Financial crisis requires
courageous leadership Congressional
Candidate Rich Baker critical of bailouts
Rich Baker, Candidate for
Congress
 A
monumental shift in economic policy hit
America two weeks ago when the US
Government nationalized Freddie Mac and
Fannie Mae, the largest holders of
mortgages in the country. The taxpayers
incurred responsibility for $1.5 Trillion
worth of mortgages. Several days later,
the government took over the AIG
insurance company, America’s largest
insurer, for $85 Billion. Bear Stearns,
Washington Mutual and others have been
merged under edict from the US Treasury.
“This system of corporate welfare is
un-American,” according to
Congressional Candidate Richard Baker.
For years, Congress had imposed
regulations on lenders, almost forcing
them to make loans that could never be
paid back. We all remember the ads:
“no money down”, “we will
pay you to refinance”. This all
worked as long as the housing prices kept
going up. But once the prices stopped
increasing, things started to fall apart.
This caused a domino effect on the
housing market, the mortgage business,
and eventually into the investment banks.
And many fear the dominos have not
stopped falling.
Years ago, banks helped people to buy
houses by regulating how much of a
mortgage they would issue. Their rules
protected homeowners from borrowing too
much. When we bought our first house, the
bank required us to put a maximum of
28-30% of our annual income towards our
mortgage. And the bank required 20% of
the purchase price as a down payment, or
a homeowner had to convince an insurance
company to insure your mortgage against
default. This covered the bank’s
money, but more importantly, it protected
the homeowner from having to decide
between food on the table and defaulting
on the mortgage. “Leisa and I put
down 10% and ate a lot of Macaroni and
Cheese those first few years of home
ownership.”
In the past few years, Congress has tried
to provide home ownership for everyone.
Mortgages were issued with nothing down.
Debt-to-income ratios have been in the
40-50% range. Many homeowners were set up
to buy and borrow more than they could
afford. The decision to starve or default
is occurring daily in America because of
Congress’s policy of giving everyone
a home and a mortgage, whether they could
afford it or not. This is not a
Republican or Democratic problem.
Congress and the administration are
equally culpable. Easy money, no
accountability and yes, greed all came
together in the perfect storm of
financial trouble that we have today.
It is no surprise that we must now pay
for the failures from the past few years.
But how to pay is the question.
Washington’s approach in the past
two weeks has been shocking. Rather than
institute a rational plan, our Government
has been throwing huge quantities of our
tax dollars into specific companies,
nationalizing Fannie Mae, Freddie Mac,
and AIG. And now Washington is asking for
another $700 Billion to spend however the
Treasury desires.
Nationalizing companies is an un-American
approach to the problem. For the past
century the United States has preached to
the world the virtues of democracy and
free enterprise. But when the going began
to get tough, the US Government folded
and started to socialize the economy.
Where is the backbone of our leaders in
Washington?
In America, we need courage to withstand
political and economic pressures. We need
a government that will exercise fearless
leadership in this crisis.
“The success of the United States is
based upon the free enterprise system
under which companies can pursue
innovation and find new avenues to make
money. However, all innovation involves
risk, and often failure. If the US
government removes the ability of
companies to fail, we all become burdened
with the costs, and no one learns the
hard lessons,” says Richard Baker.
“With every new bailout, the seeds
for the next financial crisis are sown.
The economy in general will be stronger
in the long run when the government has
the courage to allow companies to fail.”
For all of the money that the US
Government has spent to buy its way out,
economists are not even sure that the
bailout will work, according to the Wall
Street Journal. Washington is taking a
huge gamble with your money.
A better plan was floated last week to
insure the bad mortgages against default.
This plan would charge lenders an
insurance premium, bringing immediate
income to the US Government and would
focus on the specific mortgages in
default. The number of mortgages that the
government takes over would be much
smaller, and banks would be motivated to
make their mortgages work. In the
bailout, banks can dump their bad
mortgages and then make more bad
mortgages.
An even better solution would be for
private insurance companies to return to
the business of providing private
mortgage insurance, as we paid on our
first mortgage.
American has grown into the largest
economy in the world through free
enterprise and open markets. We need
Congressmen with the courage to hold to
these values. Richard Baker will provide
that leadership in Washington.
Richard Baker is the
Republican candidate for Congress from
the Massachusetts 6th Congressional
District. He faces John Tierney in the
November 4th general election. Baker
currently works as Director of
Intellectual Property Licensing at 3Com
Corporation in Marlborough. He is an
inventor of Ethernet and Web technologies
with 15 US patents to his name. He served
on the Pentucket Regional School
Committee and worked with the committee
as they turned around the finances of the
District. A talented problem-solver, Mr.
Baker has years of solid experience
building teams in the corporate arena
where he created and organized numerous
successful and profitable legal,
engineering, and technical groups. For
more information, call Richard Baker at
978-257-4101, or email at rbaker@richbaker08.com.
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