Tuesday, October 7, 2008

And I dare anyone out there to prove me wrong.

Cross posted from Investor's Business Daily http://www.ibdeditorials.com/IBDArticles.aspx?id=308186097284712 Please continue to read on and take notice of my notes (Note from Norm.) Thank you. Norman E. Hooben

Wake Up, America

By INVESTOR'S BUSINESS DAILY Posted Monday, October 06, 2008 4:20 PM PT

A nation that doesn't know history is destined to repeat its serious mistakes. People swayed by carefully crafted political propaganda relentlessly repeated and effectively delivered can easily lose their freedom and way of life.



IBD Series: After The Rescue: Challenges Ahead



How many times have you been told by soaring, almost hypnotic oratory that "the direct causes of our financial crisis and sub prime real estate loan mess were the greedy banks, big corporations and the failed economic policies of George Bush"?

It's common to blame the one in power. This time, however, it's 100% wrong.

Every American, young or old, must be told who was really behind the sub prime loan disaster that threw our economy off track and injured the good people who lost their homes — like those now boarded up in Cleveland and other major cities — plus the millions of other citizens hurt by yet another failed Big Government-run program gone awry.

In 1977, Jimmy Carter and a Democrat Congress created the Community Reinvestment Act mandating that banks make more housing loans to lower-income and inner-city borrowers. It was for a well-intended social cause and even appeared to work in the 1980s. (Note from Norm: In 1985 I was selling real estate in San Antonio, Texas. Having dealt with buyers and mortgage companies I knew then that something was wrong. I didn't figure it out until one of my customers, a first time buyer, ask for my help in trying to renegotiate his mortgage. Upon investigating his alternatives it was clear that Jimmy "The Hypocrite" Carter was truly to blame.)


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But in 1995, President Clinton imposed even tougher regulations that forced banks to make dramatically more sub prime loans to previously unqualified people with lower credit scores in higher-risk areas. (Note from Norm: I didn't figure this one out until 1999 when I stated that Bill Clinton's deregulation legislation was going to destroy the economy. Note that I called it deregulation for that's exactly what it was. Clinton and his cronies repealed the earlier laws that were passed in the 1920's and 30's that were designed to prevent what is happening right now. And that my friends is one of the main reasons Ive repeated the saying, " WAKE UP AMERICA " Further, and that is why I've stated to Senator Shelby et al, "That this financial meltdown is deliberate." It is deliberate because the bi-partisan Clinton-Obama-Bush clan need to destroy the economy to make way for the Amero and their Brave New World called the North American Union. It is bi-partisan in that some Republicans are involved with this new world order (remember former President George Herbert Walker Bush) but it has to be said that over ninety-plus percent are Democrats destined to turn the country into a Socialist State under the United Nations. And I dare anyone out there to prove me wrong.)

Government regulators rated banks by how well they performed in meeting these strict new CRA obligations. Failure to comply meant stiff penalties and limits on mergers, acquisitions and expansion.

Big Government forced the lowering of long-proven safe-lending standards. Most of the more than $1 trillion of new sub prime CRA loans had adjustable rates. Many required no documentation of the borrower's income and little or no down payment.

For the first time, the Clinton regulatory rules allowed and encouraged lenders to bundle the new, riskier sub prime loans with prime loans and sell these packages to other institutions. The first one hit the market in 1997. That tragic blunder let loan originators make their profits faster and eliminate any future risk for those lower-quality loans. It let them turn around and make even more CRA-type loans and sell them off in packages again, with little future risk.

It was a government-sponsored pyramid scheme, with Fannie Mae and Freddie Mac providing the implied government backing by buying ever larger amounts of these risky subprimes.

Freddie and Fannie also became heavy donors to top members of Congress. These included Sen. Chris Dodd, a young Sen. Barack Obama and Rep. Barney Frank, who aggressively defended the highly leveraged, extremely risky lending against any reforms.

Ironically, the Bush administration repeatedly went to Congress in 2004, 2005 and 2006 to obtain stronger oversight and some limits on Freddie and Fannie's reckless subprime lending. And each time, it was voted down by Democrats in Congress, led by Frank, now chairman of the Financial Services Committee.

Bottom line: This whole mess was another Big Government program created, designed and run by Democrats. It started with great intentions but resulted in typically awful unintended consequences that materially hurt the very people they were supposed to help.

Worse, this incompetence put our financial system in jeopardy. It's reminiscent of LBJ's two lost wars — the War in Vietnam and the War on Poverty.

Many government housing projects, though well-intended as part of LBJ's War on Poverty, later deteriorated into slums that became recruiting grounds to get very young new gang members.

That's how we got into this financial mess — and why the $700 billion rescue package was passed. But what about the future? What serious threats does America face in the next five years? The list isn't comforting:

• Iran's Ahmadinejad and his mullah bosses, the leading terrorist country in the world that will have nukes, and want to wipe out Israel and have a world with no USA.

• Al-Qaida and other radical Islamic global terrorists that want to strike us again.

• Putin's resurgent Russia, which desires to take back Georgia and Ukraine, plus give nuclear capabilities to Venezuela and re-arm Cuba and Nicaragua.

• Communist China's increasing military capabilities.

• Foolish decisions that would result in weakening our ability to defend ourselves.

Let's study the "History Repeats Itself" chart of our Nasdaq index from 1992 to October 2008 and how it has remarkably copied in parallel the Dow Jones industrials, pricewise, from the early 1920s up to the beginning of 1938. One reason for this is that while technology changes over time, human nature doesn't.

Hope and fear, good and bad, and other basic drives are always with us. The market is human psychology on display, and history continually repeats itself.

If our Nasdaq market continues to replicate the 1938 to 1942 market, as it did the prior 16 years, what may be in store for us? What happened in 1938 and 1939 and the early 1930s leading up to '38? What vital lesson does knowing history tell us?

To begin with, Germany's Nazi party in 1928 won only 810,000 votes nationally, elected only 12 to the Reichstag and was considered sort of a joke. But the 1929 crash started the Depression, with unemployment soaring and poverty hitting hard, even among the formerly prosperous middle class.

In 1930, the bad economy helped the Nazi party get 6.5 million votes nationally and put 107 deputies in the Reichstag, becoming the second-largest party. By 1933, again due to a poor economy, Hitler became Germany's chancellor. His storm troopers, Hitler Youth and Goebbels' propaganda departments grew rapidly.

In 1935, Hitler announced a draft to build the national army to 500,000. An air force was already in place in violation of the Versailles Treaty. France and England protested but did nothing.

Hitler said he wanted peace and people believed him. But in 1936 he marched into the Rhineland. France did nothing; Hitler said he had no further territorial demands in Europe.

In 1937, he intimidated Austria and took it over. Only Britain's Neville Chamberlain and France protested. Jewish people were sent to concentration camps or extermination centers. Now we're up to the equivalent of 1938 on our Nasdaq chart — where we are today.

Hitler stirs up demonstrations in Czechoslovakia's Sudetenland, claiming ethnic Germans are being persecuted. Britain's Neville Chamberlain visits Hitler in September 1938. Hitler wants Britain and France to let Germany take the part of Czechoslovakia with a German population.

Chamberlain gives in to Hitler's demands; the Munich Agreement gives Hitler Czechoslovakia's Sudetenland. Chamberlain returns to London in triumph with a letter from Hitler declaring he thereafter would continue to work for peace.

Crowds cheered when Chamberlain said, "I believe it is peace for our time."

In Parliament, one man rose to state his opposition: "We have sustained a total, unmitigated defeat." But Winston Churchill was shouted down.

In 1939, Hitler gobbled the rest of Czechoslovakia. Czechs were killed or enslaved. In September 1939, 1.5 million German troops defeated 30 Polish divisions in 18 days, as Russia invaded the rest of Poland from the east. World War II had begun — and Germany rapidly took one country after another until finally Chamberlain was replaced by Churchill in early 1940.

Why dwell on all this history? Well, history tells us that showing weakness or appeasement by negotiating with tyrants is both gullible and dangerous.

When a young JFK after the Bay of Pigs failure met with Khrushchev, the Soviets immediately moved to build the Berlin Wall. It stayed in place for 28 years. Next, the Soviets installed nuclear missiles in Cuba, threatening to turn the Cold War into WWIII.

When a one-term governor from Plains, Ga., became president, he visited our strongest military ally in the Mideast and stopped selling our fighter aircraft to them. And why? Because Jimmy Carter didn't like the Shah of Iran's treatment of Soviet spies who had been undermining Iran.

Carter preferred the exiled Ayatollah Khomeini as a leader because he was religious. So we stood by as the Shah, an ally, was overthrown. Today, Iran is the world's biggest sponsor of terror and is on track to have nukes in five years — all thanks to Carter's naivete.

We'll have to have an older, wiser, far more experienced president to deal with this dangerous threat. We can't have another Carter or another Chamberlain. Incidentally, after Carter lost Iran in what amounted to total incompetence, he visited Leonid Brezhnev.

Brezhnev afterward promptly invaded Afghanistan and Carter said, "I can't believe he lied to me." While Carter was in office, the Soviets took over a number of countries, including Afghanistan, Angola, Cambodia, Grenada, Mozambique, Ethiopia, South Yemen and Nicaragua.

The more Carter talked, the worse it got for the U.S.

Of our three youngest presidents since WWII, Kennedy, Carter and Clinton, Bill Clinton was 46 when sworn in. He was a great salesman and a smart, popular politician.

He had never been in the military and didn't know much about it and was not successful in dealing with al-Qaida, who tested him only one month into office in February 1993, when terrorists trained in Afghanistan bombed the World Trade Center in New York.

That October, al-Qaida hurt us in Somalia when they shot down our Black Hawk helicopters; 73 Americans wounded, 18 killed.

Next, a joint Saudi-U.S. facility was bombed, then our Khobar Towers housing complex. July 1996, al-Qaida defectors tell us their direction; 1998, bin Laden declares "war on America"; 1998, they blew up our embassies in Nairobi, Kenya, and Dar es Salaam; 200 killed, 5,000 injured.

In answer, we fired a couple of missiles into the vacant desert and an aspirin factory. October 2000, the USS Cole was bombed.

The 9/11 report showed that the Clinton administration had up to 10 chances to get bin Laden when they knew where he was, but failed to act.

In 12 different surveys by historians, the most recent in 2005 (and all available on the Internet), America's presidents are ranked: Of the 43 presidents, Ronald Reagan ranked 6th; Harry Truman 7th; Dwight Eisenhower 7th; John Kennedy, 15th; Bill Clinton 22nd; Jimmy Carter, 34th.

Reagan was weeks from being 70 when inaugurated, Truman was 60, and Eisenhower 62; Kennedy was only 43, Clinton 46 and Carter 52. History shows that our very best, most productive, successful presidents were older.

Why? They had the most experience, maturity and sound judgment in defending America.

Harry Truman said our most handsome presidents that to the public looked presidential were Warren Harding and Franklin Pierce.

How did they do? Harding in the 2005 survey ranked 39th, while Pierce ranked 38th. Could they have been a little less tested?

So who do you think history tells us may be the most experienced person we can trust to be commander-in-chief and deal with Iranian terrorists with nukes; Putin's resurgent Russia that backs Iran and wants to give nuclear capability to Venezuela, re-arm Cuba and Nicaragua; an al-Qaida that wants to strike America again; and, let's not forget, up-and-coming China?


The following does not say it all but it's enough to hang all the Democrats starting with Bill Clinton and finishing with Barney Frank. Where is the Attorney General when you need him? - Norm

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