What caused our financial problems?

From my email -- By INVESTOR'S BUSINESS DAILY

Jimmy Carter became our 39th president at the young age of 52. He was a one-term governor from Plains, GA, where he managed the family peanut farm and taught Sunday school. He was also a graduate of the Naval Academy and served seven years in the Navy, leaving as a lieutenant. He came to power in the aftermath of the Vietnam War and the resignation of President Nixon. The public wanted change and someone new, and Carter was an ambitious, hands-on politician who promised better days.

As good as his intentions were, however, the things he tried were not successful. In fact, he created far more serious problems than he ever solved. The centerpiece of Carter's foreign policy was human rights, and he did achieve one noble success - a peace treaty between Egypt's Anwar Sadat and Israel's Menachem Begin. Unfortunately, that later led to Sadat's assassination at the hands of Muslim radicals.

Many people felt Carter was a good man who worked hard and meant well. But he was naive and incompetent in handling the enormous burdens and complex challenges of being president. He wrongly believed Americans had an "inordinate fear of communism," so he lifted travel bans to Cuba, North Vietnam and Cambodia and pardoned draft evaders. He also stopped B-1 bomber production and gave away our strategically located Panama Canal. His most damaging miscalculation was the withdrawal of U.S. support for the Shah of Iran, a strong and longtime military ally. Carter objected to the Shah's alleged mistreatment of imprisoned Soviet spies who were working to overthrow Iran's government. He thought the exiled Ayatollah Khomeini, being a religious man, would make a fairer leader.

Having lost U.S. support, the Shah was overthrown, the Ayatollah returned, Iran was declared an Islamic nation and Palestinian hit men were hired to eliminate opposition. The Ayatollah then introduced the idea of suicide bombers to the Palestine Liberation Organization, paying $35,000 to PLO families whose young people were brainwashed to kill as many Israelis as possible by blowing themselves up in crowded shopping areas. Next, the Ayatollah used Iran's oil wealth to create, train and finance a new terrorist organization, Hezbollah, which later would attack Israel in 2006.

In November 1979, Mahmoud Ahmadinejad and other Iranians stormed the U.S. embassy in Tehran and took 52 Americans hostage for 444 days. Not until six months into the ordeal did Carter attempt a rescue. But the mission, using just six Navy helicopters, was poorly executed. Three of the copters were disabled or lost in sandstorms. (Pilots weren't allowed to meet with weather forecasters because someone in authority worried about security.) Five airmen and three Marines lost their lives. So, due to overconfidence, inexperience and poor judgment, Carter undermined and lost a strong ally, Iran, that today aggressively threatens the U.S., Israel and the rest of the world with nuclear weapons.

But that's not all. After Carter met for the first time with Soviet leader Leonid Brezhnev, the USSR promptly invaded Afghanistan. Carter, ever the naive appeaser, was shocked. "I can't believe the Russians lied to me," he said. The invasion attracted a 23-year-old Saudi named Osama bin Laden to Afghanistan to recruit Muslim fighters and raise money for an anti-Soviet jihad. Part of that group eventually became al-Qaida, a terrorist organization that would declare war on America several times between 1996 and 1998 before attacking us on 9/11, killing more Americans than the Japanese attack on Pearl Harbor.

On Carter's watch, the Soviet Union went on an unrestrained rampage in which it took over not only Afghanistan, but also Ethiopia, South Yemen, Angola, Cambodia, Mozambique, Grenada and Nicaragua. In spite of this, Carter's last defense budget proposed spending 45% below pre-Vietnam levels for fighter aircraft, 75% for ships, 83% for attack submarines and 90% for helicopters.

Years later, as a civilian, Carter negotiated a peace agreement with North Korea to keep that communist country from developing nuclear weapons. He also convinced President Clinton and Secretary of State Madeleine Albright to go along with it. But the signed piece of paper proved worthless. The North Koreans deceived Carter and instead used our money, incentives and technical equipment to build nuclear weapons and pose the threat we face today.

Thus did Carter unwittingly become our Neville Chamberlain, creating with his well-intended but inept, unrealistic and gullible actions the very conditions that led to the three most dangerous security threats we face today: Iran, al-Qaida and North Korea.

On the domestic side, Carter gave us inflation of 15%, the highest in 34 years; interest rates of 21%, the highest in 115 years; and a severe energy crisis with lines around the block at gas stations nationwide. In 1977, Carter, along with a Democrat Congress, created a worthy project with noble intentions -- the Community Reinvestment Act. Over strong industry objections, it mandated that all banks meet the credit needs of their entire communities.

In 1995, President Clinton imposed even stronger regulations and performance tests that coerced banks to substantially increase loans to low-income, poverty-area borrowers or face fines or possible restrictions on expansion. These revisions allowed for securitization of CRA loans containing sub prime mortgages.

By 1997, good loans were bundled with poor ones and sold as prime packages to institutions here and abroad. That shifted risk from the loan originators, freeing banks to begin pyramiding and make more of these profitable sub prime products.

Under two young, well-intended presidents, therefore, big-government plans and mandates played a significant role in the current sub-prime mortgage mess and its catastrophic consequences for the U.S. and international economies. Hardest-hit by the mortgage foreclosures have been the citizens that Democrats always claim to help most -- inner-city residents who fell victim to low or no down payment schemes, unexpected adjustable rates, deceptive loan applications and commission-hungry salespeople.

Now we're having to bail out at huge cost Fannie Mae and Freddie Mac, the very agencies that were supposed to stabilize the system. In time, this should improve the situation. But the party of Carter and Clinton that midwifed our mortgage mess now wants to be trusted to take over and have the government run our entire system of health care!

And everyone is blaming Bush for our current problems.