If you didn’t see this article by Larry Summer’s against the Obama Administration and the handling of the housing crisis, here is it for you. It was posted online and in Monday, October 24, 2011′s edition of the Washington Post. With that said, here is a reply to Mr. Summers.
Dear Lawrence Summers,
I see that you are looking at the housing market in the Washington Post, and writing your views on what the administration should do. I am well aware that you were a part of this administration from the start, and a member of the Democratic party. I am also well aware of the influence you held during the talks for reform, stabilization and the Stimulus Package passed at the beginning of President Obama’s first term.
I am fairly certain that the measures you’ve pointed out in this op-ed piece were presented to the President during your stay in the cabinet with him, so there should be no surprise or confusion as to why Obama has no taken these steps that you’ve outlined in your article. That is a conversation I am sure you have conducted with him, in private, and you know the reasons and justifications for the President’s positions on these matters as well as anyone outside the administration could.
I’m not writing to question your understanding of the markets. I’m not even questioning your understanding of the housing crisis. What I do have concerns about is you’re talking about the “backward-looking resolution” to the problems. In this case, that’s code for “making new regulations”. You’re clearly a proponent of deregulation, while I favor regulation and control of the financial markets. You’re paid by the large banks to support them and to work for them as a lobbyist. I’m not. New regulations preventing this thing from happening in the past is critical.
You spoke about the predatory lending practices that came up during the housing markets, and how Fannie Mae and Freddie Mac were taken over by the government. The loans that Fannie and Freddie ended up holding were banned until Alan Greenspan, Robert Rubin and yourself pushed for more deregulation of the markets. You actively pushed to keep derivatives and credit-default swaps legal and unregulated. You were even a part of keeping the warnings from Brooksley Born from ever resulting in new regulations.
All of the predatory lending that arose in the 2000s was a direct result of trying to turn mortgages into CDOs, which could be bet against by investors. Had the regulations and warnings of Born been implemented, the regulation of these markets would have taken place, the explosion in predatory lending and the subsequent collapse of the markets would have been avoided. All of these events were the result of the actions of you and your cohorts.
Credit-default swaps are considered insurance, which is supposed to be regulated. Yet, the three of you worked to keep them unregulated and uncontrolled. The ability to take out an insurance policy against an item that you don’t hold is illegal when it’s a home or a car. Yet, you allowed the markets to make money based on the value of loans bundled together, and then allowed people to bet these loans would fail, and insure the CDOs which were not even held by the people buying the insurance. And you kept all this behind closed doors until after the fact.
I’m sorry, Mr. Summers. I know you’re a very intelligent person, having attended MIT and Harvard, and working with these markets. I’m also very intelligent and work to uncover the truth. Your response in the Washington Post was simply you blaming the problems of the many on a few terms, saying the President didn’t listen to you about the housing market, and saying that regulation and fixing the existing problems won’t work. You’re working on your agenda, trying to make yourself look like the savior, when really, you were a huge part of the problem. You don’t want regulation, and that’s a fine position to have. You say that trying to stop foreclosures is important. I agree, as do millions who are faced with growing pressures. You say that the President should do more to help everyone. Agree entirely on that point as well. How we do that as a nation, is where we disagree.
I believe that derivatives and credit-default swaps should be regulated and heavily controlled. I believe that the people making the regulations and tasked with enforcement should not be members, present or former, from the firms working on Wall Street. I believe you’ve helped the American people enough during your time in the public eye. You’ve helped them lose their homes, their jobs and their savings. You’ve helped them to see all that is wrong with the financial system in America, and to see how the men on that Time Magazine cover were really working towards Armageddon. The “Three Horsemen of Financial Destruction” is a more apt description.
Please, Mr. Summers, with all due respect, you’re the last person who should be telling anyone how to fix the situation; a situation that would never have materialized had it not been for you and your cohorts meddling with the rules and laws that protected us in the first place. You, sir, should be ashamed of what you’ve caused.
The American People.