An article in the New York Times, September 11, 2003, outlined a proposal by President Bush that would have been “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” His proposal was for an agency within the Treasury Department to supervise mortgage giants Fannie Mae and Freddie Mac. But fearing that mortgages would no longer be available to people who were unable to pay them back, Congressional Democrats and some defecting spineless Republicans eventually killed the proposal.

Senator John McCain joined with three other Republican senators in sponsoring the “Federal Housing Enterprise Regulatory Reform Act of 2005.” The legislation (Senate Bill 190), was introduced in January, 2005, at which time, according to Congressional records, Senator McCain declared, “This week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were ‘illusions deliberately and systematically created’ by the company's senior management, which resulted in a $10.6 billion accounting scandal.”

The Office of Federal Housing Enterprise Oversight's (OFHEO) report went on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. The report of financial misconduct at Fannie Mae echoed the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also stated that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report came some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports for the past two years.

Senator McCain concluded his remarks in 2005, “For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac. OFHEO's report solidifies my view that the GSEs (Government Sponsored Enterprises) need to be reformed WITHOUT DELAY. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”

Ironically, that same month, January, 2005, interim Fannie Mae CEO Daniel Mudd gave special thanks to Barack Obama for his support of Fannie Mae, which is surprising since Obama had just been elected to the U.S. Senate. In that same swearing-in ceremony of the Democratic Congressional Black Caucus Mudd called those assembled the “family and conscience of Fannie Mae.” Somehow I don’t think that’s a compliment in light of facts today.

The 2005 statements by McCain provide a concise synopsis of some of the problems at Fannie and Freddie and now seem almost prophetic. His summation was accurate then, and as we can see now, the problems have grown exponentially. Like the President’s proposal two years earlier, his proposed legislation was defeated before it even got to the floor of the Senate, in large part because of intense pressure from Senator Christopher Dodd (D-Con.) and Representative Barney Frank (D-Mass.). Not coincidentally, they are the chairmen of the Senate Banking Committee and the House Financial Services Committee respectively. The irony is unmistakable, that two of the individuals most responsible for our current financial dilemma are the ones charged with fixing it. Just for the record, the other legislators most influential in killing the legislation were John Kerry, Hillary Clinton, and Barack Obama. Not coincidently, those three, along with Senator Dodd, were the top beneficiaries of campaign contributions from Fannie and Freddie and their employees.

As Charles Calomiris, Professor of Finance and Economics at Columbia Business School said this week in the Wall Street Journal, “The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.”

Over the past ten years the two mortgage giants have dished out over $250 million for lobbyists and campaign contributions. With former Clinton administration officials like Franklin Raines and Jamie Gorelick leading the charge at Fannie, and with such deep pockets, the efforts at reform were effectively blocked. Raines and Gorelick made off with a cool $100 million and $75 million respectively, when they left the company.

Meanwhile, Fannie and Freddie have been throwing money around like there was no tomorrow, which it appears there is none: for them, there is no tomorrow. They have been regular contributors to Jesse Jackson’s Rainbow Coalition. Each year they donate $100,000 and $150,000 respectively at Jackson’s primary fund-raising event. Further, Freddie awarded $1 million to Jackson’s group for a financial literacy program, which Jackson turned around and charged participating churches and organizations $1,000 for.

The “blame game” is probably only of interest to historians, for we know none of these culpable legislators will ever be held accountable, even by the press, for their roles in our current financial crisis. But it is also relevant in the context of a presidential campaign where one candidate gladly accepted the campaign contributions from the failing GSEs and then fought legislation to reform them while the other saw the problems and abuses years ago and tried to reign them in, albeit unsuccessfully. Based on their judgment and their historically documented actions, you tell me which presidential candidate is more legitimate.

Last month Bear Stearns collapsed. This last week the 170 year-old Lehman Brothers did, while Bank of America saved Merrill Lynch from a similar fate. Morgan Stanley and Wachovia are in talks to prevent collapse of their firms. Washington Mutual has been brought to the precipice of illiquidity. AIG (American International Group) has been essentially bought by all of us, and Fannie Mae and Freddie Mac, the largest underwriters of mortgages in the country were similarly saved by the Feds (us). In short, the entire financial landscape is in the process of being restructured.

It’s important to know the origins of the current mortgage market meltdown and the role the Federal Government has had in this collapse. Let’s look at the root causes from a historical perspective.

Tracing the roots of the current milieu we must go back to the Community Reinvestment Act of 1977 (CRA). This Federal law intimidated lenders into offering credit throughout their entire market and discouraged them from restricting their credit services to low-risk markets, a practice sometimes called redlining. Banks were thereafter required to submit regular reports proving that they were not avoiding home lending in impoverished regions. This started the process that has peaked over the past few years of lending with little proof of ability to pay. Lenders were willing to make creative interest-only loans, high-risk “no doc” and “liar loans,” in order to allow people to buy more housing than they could afford. We have come to know these loans as “sub-prime,” or loans issued with much higher recognition of risk. Some economists point to the CRA as a contributing factor to the savings and loan meltdown of the 1980s as they experienced the interest rate squeeze of paying higher and higher interest rates on deposits in order to have the assets to write illiquid long-term mortgages.

In 1992, Boston's Federal Reserve funded a study that resulted in increased pressure on banks to fund mortgages that, on paper, should not have been funded. It increased the regulation of the mortgage market to the point where four government agencies were monitoring banking activities relative to CRA demands. A ranking system was put into place where financial institutions were rated based on CRA lending, and the penalties could be stiff against banks whose CRA rating declined. The data and analysis of that research was later discredited.

In 1994 then Attorney General Janet Reno declared they were going to aggressively pursue lending institutions not in full compliance with the CRA.

At Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants, the temptation to augment earnings reports through expanding sub-prime lending was just too great. Company leaders bragged in internal memos about their expansion into the sub-prime business, essentially erasing the lines of demarcation with “conforming” loans, those which ostensibly fall within what had been the higher lending standards of the two GSEs (government sponsored enterprises).

Jim Johnson, CEO of Fannie Mae, resigned in 1999 under a cloud of suspicion over accounting irregularities. Franklin Raines replaced him and proceeded to “cook the books” even more. Through questionable accounting and questionable funding of sub-prime loans the company’s stock climbed, netting him a cool $100 million payout by the time he left in 2005 under an ethical cloud. Meanwhile, his company was levied a $400 million fine by the SEC for their fraudulent bookkeeping and risk management. There is a political component to this part of the historical timeline, as Franklin Raines and Jim Johnson are now economic advisors for the Obama campaign.

Also in 1999, Congress repealed the law that established a line between commercial and investment banks. This meant bad investments by banks could jeopardize depositors

In 2003 the present administration attempted a reform of government involvement in the mortgage industry. That attempt failed. An attempt was made again in 2005 with John McCain partnering with three other senators to do the same thing. That attempt failed in part because of massive contributions from Fannie Mae to senators’ reelection campaigns. The top recipients of those funds were Chris Dodd and Barack Obama.

What we see now in financial markets, is the market working properly. It is taking out the excesses built into the mortgage market and the investment banks and other financial entities that leveraged heavily into those markets. The casualties have been significant, and there may be more to follow. The most disturbing part of all this is how the Federal Reserve has stepped in along with the Treasury Department, to bail out most of these institutions at the tax-payers expense. Some of the guarantees by the Feds may be repaid, like the $85 billion bridge-loan established for AIG, with an 11.5% interest rate on the loan (that is if they can survive), but the establishment of a Resolution Trust Corporation type buyout of illiquid mortgage securities by the Feds at $.70 on the dollar will likely not be.

If we can look at the lighter side of this mess, the assets now owned by the Feds should probably be named “Securitized Housing Investment Trust.” It would make for a perfect acronym.

In short, the government created the problem by socially engineering the lending process and pushed lenders too far to make mortgages to too many and for too much. The foolhardy governmental mortgage lending policies have brought our financial industry’s “chickens home to roost.” As the Investor’s Business Daily observes, the law of unintended consequences of government policy is now fully manifest. And now the clarion calls for increased regulation are reaching a crescendo among all the political players.

An ideological dichotomy shapes the political landscape in America. On one hand, we have the “feelers.” They are the ones who employ emotions as the primary determinant in how they stand on issues. Whether it’s illegal immigration, national security, Social Security, or the commemoration of the 9/11 attacks, all information is funneled through their “emotion filters” to determine their position on issues.

On the other hand, we have what I would call the “realists.” They are the ones who think through issues and employ a logical process to determine their position on issues. While emotion may have an impact on the deductive process, cognition is the primary factor in defining their stance.

A column earlier this week typified this dichotomy while discussing the national commemoration of the horrific attacks of 9/11. Jodean Albright asserted that we are a divided nation because we haven’t “healed” from the impact of the 9/11 attacks, and that we need to reconcile our emotions of anger over those attacks in order to heal as a nation and be unified. She utilized the emotive words of feel, feelings, heal, and emotion 17 times.

For those of us who strive to look at issues based on logic rather than emotion, 9/11 was indeed a heinous attack upon the country. We were initially motivated in large part by emotion, as we were angry for the attack here on our own soil, and sought swift retribution against those who planned and implemented them. We grieved over the loss of life and still grieve for families and loved ones who suffered such a violent and unwarranted loss on that day. But emotion is far from being the primary motivator in our perspective on the ongoing war on terror that the columnist ascribed to us.

Logic and reason dictate that threats against American interests and lives still exist. The mastermind of the 9/11 attacks is still on the lam, hiding out in some cave somewhere presumably, and other nefarious agents of destruction and terror still exist in the world. In a poll conducted last year 30% of Muslim youth living in America believe it’s acceptable to kill innocents in order to advance a cause. While the vast majority of Muslims worldwide are not inclined to violence, it’s believed that as many as 10% subscribe to the extremist Wahabi sect ideals that calls for killing or conversion of all infidels. If you want to do the math, that’s over 120 million people globally who are potentially of a terrorist mindset.

Those of us who approach this logically are driven more by the awareness of reality rather than emotion, and recognize that the threat still exists for more loss of innocent life and horrendous destruction of American interests, at home and abroad. In this context, commemoration of the attacks of 9/11 serves as a reminder of that existential threat and serves to strengthen our resolve to be vigilant in protecting our country and its citizens. It is not, as proffered by Ms. Albright, a rallying point to keep us all angry and stirred up impeding a healing process to just “get over it.” To her, and others who see the world through spectacles of an emotional hue, the war on terror is based on emotions of vengeance and retribution for those attacks, and we just need to work daily on “healing” in order to unify as a country.

The logical process for those of us who see things through the lens of reality, can be summed up very simply. We were attacked. It may have been preventable. The threat of additional attacks still exists. Therefore, we must be vigilant to prevent additional attacks. In forming this postulate there is no reference to emotion. No revenge, no retribution, and no vengeance. In short, it’s not a matter of “getting over it” and allowing the nation to “heal” over the attacks of 9/11. Rather, we need to be mindful that the threat is still out there and we need to be proactive to successfully vanquish that threat.

A year after the attacks of 9/11, Frank Rich, of the New York Times observed that since major al-Qaida attacks are planned well in advance and have historically been separated by intervals of 12-24 months, we would know soon enough if Bush was doing his job. Well, Frank, we’ve not been attacked since. I, for one, could not have envisioned going 7 years without another major attack. Fox News provides a list on their website of 20 known terrorist attacks prevented since 9/11/01.

To cite a common aphorism, an ounce of prevention is worth a pound of cure. While disconcerting to some, the legislative and executive provisions implemented by Congress and the President over the past few years have undoubtedly had a positive affect on prevention of additional attacks. To me, at least, that’s worth far more than the “pounds” of healing called for by some.

As President Bush has said, the terrorists only have to be right one time, but we have to be right 100% of the time. Perhaps Bush’s success in protecting us for the past 7 years has already led to an attitude of complacency and blissful ignorance about the threat that still exists, which will only be exacerbated if Iran successfully develops their nuclear program.

As long as the threat of terrorism against America exists, we should keep the memory of 9/11 alive and well. It serves to strengthen our resolve to not allow another such attack. What some ascribe to “fear,” I attribute to logic, wisdom, and prevention.

The value placed on a life is so fundamental to our American belief system that it shouldn’t need any commentary. The Lockean creed, upon which our Declaration of Independence is based declares the veritable sanctity of life, liberty, and property (appears in our Declaration as “pursuit of happiness.”)

The debate has persisted for a generation on the legality and morality of induced abortion, succinctly defined as the removal or expulsion of an embryo or fetus by medical, surgical, or other means at any point during human pregnancy for elective reasons.

But what is the value, moral or otherwise, of a child already out of the womb? We regrettably read or hear regularly of mothers who gave birth, only to discard or allow to die their newborn infant. Those mothers, if located, are typically charged with murder for their actions, and we look upon them with disgust and contempt.

So what are we to think of someone who not only condones the killing of newborn infants, but apparently encourages it? Even worse, what are we to think of someone who, while being in a position to protect and defend such newborns, not only refuses to do so, but argues in defense of killing them or allowing them to simply expire?

In March, 2001, a bill was introduced in the Illinois State Senate. That bill stated in part, “A live child born as a result of an abortion shall be fully recognized as a human person and accorded immediate protection under the law.”

What precipitated this legislation was an investigation of a Chicago area hospital that was allowing babies born alive, following botched abortions, to simply die without any medical care. This was not over finances, whether or not the mother had insurance to care for the infant or not, it was simply determined on the part of the hospital that since the baby was intended to be aborted, that even though it was born alive it should be allowed to expire, since that was the mother’s intent. Technically, from a medical perspective, these infants were no different than the many premature babies born on a regular basis throughout the country.

The bill was the Illinois equivalent to the Born-Alive Infants Protection Act, which passed Congress and passed the U.S. Senate by unanimous consent in 2002, and was signed into law by President Bush. It was not designed to confer any rights or legal status upon any baby not yet born, which means it had no legal conflicts with Roe v. Wade, the dubious 1973 Supreme Court decision that legalized induced abortion.

Sen. Obama spoke against the bill on the Senate floor of the Illinois statehouse. Further, he was the only senator to do so. Arguing against the bill, Obama declared: “This is probably not going to survive constitutional scrutiny. Number one, whenever we define a pre-viable fetus as a person that is protected by the equal protection clause or other elements in the Constitution, what we’re really saying is, in fact, that they are persons that are entitled to the kinds of protections that would be provided to … a nine-month-old child that was delivered to term. That determination, then, essentially, if it was accepted by a court, would forbid abortions to take place … This would be an anti-abortion statute.” The bill passed the Senate, but later died in a House committee.

In 2002, the legislation was reintroduced in three separate bills. Obama voted against the two bills that received a vote and, once again, spoke in opposition on the Senate floor. Obama also has opposed restrictions on partial-birth abortion, a late-term procedure that kills a partially delivered living fetus and is considered by some to be tantamount to infanticide.

It’s easy to see why columnist Terence Jeffrey has declared, “Barack Obama is the most pro-abortion presidential candidate ever.” Consequently, if elected, he would undoubtedly become the most pro-abortion president ever. In July 2007, Obama spoke before the Planned Parenthood Action Fund and said: “The first thing I’d do as president is sign the Freedom of Choice Act.” This bill would effectively cancel every state, federal, and local regulation of abortion, no matter how modest or reasonable. It would even, according to the National Organization of Women, abolish all state restrictions on government funding for abortions.

The debate over the morality of abortion will continue, much to the consternation of those of us who think the preservation of human life, whenever it’s declared to be such, is more important than anything else. But what should not be debatable is the viability of a living infant, outside of the mother’s womb, being granted full protection under the law. To allow an infant to simply expire while gasping for breath with the intention of honoring the mother’s wish for an abortion is no different, morally or medically, than the mother that gives birth and then disposes of the baby in a dumpster. That can be considered nothing less than infanticide!

This is not just a poor reflection on the judgment of Senator Obama, but it strikes clearly at the most fundament values our country is based upon. If his personal value system does not allow for the protection of born, living infants, we might legitimately ask, “What are your values, Senator?”