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What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
Different World
If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.
But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.
That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''
Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.
But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.
Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.
There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.
Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.
THIS is a must read;
From 2005
AEI - Short Publications - Regulating Fannie Mae and Freddie Mac (http://www.aei.org/publications/pubID.22514/pub_detail.asp - broken link)
Quote:
Thus, in January 2005, three Senators--Chuck Hagel (R-Neb.), John E. Sununu (R-N.H.), and Elizabeth Dole (R-N.C.)--had introduced tough new legislation to regulate Fannie and Freddie. The legislation was state-of-the-art at the time, and included a carefully developed "bright line" test that was intended to end Fannie's and Freddie's efforts to break out of the secondary mortgage market as their sole allowable field of operations. But the legislation made no mention of limiting the GSEs' portfolios. After the Greenspan testimony, however, that issue suddenly achieved currency, with lawmakers in both the House and Senate saying that they intended to look carefully at whether such a provision should be included in the legislation they were drafting.
The sudden appearance of this new threat changed the attitude of the GSEs toward the legislation. Although they had begun 2005 offering conciliatory statements and suggesting that they had no serious problems with the regulatory proposals that Congress was then contemplating, the GSEs were clearly alarmed by the idea that their portfolios might be limited or reduced. Fannie and Freddie and their constituent support groups--the homebuilders and the realtors, among others--made clear that they would fight limitations on GSE portfolios, and Senator Charles Schumer (D-N.Y.) and other Democrats made clear that they, too, would oppose any effort to limit this aspect of the GSEs' operations.
Obscene and criminal. The electorate needs to know who was responsible for this mess.
The bill that you are talking about was first introduced in 2003 when republicans were in charge of Congress and the White House. Freddie Mac, Fannie Mae Bill in Senate
This bill was reintroduced every session since then. It died in Republican run committees every time. If finally passed in July 2007 under Democratic control of Congress.
Get your facts right - or at least get some facts. Or do you just enjoy lying?
This bill was reintroduced every session since then. It died in Republican run committees every time. If finally passed in July 2007 under Democratic control of Congress.
Exactly. Thank You. And each time the democrats killed it.
Why don't you do your own research? The republicans were in charge the first two times it was introduced - the chairman of the Committee was Shelby - Republican - their inept leadership could not get it to the senate floor. The third time it was introduced in the democratic congress it passed.
The republicans couldn't get it done so that is the democrats fault? But it passes in a democrat controlled congress and they don't get the credit?
But now there really is no practical alternative. John McCain helped create this emergency. He's partly to blame for it. Under the circumstances, rewarding him by voting for him would be perverse.
If there has been one constant in Mr. McCain's legislative record through decades in the House and Senate, it has been his unequivocal support for deregulation. He championed it during his years as chairman of the Senate commerce committee. He campaigned actively and successfully for the very act that scrapped the regulations whose absence created this cascade of bank and insurance-company failures.
"I have a long voting record in support of deregulation," he said back in 2003. It was no idle boast.
It was Bush that wanted to make the road to home ownership easier so he could make it possible for more people to own homes. He did that but now we have more people lossing their homes than ever before too. guess the sword cut both ways. it is unfortunate.
It was Bush that wanted to make the road to home ownership easier so he could make it possible for more people to own homes. He did that but now we have more people lossing their homes than ever before too. guess the sword cut both ways. it is unfortunate.
Wrong. Article from 1999.
Fannie Mae Eases Credit To Aid Mortgage Lending - New York Times (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&sec=&spon=&pagewanted=all - broken link)
Quote:
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
Guess who? Clinton and the democrats in the pocket of F&F.
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