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Obama & Subprime

Obama has been claiming that he sounded the alarm bell early on the economic crisis due to the fact that he sent a letter to Bernake and Paulson addressing the subprime mortgage situation. This claim is ridiculous and stretches the bounds of what would be considered “truthful” for the following reasons:

1) The letter was sent in March 2007 well AFTER the vast majority of the loans had been made and after problems had already been surfacing. This is in essence being on the Titanic and mentioning that you had just hit an iceberg, the warning is way too late to be helpful.

2) The letter itself was not a warning of a potential economic crisis, it was a primarily focused on the impact to low income communities that the foreclosures were having. To keep with the above analogy this was basically like saying the water coming onto the ship was getting your shoes wet.

3) The subprime mortgage situation was one factor of the economic crisis but was not the only cause. The real cause of the crisis was the overall mortgage market, how lax the terms, lending requirements, and base assumptions on all the mortgage loans were getting, the ease and growth of corporate credit and how out of line terms on those types of loans were getting, and finally the extent to which all of our financial institutions had become interconnected (such as Fannie Mae and Freddie Mac and all the institutions that owned their debt).

So the fact that Obama would like to claim victory on calling the economic problems is a joke, like many other of the claims he has made throughout his campaign. He is not an expert on the economy, he is a guy who sent a letter way too late, focused on the wrong issue. Now if you say you don’t care about the past and let’s focus on the plans for the future, well his economic “plan” is to raise taxes, up government spending, and to basically bring back welfare in the form of “tax credit” checks to people who don’t pay taxes.

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