RUSH: This is this morning on Joe Scarborough’s show on Mess NBC. The Treasury secretary, Tim Geithner, was the guest, and the cohostette, Mika Brzezinski, asked Geithner, ‘Is ‘too big to fail’ actually really being prevented here? I mean, you got the system set up and some of these proposals that provide this orderly wind-down for firms that they do. Why not just break ’em up so they’re not so big, so they don’t fail and collapse?’
RUSH: That is your regime speaking about the American private sector. Well, it’s a good bill, tough bill, with teeth, constrains risk-taking. These guys can’t take on this huge risk with leverage, imperil the system again. But if they do we get to put them out of their misery, we get to unwind them, you know, organize the elegant funeral for them. And he sounded diabolically happy, this little egghead of a Treasury secretary. I got a note: ‘Rush, would this financial regulatory reform be this harsh, would the regime want this much control if the Supreme Court had not ruled that corporations could, despite McCain-Feingold, contribute to political campaigns?’ It’s an interesting question. I don’t think it would change the degree to which Obama wants to control things. I do think it might have an impact on how fast he’s trying to get it done. I thought in the big scheme of things, cap and trade and then immigration — and I thought they’d get to this at some point — but all of this was proposed before the ruling. Dodd came up with this bill, all of this was proposed before the ruling. Now, the intensity with which they want this done I think is a direct result of the Supreme Court ruling.
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RUSH: Odessa, Florida. This is Tom. I’m glad you waited, sir. Welcome to the program.
CALLER: Thanks, Rush. I’m a busy banking executive down here in Florida and third-time caller and I’m going for my hat trick. You’ve agreed with me in the past.
RUSH: Okay, cool.
CALLER: You state that the government is at the cause of the banking crisis, and as a proof of that there’s one very simple question that proves it, and that is: How could any of this banking crisis have occurred if Fannie and Freddie did not exist to begin with?
RUSH: Explain that.
CALLER: Well, they are governmental agencies that buy mortgages from on the banking system, and it’s government guaranteed. What happened, actually, is that they changed the conforming rules for the purchase of mortgages over time by reducing credit equality — i.e., buying subprimes.
RUSH: Yeah.
CALLER: And also by changing the information requirements — i.e., not requiring income verification —
RUSH: Right.
CALLER: — and that’s what caused all these mortgages to be sucked up by Fannie and Freddie from the banking system. And if the banks didn’t issue conforming loans, then they’re held under contempt under the CRA, the Community Reinvestment Act for not doing mortgages that are conforming to the system.
RUSH: Let me see if I understand. I’ve got 30 secondsIf Fannie and Freddie didn’t exist, these banks would not be able to hold onto these worthless mortgages. They wouldn’t be able to off-load them, so they’d never make them in the first place?
CALLER: And they would have never issued them to begin with.
RUSH: Okay. That’s exactly it. Okay, once I’m told something it’s ‘indwelled’ in my brain forever.
CALLER: And then they were assembled and then they went to Wall Street and did all the slicing and dicing and the CDOs and the derivatives to hedge and all that. But none of it could have happened if those loans weren’t purchased by Fannie and Freddie to begin with which couldn’t have happened if Fannie and Freddie didn’t exist to begin with.
RUSH: Amen. Can’t make it any simpler than that.