To the editor:

We hope that many read the columns in Tuesday’s Breeze. One was by Thomas Sowell and the other by Mona Charen. Between the two of them, they explained the current financial crisis quite well. For you who do not get the paper daily, let us give you a short recap of that they said.

The very people who are leading the charge to pass this bailout are the very ones who created the problem in the first place. Barney Frank and Christopher Dodd, both Democrats, were urging Freddie Mac and Fannie Mae to increase their lending to people that would otherwise not get mortgages because of their credit rating, in order to allow people to get “affordable housing” through such things as The Community Reinvestment Act passed in 1977, which forced banks to serve their “whole communities” and require them to offer loans to people who were not credit worthy.

In 1995, the Clinton administration’s Department of Housing and Urban Development, headed by Andrew Cuomo, implemented new regulation requiring banks to meet numerical quotas in lending and demonstrate the diversity of their homeowners.

President Bush, who had nothing to do with this, tried, several years ago to get some regulatory agency to oversee Freddie Mac and Fanny Mae. N. Gregory Mankiw, Bush’s chairman of the Council of Economics Advisor warned in 2004 that expecting a government bailout if things go wrong “creates an incentive for a company to take on risk and enjoy the associated increase in return.”

Alan Greenspan came before Congress urging them to create a “regulator with authority on a par with that of banking regulators” to reduce the riskiness of Fanny Mae and Freddie Mac.

It was the Democrats who closed ranks to insulate their pet projects: Freddie Mac and Fanny Mae, from proper oversight and regulation. And when housing prices started to fall, some regulations like the “Mark to Market” accounting rule have taken a serious situation and turned it into a disaster. An estimated 6-7 percent of housing is in default (compared to 40 percent in the 1930s). Under the old accounting system, banks could have managed their losses with patience and time. But the new rules had them base the value of their assets on what they could get for them at any given moment on the open market. So when the prices of homes began to fall, the banks had to reevaluate their portfolios down. As Mona Charen writes in her final paragraph, “The secret good news is that 94 percent of America’s mortgages are sound. Once the liquidity crisis is blunted and bad loans sorted out, taxpayers should see most if not all of their $700 billion back”

It seems to us that this is a case of the foxes guarding the henhouse. Politicians are not bankers. They do what will get them elected, not caring whether or not it is sound economic policy.

And we, the taxpayer, ends up having to bale them out. let the bankers handle the money and let the politicians ruin everything else.

Bill and Doris Heyes

Cape Coral