On 12-17-09, BOB KLAHN said to TIM RICHARDSON:


TR> G.W. Bush warned congress on various occasions that the
TR> mortgage debacle was coming, but was ignored. Congress did


BK>He did? When?

Democrats Were Wrong on Fannie Mae and Freddie Mac - Michael Barone

(usnews.com)



Thursday, December 17, 2009Subscribe |Contact Us |Article IndexSearch U.S.
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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.

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*Durango b301 #PE*