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Congressional leaders contend that Wall Street is to blame and must be punished. Yet they're the ones who during the Carter years approved the Community Reinvestment Act that forced banks to make many more subprime loans.

And it was President Clinton who dramatically accelerated the rules that coerced banks to make far more subprime loans to people who couldn't normally qualify.

Three of every four foreclosures have involved these subprime loans. Most should never have been made, but big government mandated that they be made or else. Once again, a big government with the best of intentions created terrible unintended consequences. It was big government that started the whole mess.

We also hear rants about oversized executive pay. The reality is that employees at the very top of every industry are offered vast sums of money and generous contracts by businesses eager for their services and skills.

Is Alex Rodriguez worth $275 million over the next 10 years or Julia Roberts $20 million per film? The answer is yes. That's what their employers feel they can pay them and still earn a profit. If they don't produce, their next contract will be smaller or nonexistent. That's the way free enterprise works.

Accountability will free the process from this search for the villains. Those of us who signed those risky mortgages on houses we couldn't afford did so with eyes wide open. Others who refinanced houses they bought years ago, mistaking the sacred family home for a piggy bank, eagerly put the pen to the lenders' papers.

To blame such bad decisions on "predatory lenders" may be ludicrous. Sure, they were eager to accommodate us, and some were "bad guys," making them complicit as well. But they did not hold a gun to our heads.

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Speaking before Bill Clinton's Global Initiative, junk science advocate Gore called on young people to take the law into their own hands because the climate, he claims, is a-changin'. He told the gathering in New York City that "the world has lost ground to the climate crisis" and the time for action is now.

"If you're a young person looking at the future of this planet and looking at what is being done right now, and not done, I believe we have reached the stage where it is time for civil disobedience to prevent the construction of new coal plants that do not have carbon capture and sequestration," Gore said to loud applause.

It may already be happening. The four major agencies tracking Earth's temperature, including NASA's Goddard Institute, report that the Earth cooled 0.7 degree Celsius in 2007, the fastest decline in the age of instrumentation, putting us back to where the Earth was in 1930.

The climate is changing, but not in the direction Al Gore thinks. As the Earth demonstrably cools under a weakening sun, a 10-state coalition on Thursday held the nation's first carbon allowance auction to deal with a warming trend that may have ended a decade ago.

It was October 1992, nearly 15 years before the housing meltdown and subprime crisis. Republican Rep. Jim Leach of Iowa was on the floor of the House, talking about something that no one at the time seemed to care about: the potential danger that Fannie Mae and Freddie Mac posed to the economy.

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An indictment of greed! A case for more government intervention! Worst financial crisis since the Great Depression! Failure of capitalism! This...

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Someone please produce the gun held to the temples of borrowers who put little or no money down, took out "teaser" rates, and then pleaded ignorance or victimhood when the lender — as stipulated in the contract — jacked up the rate. Lenders and borrowers expected government/taxpayers to somehow, some way, step in and shield them from the consequences of their decisions. This creates "moral hazard" — behavior based upon the knowledge of protection from the bad consequences of reckless or irresponsible behavior. Decisions entail risk, whether personal or financial ones.

We need more regulation!

We have it — lots of it. Ever hear of the Office of Federal Housing Enterprise Oversight? This agency, which employs 200 people, exists for one thing and one thing only — to "oversee" Freddie Mac and Fannie Mae, the "government-sponsored entities" that own or guarantee 40% of the nation's residential mortgages. Mere months before Freddie and Fannie's collapse and subsequent government takeover, OFHEO issued a report that saw only clean sailing. The Community Reinvestment Act, passed in 1977, mandated that lenders lend to high-risk borrowers — or else. The government actually held up prudent bank mergers if one or both sides did not sufficiently "lend" to borrowers who, under normal circumstances, failed to qualify. Why is the federal government in the housing business in the first place? We need less government, not more regulation.

We are experiencing "the greatest financial crisis since the Great Depression"!

Even if this were true, we aren't even close to that catastrophic event. At the Great Depression's nadir, 25% of adults were unemployed, including nearly 50% of urban black adults. Economist David Wheelock of the Federal Reserve Bank of St. Louis says that by the dawn of 1934, nearly half the urban homes with mortgages were in default, and 7.3% of housing structures had been foreclosed. Today, 6.4% of mortgages are delinquent, 2.75% are in the foreclosure process, and 0.6% of all housing units are bank-owned.

But what about since the Great Depression? Take the recession of 1980-81. In 1980, inflation averaged 13.58%, unemployment increased from 6.3 to 8.5%, and the prime loan rate reached an astonishing 21.5%. According to the Mortgage Bankers Association, today's delinquency rate is only a little higher than in 1985. And in 1999, the foreclosure rate set records.

. . . People want "hands off" until, that is, they want "hands on." People want homes, many preferring that option even when renting may be more prudent. Many want rent control to shield them from leasing at fair market rates. Democratic presidential candidate Barack Obama promises "world class" education — with taxpayers paying for it. And the federal government, in dramatic contradiction with the limited-government intention of the Constitution, involves itself in health care, guaranteeing private-sector retirement accounts, disaster relief, welfare, unemployment compensation benefits, retirement benefits, etc.

The Federal Reserve Bank, in effect, prints money to pay for things that voters demand — but their taxes cannot cover. The proposed bailout of financial institutions enables the Fed to create hundreds of billions of dollars out of thin air. The cost is greater inflation — a stealth tax on us all.

Bailout deal collapses, Democrats try to blame McCain

The only problem? According to Marc Ambinder, citing four independent sources, McCain didn’t say much of anything during the White House meeting let alone float any alternative plans. Boehner, apparently, brought up some of the House GOP’s ideas; the Dems claim they got the impression that McCain supported those ideas, but “they concede that he did not raise them directly.” Even Reid, ever sneering, admits McCain played no major role.

Update: An astute point from Baseball Crank. In all the frenzy over McCain, you know whose name you haven’t heard much of at all as mattering to this deal? Barack Obama’s.

The dignity, integrity and rights of the European and American people are being played with by a small but deceitful number of people called Zionists. Although they are miniscule minority, they have been dominating an important portion of the financial and monetary centers as well as the political decision-making centers of some European countries and the U.S. in a deceitful, complex and furtive manner. It is deeply disastrous to witness that some presidential or premiere nominees in some big countries have to visit these people, take part in their gatherings, swear their allegiance and commitment to their interests in order to attain financial or media support...

This means that the great people of America and various nations of Europe need to obey the demands and wishes of a small number of acquisitive and invasive people. These nations are spending their dignity and resources on the crimes and occupations and the threats of the Zionist network against they will...

Today, the Zionist regime is on a definite slope to collapse, and there is no way for it to get out of the cesspool created by itself and its supporters.

Antisemitism often masquerades as anti-Zionism — a denial of the right to self-determination only for Jews. At least Mahmoud Ahmadinejad did us the service of making the undeniable connection between the two.  Disputing the legitimacy of the state of Israel, he said:

In Palestine, 60 years of carnage and invasion is still ongoing at the hands of some criminal and occupying Zionists. They have forged a regime through collecting people from various parts of the world and bringing them to other people’s land by displacing, detaining and killing the true owners of that land…The Security Council cannot do anything and sometimes, under pressure from few bullying powers, even paves the way for supporting these Zionist murderers…

Via Ace, who properly calls it awesome. This makes two segments in as many nights on Hume’s show on the roots of the crisis, and as with the first, there’s little you don’t already know. Even so, the archival footage of one of the Democrats’ nastiest demagogues reassuring America that everything’s peachy keen with the subprime mortgage industry is worth its weight in gold, especially after he thoughtfully paused this morning to snark on McCain for trying to help clean up the mess he himself did so much to make.

Joining Fox News in acknowledging the left’s role in the crisis: Newly minted right-leaning independent Bill Clinton.

Gasbag CYA moment of the day

I guess the source shouldn’t surprise anyone, as former Treasury Secretary Paul O’Neill has a habit of saying some fairly stupid things.  Today’s criticism of the Bush administration bailout plan, from an interview with ABC News, starts off well enough.  O’Neill thinks that the White House and Congress have both panicked, and that neither Barack Obama nor John McCain know what they’re talking about.  Unfortunately, O’Neill reveals himself as a clueless idiot when he tries to toot his own horn:

O’Neill said we got into this mess because bankers were not making prudent decisions, because they believed that by reselling mortgages to Wall Street they weren’t going to be stuck with the problems.

“We suspended disbelief and said we can take people with no known source income or wealth generation and we can give them a $500,000 mortgage,” he said. “I think there’s a very important thing: When you violate fundamental principles of economics you can get away with it for a while, but eventually it’s going to get you.”

Does O’Neill wish he was still in office?

“I wish I was there two years ago became I think I would have blown the whistle of these unbelievable loan practices and we would never gotten to today,” he said. “That might be wishful thinking. It’s not possible to really know that. But I’m a detail guy and I think I would have been paying enough attention to the details that I would have stopped the music.”

Say what? These lending practices and the sale of securities from these mortgages go back ten years.  Paul O’Neill served in office in 2001 and 2002, leaving at the end of the year.  In 2003, with John Snow at the helm, the Bush administration first discovered the problem and tried to get Congress to act.  Barney Frank and the Democrats insisted that any attempt to tighten credit was just a sign of latent racism, and Congress balked.

A great example of how we got to the credit-market meltdown

Most people would agree that higher home-ownership rates are a positive sign in any community.  They indicate investment in a community and commitment as well.  Property owners have more of a stake in their cities and towns, and also typically support property rights in general.

But how was this accomplished?  Here’s where that praise turns to condemnation (emphases mine):

Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.

Requiring banks to serve their low-income communities.  That’s shorthand for taking on more risk and lowering what had been standard prerequisites for purchasing homes.  Normally, lenders would have demanded at least 10% down, and preferred 20%, and demonstration of stable income, of which the mortgage payments would not exceed 30%.  Under threat of prosecution for bigotry, lenders had to start taking less-qualified borrowers as clients.

Normally, I’d say let the lenders drown.  Unfortunately, this isn’t completely their fault, and we should have known better.  Not too many of us complained about the rapid escalation of our own equity that came from this housing/lending bubble, and in the end most of us will still benefit from it, if not quite as much as it seemed a year ago.  Three years ago, Alan Greenspan tried to get Congress to act, and only John McCain, Chuck Hagel, John Sununu, and Elizabeth Dole responded — while politicians of both parties made sure to keep the Ponzi scheme in full swing.  And those MBSs were minted at the behest of Congress, the people’s branch of government.  We broke it, and we own it.

Government created this problem, and government will have to provide at least part of the solution.  What we need is a way to make sure that government doesn’t interfere in lending markets again.  We need to eliminate GSEs entirely and let borrowers and lenders find each other in the marketplace.  If government would quit trying to pick winners and losers, we wouldn’t find ourselves in this grave financial crisis.

• Sept. 2008: By 5-to-1 Public Thinks Most Journalists Trying to Elect Obama
• Rasmussen: By 10-to-1 Public Says Reporters 'Trying to Hurt Palin'
• Pew Finds Media Credibility Plummets to All-Time Lows
• Rasmussen: '55% Say Media Bias Bigger Problem than Campaign Cash'
• Fox News Poll: Two-Thirds Think Most Journalists Want Obama to Win
• Rasmussen: Three Times More See Pro-Obama Over Pro-McCain Bias
• Pew: Many Recognize Media's Pro-Obama Bias, Democrats Prefer CNN

Plus:
Rasmussen: 63%+ of ABC, CBS, CNN, NBC and MSNBC Viewers Back Obama
More Polls on How the Public Views the News Media
Polls Documenting Liberal Beliefs of Journalists

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One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market?

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While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules.

In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.

Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.

Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP-led Congress was almost sure to reject, Clinton ordered Robert Rubin's Treasury Department to rewrite the rules in 1995.

The rewrite, as City Journal noted back in 2000, "made getting a satisfactory CRA rating harder." Banks were given strict new numerical quotas and measures for the level of "diversity" in their loan portfolios. Getting a good CRA rating was key for a bank that wanted to expand or merge with another.

Loans started being made on the basis of race, and often little else.

Clinton's HUD secretary, Andrew Cuomo, "made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis," the liberal Village Voice noted. Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big way.

Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks.

From 1995 to 2005, a Harvard study shows, minorities made up 49% of the 12.5 million new homeowners.

The problem is that many of those loans have now gone bad, and minority homeownership rates are shrinking fast.

Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a failed legacy of the Clinton era.