In 2003, President Bush proposed a “significant regulatory overhaul” of Fannie Mae and Freddie Mac, in order to “determine whether the two are adequately managing the risks of their ballooning portfolios.” It didn’t go anywhere. Why?
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.”
The Democrats’ priority on maintaining “affordable housing” is laughable. “Affordable housing” means low property values, which equates to smaller mortgages and, thereby, smaller mortgage payments. Under the banner of anti-discrimination and “war on poverty” policies, Democrats in the Nineties encouraged lenders (in the form of government backing) to loan money to people who were highly unlikely to pay it back. From Investor’s Business Daily Editorials:
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.
Adding more home buyers into the market, thanks to artificially lax lending guidelines, drove up home prices. In order to keep housing “affordable”, interest rates were suppressed (underpricing the risk associated with them), which drove more home owners into the market, which increased prices. This is how a bubble is created. Bush wisely saw that this cycle would eventually lead to major financial problems (like the ones in the papers today), but the Dems didn’t want to put any “pressure” on Fannie or Freddie.
Jump forward a couple of years to when John McCain co-sponsored the Federal Housing Enterprise Regulatory Reform Act of 2005. McCain warned us that “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.” It appears that his prediction was accurate, as the tab for the recent bailouts comes to more than $1,000 for every man woman and child in the country.
McCain’s bill died in committee, under the leadership of Sen. Chris Dodd, a Democrat from Connecticut and chairman of the Banking Committee. Oddly enough, a scandal unearthed this summer involved Dodd receiving discounts and preferential treatment through Countrywide’s V.I.P. program during 2003 and 2004. According to wikipedia, “in 2006 Countrywide financed 20% of all mortgages in the United States, at a value of about 3.5% of United States GDP, a proportion greater than any other single mortgage lender.” Countrywide would have been directly affected by increased regulations, but thankfully they had a friend in high places looking out for them.
Speaking of Countrywide, during the primaries Obama accused Countrywide of “infecting the economy” and helping to create the home foreclosure crisis we are now in the middle of. However, when it came time to look for a running mate, Obama turned to James Johnson to help with the search. According to the New York Sun, Johnson received more than $7 million from the same Countrywide sweetheart program as Dodd.
You can tell a lot about a man by the friends he keeps, but if Obama’s link to Johnson and Johnson’s link to Countrywide isn’t enough for you, consider this from John Gibson of Fox News:
Lehman Brothers’ collapse is traced back to Fannie Mae and Freddie Mac, the two big mortgage banks that got a federal bailout a few weeks ago. Freddie and Fannie used huge lobbying budgets and political contributions to keep regulators off their backs. A group called the center for responsive politics keeps track of which politicians get Fannie and Freddie political contributions. The top three U.S. Senators getting big Fannie and Freddie political bucks were democrats and number two is Senator Barack Obama.
Now, remember, he has only been in the Senate four years but still managed to grab the number two spot ahead of John Kerry, decades in the senate, and Chris Dodd who is chairman of the senate banking committee.
So now Obama and Joe Biden, the running mate James Johnson picked for him, are telling us that Republicans are to blame for the current economic problems.
My lord, take a look at what — who got us in this hole, whose policies. This has been a Republican philosophy of letting Wall Street do what they want and the middle class be damned. It’s about time we change it. If I sound like I’m angry, I am fighting mad for middle-class people who have been the scapegoat of this economy because of the policies of the McCains and the Bushes.
Obama is singing the same song, mocking McCain for stating that “the fundamentals of our economy are still strong” (they are), and claiming that “what we need now is leadership that gets us out. I’ll provide it. John McCain won’t. And that’s the choice for Americans in this election.”
Yes, Americans have a choice this election. On the one hand is a leader who has decades of leadership experience and that warned us all about this problem years before it came to fruition. On the other hand is a politician with less than half a decade of leadership experience, whose party directly contributed to this problem while his historical revisionism has led him to blame everyone but those who are truly responsible for the crisis at hand. I don’t think it’s too tough to see which brand of “leadership” this nation needs.