Alexander Pope’s original quote was, of course, “All’s fair in love and war,” meaning you can get away with anything in those two areas.  Now, as we all know, the entire economy of the United States is threatened with collapse because of supposed “errors and outright fraud on Wall Street.”

Let’s step back a bit.  The crisis began with the financial collapse and federal take-over of the two “private” organizations which insured and/or bundled and marketed a major part of all home mortgages in the U.S.  These two organizations had gone along for decades, serving the public one mortgage at a time.  What brought Fannie Mae and Freddie Mac to “suddenly” collapse?

A decade ago, Congress changed the rules of operation for both institutions.  It ordered banks to broaden their lending into areas where the risks were greater and to make loans to borrowers they previously thought would not pay those mortgages when they came due.  The two institutions would then buy those loans.

Then, those loans were bundled into pools and sold on national and international markets.  They were attractive, because they paid high interest rates, because they were, after all, high risk loans.  The mortgages had low or no down payments.  So all it took was a downturn in the housing markets and many of these loans went below zero in value.  The home owners walked away.  The banks were left with piles of bad paper.

Congress created this problem by telling banks that water would run uphill, that they had to accept bad risks.  But some in Congress realized the danger; in 2003 a new and tight regulation bill on the mortgage giants was introduced in the Senate.  It was roundly defeated there, and seriously attacked in the House.  Who led the charge to stop better regulation of these markets?

In the Senate, it was Christopher Dodd of Connecticut.  Not coincidentally, he received more money from Fannie Mae executives and interests than any other senator or representative.  (He also received a sweetheart, jumbo personal loan, courtesy of the president of Countrywide Mortgage, one of the first financial institutions to collapse.)

The Senate Democrats as a block defeated the reform which could have stopped this train wreck.  Fannie Mae, being a “private” company, spent about $20 million on lobbying.  A brand new senator, Barack Obama of Illinois, managed to become the second-highest recipient of Fannie Mae in Congress, despite his short career in the Senate.

But there was also opposition in the House.  Among the leaders of that was Congressman Barney Frank of Massachusetts.  He denied in the press as late as this year that Fannie Mae and Freddie Mac were in serious trouble.

Congressman Frank was well down on the list of financial assistance from Fannie Mae, but he formerly dated, and referred to as his “spouse,” Herb Moses.  Moses was then assistant director in charge of new markets for mortgage securities at Fannie Mae, including the relaxation of underwriting standards, which led to the current collapse.  Congressman Frank was at all times on the House Banking Committee.  He is chairman of that committee, today.

The specific senators and representatives in charge of the committees which are considering the current bail-out are Dodd and Frank.  Doesn’t that make you just a little nervous, that those who helped create the mess are in charge of solving it?

And then, there is one more wrinkle which Michelle Malkin, a very able reporter, has just dug up. The mortgage failure rates are highest in precisely the jurisdictions which have the highest level of illegal alien “residents.”  The banks have been making mortgage loans to illegals, who could lose their jobs and be deported at any time.  That would seem to be a disqualifying factor to any bank, making a 20- or 30-year loan.

Or am I just nitpicking?

Lastly, the question is, what will happen, or not happen, to get us out of the pickle?  As I write this, I am listening to Senator Obama’s reply to Senator McCain’s initiative.  Obama again blames the crisis on “Wall Street greed,” ignoring the fact that two of his advisers, Franklin Raines and Jim Johnson, were previously officers of Fannie Mae when it was being mismanaged into disaster.

Right now, it looks like Senator McCain will go to Washington, where action needs to be taken.  It looks like Senator Obama will stay on the campaign trail, where words need to be said.