Democrats Were Wrong on Fannie Mae and Freddie Mac
Corrected on 10/08/08: An earlier version of this article incorrectly stated the year Barney Frank and Herb Moses broke up. They broke up in 1998.
Seventeen. That's how many times, according to this White House statement (hat tip Gateway Pundit), that the Bush administration has called for tighter regulation of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Congress has cooperated only once. In spring 2007, as House Financial Services Committee Chairman Barney Frank likes to point out, the House did pass a bill in response. The Senate did not act until 2008; Senate Banking Committee Chairman Christopher Dodd spent most of 2007 camped out in Iowa running for president. The legislation passed by Congress in 2008 enabled Treasury Secretary Henry Paulson to put Fannie and Freddie into federal conservatorship this summer when they failed. But it didn't prevent them from spewing a huge amount of toxic waste, in the form of subprime and Alt-A mortgages, into our financial institutions from 2004 to 2007. As Stephen Spruiell points out in The Corner on National Review Online, Fannie and Freddie spewed out $1 trillion worth (face value) of subprime mortgages between 2005 and 2007. That's a whole lot of toxic waste. For more detail, consult the items referred to in my previous blogpost on this subject (most of the comments seem to have been disputes about the plot line of the movie It's a Wonderful Life, which I should think could be settled by consulting a reference work).
Much if not all of that could have been prevented by a bill cosponsored by John McCain and supported by all the Republicans and opposed by all the Democrats in the Senate Banking Committee in 2005. That bill, which the Democrats stopped from passing, would have prohibited the GSEs from speculating on the mortgage-based securities they packaged. The GSEs' mission allegedly justifying their quasi-governmental status was to package or securitize such mortgages, but the lion's share of their profits—which determined top executives' bonuses—came from speculation.
John McCain has shied away from making this an issue, for reasons my U.S. News colleague Jim Pethokoukis speculates on. This National Republican Congressional Committee Web ad makes the point McCain has been avoiding. Jim Geraghty of the Campaign Spot blog at National Review Online seems exasperated by the McCain campaign's failure to exploit this issue. Excerpts:
Why can't John McCain and Sarah Palin make the points about how the crisis was built illustrated in the "Burning Down the House" (with the revised music) YouTube video? Could McCain please, please bring up some of this in Tuesday's debate?
Don't the American people deserve to know that Democrat Barney Frank, then ranking member and now chairman of the House Financial Services Committee, said, "I want to roll the dice a little bit more in this situation towards subsidized housing"? Isn't the fact that the ranking Democrat in charge of oversight of Fannie Mae was in a sexual relationship with a high-ranking Fannie Mae executive a glaring conflict of interest? Isn't it worth noting that Democratic Rep. Maxine Waters insisted, "we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines"? Shouldn't the American people know that Democratic Rep. Gregory Meeks insist that "there's been nothing that was indicated that's wrong with Fannie Mae"?
If nothing else, shouldn't we salute Democratic Rep. Artur Davis for saying, "Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong."
I talked with Artur Davis in the Speaker's Lobby Friday during the vote on the financial bailout/rescue package. He reiterated what he said here, and he also makes the fair point that Republicans made some mistakes too. As for the reference Geraghty makes to the fact that Barney Frank's partner Herb Moses worked at Fannie Mae, I think we should keep in mind the fact that Frank and Moses broke up in 1998 and that Moses quit working at Fannie Mae at about the same time. As far as I'm concerned, that's ancient history. And while in retrospect it's clear that Frank was wrong about the GSEs in 2003, he did work with the administration and pushed legislation through the House in 2007, so it seemed he was open to learning from experience.
Finally, check out this Fox News Channel-Fox Business News Channel documentary by David Asman.
Tags: Congress | Democrats | White House | subprime mortgages | Bush administration | Fannie Mae | Freddie Mac
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"It's all about the money"
I've been following the unfolding crisis in great detail utilizing all of the information available on the internet and through the press and media regarding Fannie Mae and Freddie Mac and the whole financial collapse, and unfortunately, can only surmise that "it's all about the money" in politicians', regulators', and Wall Street's pockets. Everyone was overcome by greed and there was no concern for the average citizen, at least until it was way too late...
It will happen again and again because of basic human greed, unless, maybe this time, the coming depression will cause all of those responsible to jump out the window, and be replaced by human beings that are both intelligent and do care.
last sentence was cut short - fixed on this one
Burning Down the House Video
THIS IS WHY MCCAIN HAS SHIED AWAY FROM MAKING THIS AN ISSUE:
In 2002 McCain voted for the Sarbanes-Oxley Act, which passed the Senate without opposition.[53] In 2007, however, McCain stated that he regretted his vote in favor of Sarbanes-Oxley,[54] which strengthened financial reporting requirements for publicly held companies but which has been the subject of complaints from businesses.
THE VIDEO TELLS ABOUT HOW THE DEMOCRATS INCLUDING BIDEN VOTED FOR AND PASSED THE GRAMM-LEACH-BLILEY ACT -
In 1999, McCain voted FOR the Gramm-Leach-Bliley Act, which passed in the Senate by a vote of 54-44.[52] The deregulation bill loosened restrictions on the activities of banks, brokerage houses, and insurance companies.
MORE FROM THE VIDEO:
RE: THE NEW AGENCY TO PROVIDE OVERSIGHT TO FANNIE AND FREDDIE PROPOSED BY GEORGE BUSH:
Quote from the New York Times Article featured on YouTube:
"The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws." YES, McCain voted FOR it. Do you think maybe others voted against it because it JUST PROTECTED FANNIE AND FREDDIE - NOT INNOCENT PEOPLE WANTING LOANS!!!!!
Countrywide and its employees have contributed $1.3 million to political parties, candidates and committees since the 1990 election cycle, according to the CRP. Nearly 60 percent of that went to Republicans and 40 percent to Democrats.
OBAMA TAKING MONEY FROM FANNIE MAE :
Corporations cannot give to candidates, so the center's list adds up contributions from Fannie and Freddie employees and their families. Obama has received a lot of money during his presidential campaign, though, and Fannie and Freddie don't make his list of top 20 companies. (The top three companies with employees donating to Obama are Goldman Sachs, University of California, and Citigroup, according to the center.)
The New York Times looked at contributions from Fannie and Freddie's boards of directors and lobbyists, who are technically not employees. That analysis found Fannie and Freddie-related contributors gave $169,000 to John McCain and his related committees, compared with $16,000 to Obama and his related committees.
Aquiles Suarez, listed as an economic adviser to the McCain campaign in a July 2007 McCain press release, was formerly the director of government and industry relations for Fannie Mae. The Senate Lobbying Database says Suarez oversaw the lending giant's $47,510,000 lobbying campaign from 2003 to 2006.
And other current McCain campaign staffers were the lobbyists receiving shares of that money. According to the Senate Lobbying Database, the lobbying firm of Charlie Black, one of McCain's top aides, made at least $820,000 working for Freddie Mac from 1999 to 2004. The McCain campaign's vice-chair Wayne Berman and its congressional liaison John Green made $1.14 million working on behalf of Fannie Mae for lobbying firm Ogilvy Government Relations. Green made an additional $180,000 from Freddie Mac. Arther B. Culvahouse Jr., the VP vetter who helped John McCain select Sarah Palin, earned $80,000 from Fannie Mae in 2003 and 2004, while working for lobbying and law firm O'Melveny & Myers LLP. In addition, Politico reports that at least 20 McCain fundraisers have lobbied for Fannie Mae and Freddie Mac, pocketing at least $12.3 million over the last nine years.
For years McCain campaign manager Rick Davis was head of the Homeownership Alliance, a lobbying association that included Fannie Mae, Freddie Mac, real estate agents, homebuilders, and non-profits. According to Politico, the organization opposed congressional attempts at regulation of Fannie and Freddie, along the lines of what John McCain is currently proposing. In his capacity of president of the group, Davis went on record in 2003 and insisted that no further reform of the lenders was necessary, in contradiction to his current boss's sentiments. "[Fannie and Freddie] are subject to an innovative and stringent risk-based capital stress test," Davis wrote. "The toughest in the financial services industry."
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