But nobody listened. Democrats would have nothing to do with warnings, proposals, or a bill to make the necessary corrections needed to avert the Fannie and Freddie problem.
Posted by Tina
The mortgage and banking crisis has Democrat fingerprints all over it. In this important election year we need facts at our disposal. The following article, and excerpts from a White House webpage, provide vital background information in this ongoing saga. Read on fellow Post Scripters:
How the Democrats Created the Financial Crisis: Kevin Hassett – Bloomberg
Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex. But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally. *** Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.
Now that we’ve been armed with an explosive visual…all of this mess is much easier to understand, right? Well not exactly, which is why reading the rest of Mr. Hassetts article would be a smart move for those who haven’t seen it.
Moving on…
Presidents are usually credited (or discredited) for the state of the economy at the end of their term even though they are not charged with writing legislation and even when they have done all in their power to move Congress. Many Democrats today would like to place the blame for all of this mess on greedyJust the Facts: The Administration’s Unheeded Warnings About the Systemic Risk Posed by the GSEs
For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. *** President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President’s repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems. *** 2001 – April: The Administration’s FY02 budget declares that the size of Fannie Mae and Freddie Mac is “a potential problem,” because “financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.” *** 2002 – May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02) *** 2003 – February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that “although investors perceive an implicit Federal guarantee of [GSE] obligations,” “the government has provided no explicit legal backing for them.” As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. (“Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO,” OFHEO Report, 2/4/03) * September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact “legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises” and set prudent and appropriate minimum capital adequacy requirements. * 2004 – February: The President’s FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: “The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and thereforeshould be replaced with a new strengthened regulator.” (2005 Budget Analytic Perspectives, pg. 83) * 2007 – August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying “first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.” (President George W. Bush, Press Conference, The White House, 8/9/07) * December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying “These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I’ve called on Congress to pass legislation that strengthens independent regulation of the GSEs and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon.” (President George W. Bush, Discusses Housing, The White House, 12/6/07)
Ive listed only a few of the notations. The list continues through December of 2007. I urge you to follow the link to read about the many times the president and others in the administration made fervent pleas for Congress to act. Legislation that was proposed by John McCain in the Senate was blocked by Democrats. Among those who opposed reform legislation were Chris Dodd, Hillary Clinton, and Barack Obama all of whom had received donations from Fannie Mae. I also have to question whether the Congress frefused to act in part because they wanted the resulting bad economic situation to use against Republicans in the election…trouble is, they just didnt anticipate that it would end quite this badly and leave a trail leading straight back to them. But it has…and I thought you should know about it.