The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
The Democrats reaction?
Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.
Obviously, Nancy Pelosi's doesn't remember that - nope, she and the Dems bear no responsibility for what has happened. Nothing to see here, move along, nothing at all ...
Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the “trickle-down” economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.
But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street’s most revered institutions.
Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.
The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but “predatory.”
Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the ’90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.
And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.
As soon as Clinton crony Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud.
Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million.
Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses.
In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk.
But it was too little, too late. Raines had reportedly steered Fannie Mae business to subprime giant Countrywide Financial, which was saved from bankruptcy by Bank of America.
At the same time, the Clinton administration was pushing Fannie and her brother Freddie Mac to buy more mortgages from low-income households.
The Clinton-era corruption, combined with unprecedented catering to affordable-housing lobbyists, resulted in today’s nationalization of both Fannie and Freddie, a move that is expected to cost taxpayers tens of billions of dollars.
No, Nancy, Democrats had nothing to do with it. It’s not a failure of government it’s all the bankers fault.
No wonder Congress is currently at the lowest approval rating in history. You’re running it.
Why SHOULD she take any of the blame? I mean, even though her filthy party has controlled the Congress for the last two years, heaven knows that THEY aren’t responsible for ANYTHING. Even if there was undeniable evidence that the dems had been warned every hour of every day for the past two years that this financial crisis was coming, it would STILL be Bush’s fault. The MSM would see to that. I do have to chuckle ruefully at dem claims back in ’07 that they would conduct "oversight" of the administration; looks like they missed the boat... again.
This demonstrates a broader problem with our democracy. We have the on the one hand demands for Washington to "do something" about an increasing number of problems, from standardized testing to hurricane relief to steroid use by baseball players. On the other, Congress has become increasingly adept at ducking any responsibility: it’s always the president’s fault (especially if the president is a Republican, as he has been for all but twelve of the past forty years). In short, Congress is making themselves increasingly irrelevent. Is it possible that, if this state of affairs continues, some future president will start wondering why we even need Congress?
I like the part about how Bush "mismanaged" the economy. Like it’s the job of the president to sit in the Oval Office like the Wizard of Oz, pulling all the right strings and pressing the right buttons (or maybe saying the right incantation, since increasing numbers of "liberal" Democrats I meet, particularly females and feminized males, are into New Age stuff), and making the economy run right. Because, you know, presidents can actually do that!
As I often tell "liberals" complaining about Bush and the economy: "So in this instance, them you would like Bush to be MORE of a fascist?"
Bilwick, you would think the dems basically take the country to a bunch of idiots who don’t understand where the real power in our government lies, the pres is ALWAYS at the mercy of the Congress, no law can be passed unless Congress allows it, end of story, no debate, done. Congress ALWAYS has the final veto. To try and move the blame to Bush alone is preposterous.
I [McCain] join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.
Open Secrets has the list of Congressmen who have benefited from Fannie Mae/Freddie Mac largesse since 1989 (inclusive). Remarkably, after only serving less than four of those 20 years, Barack Obama has vaulted to the #2 position on Capitol Hill. Only Dodd outstripped him. He took more than six times the amount that McCain received in a 20-year period.
The record shows that McCain saw the problem coming and tried to get Congress to act. In 2005, both McCain and Obama served together in the Senate. Did Obama attempt to pass this reform, sign on as a co-sponsor, or even speak out in its favor? The record is tellingly blank.
True enough, josh jr.; but my point (however I much I may have failed to indicate it) was much broader: that even if the president did have the Constitutional power to "manage" the economy, like some sort of priest-king w, it’s absurd to think that even with economic advisers counselling him, he could be that all-knowing to just sit back and as if by wizardry snap his fingers and make the economy prosper. I doubt if Congress could do that if they wanted to. If Nancy Pelosi and Harry Reid have any great grasp of economics they’ve managed to keep it hidden so far. The best they could do is get out of the way and let the people who can create wealth do what they do and . . . well, create wealth.
We’ve been crediting and/or blaming the President for as long as I can remember and I never understood why.
The answer is - the media.
The same people who will willingly deliver the lie - the Dem’s don’t have anything to do with the current financial crisis. The same people who will willingly deliver the lie - a reduction in a proposed increase in spending is a "cut". etc. etc. etc.
Looker, it is like LBJ signing the ’64 Civil Rights Act and getting the black vote, despite the fact that more R’s favored the Act and the R’s were the one’s pushing for a civli rights act since the ’40s or even ’30s.
And LBJ knew, hence his "Now we will have the ni**er vote for the next 100 years" comment.