How is it that Republican presidential candidate Sen. John McCain has been badly damaged by this financial crisis while the Democratic presidential candidate, Sen. Barack Obama, is successfully presenting himself as a financial genius, capable of working Christ’s miracle of the loaves and fishes on our economy?
The financial markets froze up because the Democrats prevailed on mortgage lenders - mainly Freddie Mac and Fannie Mae - to relax standards against thitherto unqualified property buyers. They did it out of an ideological commitment to their thesis that poor people living in private homes would be better citizens. It was a noble vision. Yet it was economically untenable. A huge real estate bubble resulted, and now that the bubble has burst the entire economy is imperiled.
Curiously, the Democrats have not suffered the consequences of their “deregulation” of the mortgage market. Instead, they have hung the “deregulation” canard on Mr. McCain. As the record makes clear, it is Mr. McCain who signed on to a letter with 19 other Republican senators in 2006 calling for the tightening up of Fannie and Freddie’s loans. Even before that, in the summer of 2005, Republican Sen. Richard Shelby fashioned a bill in the Senate Banking Committee to impose stricter regulations on Fannie and Freddie only to see it blocked from getting to the Senate floor by a party line vote that kept it in committee. Republicans favored this regulation tightening. Democrats opposed it.
In an early example of his slipperiness, Mr. Obama stood with his fellow Democrats in opposing the bill. Then he went on record opposing his own vote by writing the Treasury secretary that subprime mortgages are dangerous. As has been said of other evasive politicians, Mr. Obama is a chameleon on plaid. Apparently a chameleon on plaid can escape the media’s accountability even as he boldly opposes stricter regulations on subprime loans while writing the Treasury to oppose such loans. Yet how is it that the media have given the entire Democratic Party a pass on its advocacy of subprime loans?
As this election grinds on, I am frequently reminded that voters are not getting the whole story, that coverage is amazingly slanted toward an inexperienced Barack Obama who, incidentally, comes from a very dubious background. I have been especially aware of this since Sept. 26. That was when the American Spectator online reported that Mr. Obama’s longtime political supporter and present national finance chair gutted a Chicagoland bank by recklessly extending the kind of dubious loans that have caused today’s financial crisis.
Penny Pritzker, from her position on the board of the holding company controlling Superior Bank, approved of risky loan practices that eventually cost depositors hundreds of millions of dollars. Superior had been unable to make money with traditional safe loans, so Mrs. Pritzker encouraged the bank to enter the subprime market. Then she defied regulators who told her the bank’s practices were reckless. After the bank failed in 2001 and government investigators examined the corpus delicti, the wealthy Pritzker family ended up paying $460 million in penalties over a 15-year period.
Nonetheless, when it came to selecting his finance chair, candidate Barack Obama chose Penny Pritzker. Now, with not a peep of recognition from the media, he abominates Wall Street for practices she pioneered. He claims Republican aversion to regulation led to this financial crisis. Yet the record is clear. In the finance sector it is the Republicans who favored regulation and the Democrats who thwarted it. If the media remain mum on all this, these same Democrats will control two branches of the federal government soon. Maybe they will make Penny Pritzker secretary of the Treasury.
R. Emmett Tyrrell Jr. is the founder and editor in chief of the American Spectator and an adjunct scholar at the Hudson Institute.