Obama Had No Opinion on Mortgage Reform

October 15, 2008 · Filed Under Economy, Fiscal, John McCain 

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Barack Obama and John McCain are very different when it comes to the issue of mortgage reform.

While Obama has repeatedly assigned blame for the financial crisis on “Republican deregulation,” which is patently wrong, McCain has been able to point back to his demand to take action on the issue.

The Wall Street Journal explains the flaws in Obama’s theory today…

In each of the first two presidential debates, Barack Obama claimed that “Republican deregulation” is responsible for the financial crisis. Most viewers probably accepted this idea, especially because Republicans generally do favor deregulation.

But one essential fact was missing from the senator’s narrative: While there has been significant deregulation in the U.S. economy during the last 30 years, none of it has occurred in the financial sector. Indeed, the only significant legislation with any effect on financial risk-taking was the Federal Deposit Insurance Corporation Improvement Act of 1991, adopted during the first Bush administration in the wake of the collapse of the savings and loans (S&Ls). FDICIA, however, substantially tightened commercial bank and S&L regulations, including prompt corrective action when a bank’s capital declines below adequate levels and severe personal fines if management violates laws or regulations.

Perhaps Obama is thinking about a bill that emerged from the Senate Banking Committee in the Summer of 2005 that would have considerably tightened regulations on Fannie and Freddie.

Oh wait… in that case, all the Republicans voted for the bill in committee, and all the Democrats voted against it.

This is around the time Obama maintains that he wrote a letter to the Treasury Secretary, which indicates that he was aware that subprime loans were dangerous and had to be dealt with.

Assuming he was telling the truth about this, why didn’t Obama step up and vote for the bill?

Well actually, it wasn’t so much that he didn’t step up, because he didn’t do anything. He voted “present”, as he has frequently done.

Unfortunately for Obama, the President doesn’t have the option to say “Present” when legislation comes to him desk.