Jason, how you doing?
Good.
You've got me a little confused.
The last time I looked, George Bush was president, and the Republicans had control of Congress from 2002 to 2006.
Is that right?
Yes, sir.
So why is it all the Democrats' fault?
Well, because the Democrats.
Who's doing the bailout?
Okay.
Well, the bailout had to come.
I mean, I'd be more than happy to let them go, but if you let them go, then you're going to bail out Citigroup.
You're going to bail out all the banks that have assets from Fannie Mae on their books that are going bad.
So the bailout had to come.
But the problem began, you're right, in 2003 when the accounting scams blew up.
But I get a kick out of all the talk about Enron and the corporate accounting, corporate accounting scandals and transparency.
Who was running Fannie Mae when their accounting corruption blew up in their face in 2003?
Anybody remember that?
You remember that, Joe?
Yeah, Reigns.
Yeah, Franklin Reigns.
Now, tell me his background again.
Tell me his background again.
But he left in 2004, right?
Yes, he was forced to resign.
Didn't Bush appoint somebody to take his place in 2004?
Yes, and they've been trying to regulate it ever since.
And who's been blocking it?
They haven't blown up.
And who's been?
Well, no, they didn't.
You know why?
Let me tell you why.
When you had Mike Oxley, who sits on the Financial Services Committee, they were trying to get a regulator in there to up the accounting standards.
Representative Barney Frank, then in the minority, rolled all over him to protect the companies from stronger regulatory oversight.
In the Senate, they were filibustering any regulatory oversight.
The bottom line is, Freddie Mae, I will concede this point to you, Joe, however, that it is a bipartisan problem, but the people that protected Fannie Mae and Freddie Mac the most were the Democrats and have been the Democrats, and those have been the people employed there.
Jason, can I bring up one more possible bailout in the future?
That's interesting.
Yeah, go ahead.
Back in 2006, the Republicans passed an energy bill.
Remember that?
Yeah, it was a mistake.
2007, I believe it was.
Well, actually, it was 2006 that I was going to say.
Well, the energy mandates that included ethanol was in 2007.
But go ahead.
There was another interesting little aspect in the Sarah Palin getting credit for the gas pipeline.
Do you remember in the energy bill that the Republicans passed, there was an 80% financial guarantee for that pipeline?
Do you think that had anything to do with the fact that the gas pipeline's moving ahead?
No, because the oil company said it wasn't going to move ahead unless they got a monopoly under Murkowski, and she took away that monopoly and it went ahead anyway.
I don't think that had anything to do with it.
And I don't know that any pipeline, I don't know that any pipeline, you know, you can try as you might, Joe.
I understand you got your Democrat hat on.
That's your job.
That's great.
But you can try as you might.
There is simply no doubt that when Bush comes to shove, the people that are pushing corporate welfare the most these days are Democrats.
Oh, I don't care whether it's biofuels.
I don't care whether it's Freddie Mac or Fannie Mae.
I mean, look at the people who ran these government-sponsored enterprises.
Look at where the money went, the Congressional Black Caucus from the Fannie Mae Foundation, Acorn, Center on Budget Policy and Priorities.
Look at Chris Dodd and Kent Conrad, who blocked also in the Senate any serious regulatory effort on the part of Freddie Mac and Fannie Mae.
This really isn't disputable.
Now, the Bush administration should have pushed harder, I agree, and they could have done more.
And I'm not even enamored with what they're doing because they're not going to privatize it tomorrow.
Maybe we can agree on this, though.
Do you think there should be going forward any government guarantee at all for this government-sponsored enterprise?
Should we just privatize them?
Which enterprise are you talking about?
Well, whatever they turn out to be after the fifth.
To the risk-taker goes the rewards.
And if the government's providing financial guarantees, then it looks like they're the risk-taker and the corporations are just benefiting from the situation.
And so I agree with you.
No.
You might want to check the journal this morning, too, the figures you're in.
Democrats received almost 60% of the $1.6 million in political contributions from the two companies, Freddie Mac and Fannie Mae.
According to the Center for Responsive Politics, Senator Obama received $106,000 from donors tied to the companies.
So I don't think there's any doubt there, Joe, but nice try.
Plano, Texas, Bryce, you're on the Rush Limbaugh program.
Hi.
Hi.
I was wanting to point out about the redlining problem that started a lot of the mortgage problems.
There were areas in the country that, are you there?
Yep, I'm there.
There were areas in the country that were low income and low credit ratings that banks did not make and mortgage companies did not make loans to because the people couldn't pay for it.
It is funny.
It is funny you should bring that up, and I don't want to traumatize our old friend Joe over in Richmond, but I'm going to touch on that when we come back because guess who is at the heart of that little problem?
Another Democrat.
Jason Lewis here in for El Rushbo Rush once again.
Back tomorrow.
In the meantime, check out RushLimbaugh.com, 1-800-282-2882.
Now, the previous caller made a great point.
The Democrats are trying to lay the blame on predatory lending.
That's how we got into this subprime mess and why we had to bail out Freddie Mac and Fannie Mae.
Nothing could be further from the truth.
As Bryce said from Texas a moment ago, they were told to lend to low and moderate income families.
In fact, if you go back, and once again, Joe, it's a Democrat problem.
Andrew Cuomo, the young whiz kid who used to be the Secretary of Housing and Urban Development, you know, that great department the founders fought so hard to preserve?
Not quite.
I always tell people, you know, our brave troops, our brave men and women, if you really want to look at the proper function of government, they're not overseas fighting to preserve the Department of Housing and Urban Development.
They're there to preserve liberty.
But that's another point.
I digress.
Cuomo, when he was at HUD back in the 1990s, raised the number of loans or mortgages that all these lenders and the GSEs would have to give to serve low and moderate income families.
He raised the number from 42% to 50%.
And he dramatically hiked the government-sponsored enterprise mandates to buy mortgages in quote-unquote underserved neighborhoods.
That's for the very low income.
And if you don't do that, well, you must be redlining.
So they made them stop redlining and told them to buy these mortgages on very flexible loan terms.
What happened?
Well, Fannie had gone from $1.2 billion in subprime mortgages and securities purchased in 2000 to $9.2 billion in 2001, $15 billion in 2002.
This thing was starting all along.
And it was starting because of two fundamental things.
They were told to make bad loans, in essence.
And two, we had the government guarantee so the banks would keep loaning Freddie Mac and Fannie Mae money, knowing full well, well, if they blow it like the SNL executives did 18 years ago, the government will bail us out and we'll get the money.
And that's really what we're doing.
We're bailing out Wall Street and the banks.
And we're trying to do it now to avoid a run on the banks in the future and really blow things up by bailing out the FDIC, which we don't have the assets to cover.
We have no, I mean, we aren't, I hate to, I don't want to be an alarmist here, my friends, but we have no idea what the Treasury is going to look like or what our full faith and credit ratings are going to look like for government paper once this stuff is on the books.
We don't have no idea what the liabilities we're taking on are.
And so once again, I don't know what we can do about it now going backward, but going forward, the answer has got to be no government guarantees for business losses.
I don't care whether it's Detroit.
I don't care whether it's Bear Stearns.
I don't care whether it's secondary mortgage buyers or GSEs.
Enough with it.
You know, bail these people out.
Hopefully that'll get us out from under this mess for now.
And then privatize them with no government guarantee.
If they want private market insurance, they can go out and buy it in the private market.
And then all of a sudden, if a bank wants to loan money to the new Freddie Mac and Fannie Mae, they're going to say, well, let me see those books.
Let me see your capital.
I'm not loaning you this money.
But for the last few decades, they would loan them the money knowing you and I would eventually bail them out, which we are doing right now.
And this is, it's not too, you know, this is just politics.
It's not business.
And, you know, remember this, friends.
This is an opportunity for the McCain folks to appeal to Reagan Democrats and blue-collar Democrats.
We should not be penalizing corporations in America with a 35% corporate income tax, the second highest in the world.
But we should also not be bailing them out of their mistakes.
We ought to have a neutral policy.
We're not going to penalize corporate America, and we're not going to insulate or subsidize corporate America.
And that's something that McCain and Palin can latch on to, because I will tell you flat out, go look at Wall Street contributions.
Go check the Center for Responsible Politics or Responsive Politics and see who's making the biggest Wall Street contributions to which parties?
It will be the Democrats, the people engineering the bailout.
And I'll tell you another thing.
All this talk about transparency in the corporate crooks at WorldCom and Enron, what are we going to do about Franklin Reigns?
What are we going to do about all the CEOs that have had their bonuses and the millions of dollars the last decade while running these enterprises into the ground?
Going to see Chuck Schumer pontificate about going after corporate crooks?
Oh, Freddie Mac and Fannie Mae don't count.
They don't count because they're the Democrat playpen.
They don't count because the Democrats get contributions from them and then block the regulators in a quid pro quo.
That's what's going on here.
Rick in Eaton Rapids, Michigan, you're on the Rush Limbaugh program.
Hi.
How are you doing today?
I'm doing fine, sir.
How are you?
Hey, I'm just doing great.
I'm watching the Democratic ship sink, and I just love it.
Michigan in play, right?
Oh, yeah.
I mean, I heard Axelrod talking about how they can put Michigan in the Democratic column.
I take a look at my tax statements and look at our governor who, to cover dropping revenues, accelerated everyone's property tax collection.
Yes.
Jeff Daniels can't even cover up that one.
No, he can't.
But what I called about was this thing about the bailout of Freddie Mac and Fannie Mae.
I remember when the SNLs went under, there were some very, very influential people that went to prison, including very close friends of a former governor, first-term president, and his wife.
And the only difference between now and then is when they started the scam again, they made sure they had very, very good congressional coverage so that the real money people would never go to jail.
People forget the SNL scandal of 1990 or roughly therein, early 1990s, was rooted in the same sort of moral hazard.
I think it was Ferdinand St. Germain who slipped in coverage for the assets up to $100,000 each on these FSLIC coverage, the savings and loan.
And so the SNL kingpins realized, well, we've got this government guarantee.
If we make bad loans, we've got this taxpayer guarantee that they will come to our aid.
So what did they do?
They made bad loans.
Isn't it amazing how the market can regulate if you let it?
But if the government starts to insulate and subsidize and insure things, how irresponsible people can behave.
Yep.
Can you spell white water?
Well, who knows?
I just think that McCain and Palin have a golden opportunity to point out their common man bona fides here to say, look, I'm not for bailing out Wall Street.
I'm not for bailing out all of these mistakes.
And here's what we ought to do.
We're going to have to make certain that this thing doesn't spread to a full-blown bank panic.
But as of now, after this one singular bailout of Freddie Mac and Fannie Mae, we are splitting these companies up.
We're going to chop them up into a bunch of little mortgage-backed lenders or mortgage.
Yeah, I mean, basically, that's what they do.
They borrow or they buy mortgages from the initial lender.
And we're going to de or privatize them so they don't have government backing.
Now, I will tell you, the Democrats are going to fight them on that.
The Democrats are in a corner on this.
The Barney Franks and the Chuck Schumers and the Chris Dodds and the Kent Conrads and the Joe Bidens, they're all circling the wagons for these guys.
Make them say, no, no, no, we ought to keep this as usual.
We ought to keep the operations going.
And all the former CEOs who pocketed the bonuses, why, they're just fine.
This is a golden opportunity.
Brad in Pontiac, Michigan, you're on EIB.
Hey, good afternoon.
How you doing?
I'm doing fine.
Great.
Yeah, a couple of comments.
I agree.
We shouldn't be bailing out the mortgage companies, but I am afraid of the consequences if that doesn't happen.
Who knows what could happen?
But you had a caller that was talking about redlining and how the low-income areas people were not allowed to buy homes.
I'm a landlord in a low-income area north of Detroit.
And back in the 90s, mid to late 90s, government was giving away homes to people that couldn't afford to pay the rent, much less purchase the house.
And not only were they giving them the homes with zero down, they were paying their closing costs and giving them money back to put in kitchen cabinets, which of course never happened.
And all around me here, I've got homes that at the peak back in the late 90s were worth $50,000, maybe $60,000.
The bottom's been pulled out.
They're worth $20,000, $30,000.
Well, here again, you know who's going to bail this out?
We are.
You are.
Right.
The taxpayer.
Yeah, exactly.
Exactly.
All these people have been.
And the housing bailout bill, which was passed here recently, the FHA bill, that says, well, if you're the mortgage holder on this house you just mentioned, all you have to do is write down, let's say you're the mortgage lender on a house, an example that you just gave us.
And now that mortgage is worth 50% of its value.
So you lent them $300,000.
The house is now worth $200,000.
So the mortgage, they owe $300,000.
They're going to walk.
But you've lent them $300,000.
So you need to get that back.
The FHA is going to take over that, and the taxpayer is going to bail out the lenders on those.
I know, it's crazy.
And for those of us that have tried to play the real estate market in a conservative way and not take unnecessary trips to Vegas and that type of thing, we still end up paying the price.
You got it.
You try to run a solid business, and then it ends up coming back to piecha.
And really, there's one thing I haven't heard said publicly yet, and I'm going to do it, and I'm going to ruffle a lot of feathers out there.
If there's any blame to be placed on this, it goes right to the home appraisers who were flat-out fraudulent when all of this was going on.
And everybody else above, the mortgage, the banks, the mortgage companies, you know, they may not have done their due diligence.
They might have turned a blind eye.
They might have said, well, we just take whatever information is given to us, but it's the appraisers that committed fraud.
Well, there's no doubt there's some of that, but you've got to lay the blame, once again, at government for literally priming the pump with this easy money.
There were negative real interest rates.
Banks had money to lend.
They were generating fees by issuing these mortgages.
And then the investment banks were generating more fees by creating packages and selling them to people time and time again.
You almost had options on mortgages with these CDOs and all the rest.
And what you've really got to look at at some point is why was credit so easy in this decade?
And it was easy because the Federal Reserve's massive mistake on lowering interest rates to 1% at one point, literally making all of the creditors flush with money, all of the banks flush with money.
That money was going to find a home, and it found a home in the riskiest sort of loans.
I'm Jason Lewis in for Rush on the Excellence in Broadcasting Network.
El Rushbo back tomorrow in the Till of the Hun chair behind the golden EIB mic.
Until then, I, Jason Lewis, Minnesota's real anchorman with talent on loan from El Rushbo, trying to fill those shoes.
1-800-282-2882 down in Kansas City, Missouri.
AJ, thanks for waiting.
You're on the Rush Limbaugh program with Jason Lewis.
Hi.
Good afternoon.
The reason for my call is, if my memory serves me correctly, Acorn, which is a federally funded organization and kind of a Democratic front, kind of walked through the doors at Citigroup and, in my view, basically shook down Citigroup for about $400 million in those subprime loans because basically if they didn't get the loan, then they'd sit there and start claiming that they weren't willing to loan to the.
That was the old redlining.
Absolutely correct.
It happens not just with Acorn, but a bunch of these groups, so-called the low-income community or poor people's campaign groups.
They were getting great pressure to do that.
And what Barney Frank and company did in Congress is increase the amount that could be devoted to quote-unquote affordable housing in every piece of legislation governing Freddie Mac and Fannie Mae.
So this was a recipe for disaster right from the get-go.
And remember, the foundations gave money directly to Acorn, the foundation from Fannie Mae and Freddie Mac.
So to Fannie Mae anyway.
It also means that the people at Citigroup weren't always making bad loans.
They were forced basically to make some bad loans.
Yeah, there was great pressure, but remember, they were complicit in all of this.
Certainly some of the big mortgage companies, I would personally suggest the countrywide was complicit and some of these other people say because they wanted somebody to buy those loans.
So every time there was an attempt to wean Fannie Mae or Freddie Mac off the implicit guarantee of the Treasury, that would be fought by those in the lending community because they wanted someplace to sell their loans.
Now, I know it's kind of a vicious cycle.
If you're forced in some ways to make bad loans, and I mentioned Mario, but Andrew Cuomo's raising the percentage of loans that would serve Low-income households, which is kind of a euphemism for we're going to make some bad loans here.
You want some place to dump those.
But again, none of this would have happened had the guarantee not been there.
Because I don't care what lender you are, if you're going to have to sit with this paper and you're going to have to look at this asset on your books for a while or get a different secondary buyer to buy it voluntarily without a government guarantee, there would have been much more scrutiny.
It's almost like the profit motive or the profit incentive, if you will.
When your money is at risk, you look at things closely.
When the government's money is at risk, nobody cares.
And therein lies one of the big problems.
Anyway, thanks for the call.
Tanya in Youngstown, you're on EIB.
Hi.
Hi, Jason.
This is Tanya, and I'd like to thank you for your information that you're giving us and commend you.
Do you have a website?
Because I'd like to have that.
The list of things that you went over about Andrew Cuomo and how we got into this mess.
Do you have a website?
Yeah, I work at KTLKFM in the Twin Cities, Minneapolis, St. Paul, and that's our website.
Just go to ktlkfm.com and you'll see our website.
I'm sorry, K-T-L-K.
F-M.
F-M.com.
FM.com.
Well, like I said, I want to commend you, and because I do study the government and what you're saying about ACORN and a congressional-backed Congress.
More people should be listening to this, and that's how they should vote.
But we'll see what happens in this election.
Thank you.
And I know that a lot of this will be up on rushlimbaugh.com.
Perhaps this monologue or perhaps some of the data I've given out too.
So don't forget that.
That's the important one.
El Rushbaugh back tomorrow as well.
We'll take a quick pause.
Come back one more time on the Rush Limbaugh program.
Don't go away.
All right, time to squeeze in one quick call.
But let me just make one more point before we do that.
And that's: look, the purpose of the implicit government guarantee to run through Freddie Mac and Fannie Mae was to hopefully lower the interest rate on mortgages.
Instead, it didn't do that by much, if any, at all.
Instead, it allowed them to pay their people bonuses, big-time bonuses.
What's the figure I saw in the journal the other day?
I think you saw, well, they were able to pay no fewer than 21 of their executives more than $1 million in 2002.
Reigns, as we talked about, the former Clinton crony, pocketed more than $20 million.
And by the way, the Andrew Cuomo stuff is at the Village Voice.
They wrote a piece on Andrew Cuomo and Fannie and Freddie, so you can check that out as well.
This thing needs to be privatized pronto.
Let's go to McHenry, Illinois, and Callie.
Hi.
Hi, how are you?
Good.
I had a question, and I don't know if it's a dumb question or not, but with the people having to bail out Fannie Mae and Freddie Mac, why is it that we can't do it as a loan?
Because they can't repay the loans.
Their balance sheet is that bad.
Literally, you know, this is the problem, quite frankly, with the Federal Deposit Insurance Corporation.
And to be perfectly blunt, their mismanagement of charging insurance premiums.
When do you charge somebody an insurance premium for the taxpayer guarantee on bank deposits?
Well, you ought to do it when they're flush with cash.
Now that their balance sheets are horrible, if you hit them with a big premium, they can't afford it.
Well, it's the same thing here.
And by the way, the FDIC is a scary thing right now.
But it's the same thing with this.
They literally don't have the money.
They're getting loans called in from the banks that lent them money.
They can't afford to pay it back.
So that's how bad it is.
Well, I know, but if you end up bailing them out anyway, they're going to end up making money again eventually, aren't they?
Not unless you privatize it.
If you privatize it and you tell you chop these into 10 other companies with no taxpayer guarantee and you make certain the bailout, you're right, doesn't go to the managers, doesn't go to the shareholders, ought to take a big bath.
And the new companies that come out of this ought to be private with no implicit guarantee.
Then they're on their own and the taxpayer is free.
▲
Export Selection