Root Cause of Current Crisis

If you don't have time to view this whole video clip, I will summarize. The root cause of the current crisis is the spread of bad mortgage debt through the financial system. This debt flowed because Fannie Mae securitised high risk mortgages and sold them to Wall Street and banks. Fraud in the valuation of these securities also played a role, resulting in the sacking of the Harold Raines, the head of Fannie Mae. The political push that allowed this to happen was the Community Reinvestment Act which turned every mortgage institution in the country into a predatory lender. Obama has much closer ties to the problem than John McCain who made early attempts to correct the problem. This all sounds very dry, but the video is highly entertaining.

H/T Drudge.

POP QUIZ! (For the Candidates, Updated)

Today, Treasury Secretary Paulson announced that the federal government was seizing control of the mortgage behemoths Fannie Mae and Freddie Mac. This provides us with an opportunity to see both candidates reactions and judge their judgment side-by-side. After all, Obama himself said that this election is all about good judgment. First the quotes:

From Obama:

"Given the substantial role that Fannie Mae and Freddie Mac play in our housing system, I believe that some form of intervention is necessary to prevent a larger and deeper crisis throughout our entire economy," Obama said in a statement.

From McCain

Republican McCain supports the federal takeover of mortgage finance giants Fannie Mae and Freddie Mac but wants eventual privatization, his advisors said.

"The long-term reforms are to scale down Fannie and Freddie so their size is no longer a threat. And then privatize them. Get them off the taxpayer's books entirely," said McCain's chief economic adviser, Douglas Holtz-Eakin.

Obama's statement is fine, as far is it goes, but note, PLEASE note that McCain says the truly courageous thing, that these quasi-governmental agencies need to be privatized to reduce the risk to you the taxpayer. BTW, how do you like sharing the estimated $200 billion bill with your fellow citizens. You probably can guess my preferences, but we want to hear from you the readers. Please take our poll and comment.

UPDATE #1:

John McCain and Sarah Palin have posted their full response in the WSJ. I really like it.