The recent letter about deregulation being the cause of the current turmoil in financial markets demands a response. The letter begins with “There is little doubt that…” but the only thing it leaves little doubt about is the author’s lack of knowledge and understanding of government and financial markets.

The source of the current problems is the lending activities we’ve all seen recently, which advertised mortgage loans at 100 percent of value of your home, at low teaser rates, and without verification of credit or income – or even a job. We should have known this would implode.

This activity was initiated and promoted by Fannie Mae and Freddie Mac, two government agencies which insured these loans so they could be sold to investors here and abroad. However, they were not sold as loans, but as obligations secured by the loans. This activity was pushed by Democrats in the Congress who wanted housing finance available to anyone and everyone who wanted it, regardless of the ability to repay. Check the record.

Over three years ago some in Congress realized the dangerous liability building for the government (taxpayers) by the activities of FNMA and FHLMC. These two agencies had not been “deregulated,” they had never even been regulated. Several senators, including Sen. John McCain, sponsored legislation to regulate and rein in the activities of FNMA and FHLMC, but it was defeated by Democrats. These two agencies had given large amounts of money to congressional candidates, most of which went to Democrats. Check the record. Sen. Obama was the second largest recipient, having served only three years in the Senate.

To further compound the problem, this lending activity pushed inflated values in housing in some parts of the country – a bubble which inevitably will burst. When it did, many folks then owed more on their home than it was worth. Who wants to repay such a mortgage? Certainly not those with low income and poor credit.

I speak with some authority on this. Most of us remember the savings and loan problems of 20 years ago. Most savings and loans were federally chartered and were closed. The local banks and savings and loans were state chartered and avoided the pitfalls. The one with which I associated remained profitable and successful. Federal savings and loans were prevented from making anything but fixed rate mortgage loans. When interest rates soared to over 20 percent in the 70s, under Democrat leadership, savings and loans pleaded for the ability to write adjustable mortgages so they could survive. I was present when the Democrat leadership in the Congress said “over my dead body will you get the right to do so.” Thus most savings and loans were left with mortgage assets earning about 6 percent and having to pay over 10 percent to hold deposits. How long could any of them last? Yet the hue and cry by congressional Democrats was against savings and loans managers because they refuse to acknowledge the role played by government in the whole debacle.

The same thing is being repeated today. Democrats want to blame Wall Street, President Bush and even John McCain, who was one of only a few prophetic voices trying to prevent this crisis. For the sake of our future, folks, please wake up. Put the blame where it belongs, or next time it will be even worse.

Barney Beeksma

Oak Harbor