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Republican Congress Talked About Financial Reform, But Did Nothing

By September 18, 2008

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According to the New York Times, in September 2003 the Bush Administration "recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." (tip)
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...

After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall.

The President's call came after "a Freddie Mac accounting scandal" in July.

"It seems that Congress doesn't have the stomach to do anything substantial,'' said Marshall Front, president of Front Barnett Associates LLC, which manages $1.5 billion in Chicago, including shares of Fannie Mae. (quote from July 2003)

It seems Mr. Front was correct.

In 2003, Republicans controlled both branches of Congress (108th) and the White House. What happened to Fannie Mae and Freddie Mac regulatory reform under Republican leadership? Nothing.

Here's what I found when I searched THOMAS for the phrase Fannie Mae for the 108th Congress (2003-2004): eight bills .... but only six appear to relate to this topic, per their title. Of those six, only one was introduced after the White House weighed in (at least rhetorically) in September ... and the prime sponsor of that bill was a Democrat. The other bills seem to have resulted from the July scandal. No bill moved out of committee.

  1. H.R.2022 introduced on 7 May 2003 by Rep. Christopher Shays (R-CT,4).
    Title: To extend the registration and reporting requirements of the Federal securities laws to certain housing-related Government-sponsored enterprises, and for other purposes.
    Latest Major Action: 5/23/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.
  2. H.R.2117 introduced 23 May 2003 by Rep. Pete Fortney (D-CA,13).
    Title: To amend the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act to remove certain competitive advantages granted to the housing-related government-sponsored enterprises relative to other secondary mortgage market enterprises, and for other purposes.
    Latest Major Action: 5/23/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.
  3. H.R.2575 introduced on 24 June 2003 by Rep. Richard H Baker (R-LA,6).
    Title: To reform the regulation of certain housing-related Government-sponsored enterprises, and for other purposes.
    Latest Major Action: 9/25/2003 House committee/subcommittee actions. Status: Committee Hearings Held.
  4. H.R.2803 introduced on 21 July 2003 by Rep. Edward R Royce (R-CA,40).
    Title: To establish the Office of Housing Finance Oversight in the Department of the Treasury to ensure the financial safety and soundness of Fannie Mae, Freddie Mac, and the Federal home loan banks.
    Latest Major Action: 8/4/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.
  5. H.R.2897 introduced on 25 July 2003 by Rep. Julia Carson (D-IN,7)
    Title: To end homelessness in the United States.
    Latest Major Action: 8/25/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on Housing and Community Opportunity.
  6. S.1508, introduced 31 July 2003 by Sen Chuck Hagel (R-NE).
    Title: A bill to address regulation of secondary mortgage market enterprises, and for other purposes.
    Latest Major Action: 4/1/2004 Senate committee/subcommittee actions. Status: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
  7. S.1656, introduced 23 September 2003 by Sen Jon S. Corzine (D-NJ).
    Title: A bill to address regulation of secondary mortgage market enterprises, and for other purposes.
    Latest Major Action: 9/25/2003 Referred to Senate committee. Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
  8. H.R.3507 introduced 18 November 2003 by Rep. Brad Sherman (D-CA,27).
    Title: To expand homeownership opportunities in States having high housing costs.
    Latest Major Action: 1/2/2004 Referred to House subcommittee. Status: Referred to the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

Clearly, in 2003 and 2004 the issue of finance reform was not a priority of the White House or Congressional Republicans.

In the 109th Congress (2005-2006), the House overwhelmingly approved (331 to 90) HR 1461, The Federal Housing Finance Reform Act, designed "to create a stronger regulator for Fannie Mae and Freddie Mac." The Senate, still controlled by Republicans lagged the House in taking action. It is not clear if this was a lack of Republican leadership or blockage by Democratic leadership (filibuster threats). (Shout if you have links to illustrate this impasse.)

HR 1461 remained stalled in the Senate: last action, 31 October 2005, referred to the Committee on Banking, Housing, and Urban Affairs.

On 31 July 2007, after the Democrats obtained control of the Congress in the November 2006 election, House Speaker Nancy Pelosi introduced HR 3221, a "bill to provide needed housing reform and for other purposes." Among other things, the bill granted the newly formed Federal Housing Finance Agency "supervisory and regulatory authority over Fannie Mae, Freddie Mac, and the federal home loan banks (enterprises)" (per CRS analysis).

Pelosi's bill became Public Law 110-140 on 19 December 2007 110-289 on 30 July 2008.

Comments

September 19, 2008 at 11:51 am
(1) Carolyn Drake says:

If y’all can find a copy of THE GREATEST-EVER BANK ROBBERY by Martin Mayer, I highly recommend it. The book chronicles how the Resolution Trust “solution” to the S&L crisis in the 1980s enabled Bush’s family and friends to make out like bandits after thrifts like Silverado in Denver failed. Neil Mallon Bush was on their board, and the bailout cost taxpayers $1 billion.

Remember Charles Keating at Lincoln Savings in Arizona? One of his errand boys in the Senate was none other than John McCain who opined, “land values are skyrocketing” just as they were beginning to collapse. Mayer says, “McCain concealed for months the fact that he had accepted free rides on Keating’s jets for himself, his family, their baby-sitter ~ and had taken vacations at Keating’s Bahamian paradise.”

Deja vu all over again!

September 19, 2008 at 11:54 am
(2) Randy Robison says:

Nice try, but you ignore the bill McCain co-sponsored to eliminate the graft at Fannie Mae/Freddie Mac. It’s on record as S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005. Chris Dodd (D) killed it. The second-highest recipient of political funds siphoned off of this scandal was Barack Obama. You cannot blame this solely on Republicans when Democrats are flush with cash from it. Greed and mismanagement crosses partisan lines.

September 19, 2008 at 2:03 pm
(3) rick says:

I watched the speeches today and McCain REALY showed up Obama. It’s certainly clear who “gets” the economy and is best for the country and the middleclass. I’m really ashamed of Obama. I’m changing my vote to McCain and Palin. All Obama talked about was his Grandma and how women should get paid more. But once again, his actions don’t back up his talk. Obama pays his female campaign supporters less than McCain. Wise up Americans

September 19, 2008 at 2:33 pm
(4) uspolitics says:

Hi, Randy:

I outlined my methodology – because I knew that searching for “Fannie Mae” was a proxy. The issue in **2003** was Fannie Mae and Freddie Mac … and the President made a public statement to that effect.

I fail to see how Chris Dodd could block anything in **2005**, given that Rs controlled the Senate. Please provide some evidence for the claims — was there a Democratic filibuster? Note that I specifically said that in 2005 it was not clear what happened with the House bill when it got to the Senate — whether its failure to move was R leadership or D filibuster threats.

Regardless, the record in 2003-2004 is CLEAR.

Despite public statements from the President and the House and Senate Banking Committee chairs, the Republicans did not see the issue to be sufficiently problematic to make it a priority … unlike, say, the Terry Schaivo case.

Neither did McCain. Obama was still in the Illinois legislature, working on becoming a US Senator.

September 19, 2008 at 2:40 pm
(5) uspolitics says:

Randy, I listed Federal Housing Enterprise Regulatory Reform Act of 2005 … the PRIME SPONSOR WAS CHUCK HAGEL.

Yes, McCain was a co-sponsor — along with two other Senators. So what? I didn’t list co-sponsors of ANY of the bills.

If McCain et al jointly sponsored the legislation, please provide a link to a contemporaneous news account that says that, and I’ll add it.

This distraction (a perceived slight to John McCain) changes nothing about the lack of will on the part of the Republican Party to make financial reform an issue.

September 19, 2008 at 3:28 pm
(6) Harry M. VA Beach, VA says:

This is what I found on the bill, I am sure there is more out there:

http://www.govtrack.us/congress/bill.xpd?bill=s109-190

McCain is on the bill, but as Santorum said the other day on Hannity and Colmes, when told that Obama had co-sponsored 600+ bills that just means he signed his name to it, it doesn’t mean anything. I know this is something Hannity is running with how Mr. Maverick was on top of this, but I think it speaks volumes of his kind of persuasiveness, that he was so unpopular that he couldn’t get this Republican bill passed or even debated, it just died, even with a republican congress and President.

Bottom line to all of this is the bush tax breaks, that people scream can not be removed or our country will fall apart, and republican oversight (actually an oxymoron) leads to where we are now. The Dems had the congress the last year + and did nothing but empty resolutions. And now without consent of Congress Bush is socializing AIG and whatever else he can grab. This is the result of Wild West Economics that have been allowed during the Bush Admin.

September 20, 2008 at 1:16 am
(7) JohnGalt says:

Sorry but you attempt to smear Republicans who did in fact attempt some reform. Your article fails to mention that Democrats blocked any and all attempts at reform.

September 20, 2008 at 11:53 am
(8) rick says:

Exactly right John. I noticed the economy was able to recover from the dotcom drop and the 9/11 impact under a republican congress and it’s been primarily the last year or so under the democratic majority that the economy has deteriorated so much. Conservative principles are simply better for people overall and that’s why they are supported almost 100% by the “genuine” Christian community.

September 20, 2008 at 2:22 pm
(9) Michel Ramey says:

You ignore entirely the roll Obama, Hillary, Biden, Dodd, and other key Democrats in defeating any possible reform of Freddy Mac, and Fanny Mae. This is a matter of record and no amount of damage control is going to change that.
I left the Democrats because they keep moving further and further to the left. Try going toward the center. Stop nominating Left Wing Extremists. The Democrat Party today is just plain devastatingly destructive to our government, the people, and our institutions. Please, Change! Change! Change!

September 20, 2008 at 6:26 pm
(10) uspolitics says:

Dear Mr. Impersonating An Ayn Rand Character

I have done no such thing.

I specifically said, in the main post, that it was possible that Democrats used filibuster to block action on a bill in the Senate in **2005-2006** . But there is no way in hades that they did that in **2003-2004** because no bill came to the floor of the Senate (or the House) for a vote … NO bill moved out of committee.

All the Rs would have had to do would have been to vote party line in the committee and the bill would have moved to the floor. That did NOT happen. This is a failure of leadership.

I have asked for links — I will change the post if someone provides proof of their charges.

But right now, the comment thread is simply hot air — a lot of assertions with absolutely NO evidence.

September 20, 2008 at 6:28 pm
(11) uspolitics says:

To Rick and Michel:

I have not ignored Ds. They were not the party in control of the House or Senate from 2003-2007.

I have specifically “picked on” the three men who publicly said that they would push for FM/FM reform … all of who were Rs … because they did nothing. Reform came when the Ds took control of Congress.

September 21, 2008 at 2:47 am
(12) huh says:

It’s funny that you failed to include the final paragraphs of the NY Times piece:

Significant details must still be worked out before Congress can approve a bill. 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.

September 21, 2008 at 12:08 pm
(13) uspolitics says:

Not “funny” … I was focusing on the promised actions of the President and the two Republican banking chairmen.

The Ds could scream to the high heavens, but the only “power” that they held was that of the filibuster in the Senate. The bills never got out of committee in 2003-2004.

I know Barney Frank has said some pretty stupid things … and believe me, he’ll be in the next piece. But he had no power in 2003-2004.

September 21, 2008 at 3:47 pm
(14) rick says:

And now the Ds have had 2 years in control of the Congress and even less is done. If we had all listened to McCain a couple years ago this may have been avoided. But more important, why in the world will the Ds not support drilling for oil and gas in our country instead of sending enormous amounts of money to the Middle East. There is NO common sense reason for that. Look at it from any angle and it is a positive move. Look what’s happen to the market and your 401Ks in the last year. That’s why we need McCain and Palin in the White House. They are the only option that walks the talk.

September 21, 2008 at 5:05 pm
(15) Amy Jacobs says:

Thank you for a very well researched post. Regarding H.R. 1461, you might add this response from the Bush administration:

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503

October 26, 2005

STATEMENT OF ADMINISTRATION POLICY

H.R. 1461 � Federal Housing Finance Reform Act of 2005
(Rep. Baker (R) Louisiana and 19 cosponsors)

The Administration has long called for legislation to create a stronger, more effective regulatory
regime to improve oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks
(“housing government-sponsored enterprises” or “housing GSEs”) and appreciates the
considerable efforts of Chairman Oxley and Chairman Baker in crafting H.R. 1461. However,
H.R. 1461 fails to include key elements that are essential to protect the safety and soundness of
the housing finance system and the broader financial system at large. As a result, the
Administration opposes the bill.

September 21, 2008 at 5:07 pm
(16) interestedparty says:

Threat of filibuster is not the issue because the bills were effectively killed in Committee.

In 2003, the bills were stalled in Committee and the GOP did not have a large majority (52% – 48%) in the House. Democrats and a handful of Republicans is all it would take to stall/block something. This was Fannie Mae’s strategy, stop it in Committee.

The same thing happened to the Senate Bill co-sponsored by McCain; it was stalled in 2005, reintroduced in 2007 and stalled again. Chris Dodd was a senior ranking member and now the chair of the Committee, and the largest recipient of Fannie Mae/Freddie Mac donations.

More to the point, McCain accurately predicted it and tried to reform the GSE system, along with others. If the GOP did nothing then that contradicts the claim that McCain is just another Bush, because he went against his party and tried to prevent a financial collapse.

In three years, Obama shot up to 2nd on the list in donations from Fannie Mae/ Freddie Mac while Chris Dodd was 1st and received VIP loan treatment. Democrats clearly pushed for subprime lending and opposed efforts at reform. The inner workings of the Committees and the lobbying efforts hopefully will come out. Expect Dem’s fingerprints to be all over it and the denials to be thick.

September 22, 2008 at 5:06 am
(17) Alphast says:

Funny how all the Reps get suddenly touchy. Kathy has previously written about BOTH parties inaction on this topic. She is now detailing the Republicans failure in it (please notice that Reps were in power for 6 years, Dems had a very tiny majority for less than two years). And suddenly all the Reps are whining. And they tell us that Kathy is not objective. Come on guys, this is so hilarious. And for the record, guys who write that they are changing their vote or whatever: please, we don’t care. We don’t know who you were really intending to vote to before and there is no way for us to check. It is so lame that it is pathetic. If that’s the only argument you have, please, put your head back in the sand and let real citizens have a real debate.

September 22, 2008 at 1:37 pm
(18) uspolitics says:

Hi, Amy — thanks for the link to the White House commentary on 1461.

(1) Note that it was introduced in 2005. The President, Oxley and Shelby said in 2003 that they were gonna do something, with the implication that the “something” would be soon. Not two years later.

(2) It is interesting that the president credits both Oxley and Shelby with crafting the bill because the was introduced by Rep Richard H. Baker [LA-6] … and there was NO companion Senate bill. [This is not an appropriations bill, so it did not have to originate in the House.] Oxley is listed as a co-sponsor.

Shelby did nothing with the bill when it came over to the Senate. I’ll check news reports to see what I can find about it.

Thanks again for providing a LINK!

September 22, 2008 at 1:41 pm
(19) uspolitics says:

Hi, Rick:

“And now the Ds have had 2 years in control of the Congress and even less is done.”

Ummm… they finally got a bill through (HR 3221) AND the President signed it. It contained oversight for FM/FM … oversight that Bush called for in 2003, at least rhetorically.

Here’s Bush’s policy statement on 3221: http://www.presidency.ucsb.edu/ws/index.php?pid=76689

“The Administration looks forward to working with Congress on legislation such as FHA modernization and Fannie Mae, Freddie Mac, and Federal Home Loan Bank regulatory reform already moving through the legislative process.”

Then, as now, he opposed restructuring foreclosed mortgages.

September 22, 2008 at 1:54 pm
(20) uspolitics says:

Belated thanks, Carolyn, for the book tip!

September 22, 2008 at 9:05 pm
(21) thwap says:

An excellent post. It must be difficult dealing with people like the cretins in this comments section who repeatedly overlook your very clear points and your very clear statements that you will post about Democratic actions that stalled the needed reforms upon receiving EVIDENCE of these actions.

I had the misfortune to listen to a right-wing talk radio imbecile ranting about this very subject today. At the time I wondered how the Dems could have stopped anything given the Repug majority. After reading these Repug bozos in your comments, I’m still wondering.

September 23, 2008 at 12:32 am
(22) Presley Cannady says:

Um, HR 3221 became became Public Law No: 110-289, and it didn’t pass until this past July.

Somebody needs to learn how to use Thomas.

September 23, 2008 at 1:34 am
(23) Keepin 'em honest says:

Hope this helps, i was just googling to make sense out of this very argument and found this site as well as the OMB watch one, great article on here.

It seems this was not killed by democrats at all. tsk tsk tsk righties.

http://www.ombwatch.org/article/articleview/3116/1/396

Nonprofit Anti-Advocacy Language Proposed for Housing Bill

Supporters of H.R.1461, the Federal Housing Finance Reform Act of 2005, are optimistic it will go to the House floor soon, without nonprofit anti-advocacy language proposed by a group of conservative Republicans. The language would have disqualified any nonprofit that lobbies or carries on other advocacy activities from applying for grants under a proposed new affordable housing program.

On May 25, the House Financial Services Committee passed H.R. 1461, a proposal to strengthen oversight of government-sponsored enterprises (GSE), such as Fannie Mae. The bill creates an independent regulator for the GSEs known as the Federal Housing Finance Agency (FHFA). The legislation is, in large part, a response to accounting irregularities at Fannie Mae and Freddie Mac that came to light in 2004.

Financial Services Chairman Michael Oxley (R-OH) and Financial Services Capital Markets Subcommittee Chairman Richard Baker (R-LA) modified the bill to create an Affordable Housing Fund (AHF). Fannie Mae and Freddie Mac would be required to contribute 5 percent of their after-tax income to this fund. The provision, which prompted committee Democrats to vote for of the bill, has been the center of negotiations between the sponsors and the Republican Study Committee (RSC), which is comprised of conservative House members. RSC members opposed the fund, claiming it would harm private enterprise. After failing to stop the bill in committee, members of the RSC contended that money from the fund will be used to “finance third-party advocacy groups that have agendas far beyond simply increasing affordable housing for low-income Americans.” Rep. Tom Feeney? (R-FL) took an even stronger tone, explaining that he would “rather burn the money then give it to advocacy groups.”

The RSC wrote to then-Majority Leader Tom DeLay (R-TX), opposing the AHF and asking that the bill “not be scheduled for consideration by the full House until these concerns were addressed in the appropriate manner.” DeLay held up the floor vote on the bill, but has since stepped aside as Majority Leader after being indicted in a Texas campaign finance case.

Oxley and Baker are opposing inclusion of the RSC’s suggested anti-advocacy language. Along with Rep. Bob Ney? (R-OH), they circulated a letter on Sept. 20 to colleagues, entitled “The Truth About the Affordable Housing Fund.” The letter clarified misleading information about the AHF put forward by the Republican Study Committee, countering RSC accusations that grants will be used for political advocacy, that the AHF is a “slush fund,” and that it will become an entitlement fund.

To assuage the RSC, Oxley and Baker added a provision that restricts the funds to “the production, preservation, and rehabilitation of rental housing” and “the production, preservation, and rehabilitation of housing for homeownership.” Additionally, administrative and outreach costs are limited to the costs of maintaining the affordable housing fund and carrying out the program. Any organization found to be violating the provision would be permanently banned from receiving additional grants from the fund.

Critics of these restrictions believe they hinder the free speech of AHF grantees, forcing them to choose between receiving federal grants or speaking out on behalf of the people they serve. Many nonprofit groups provide valuable information and perspective that enable Congress and federal agencies to make more informed decisions. Nonprofit advocates fear this would be severely restricted by the language proposed by the RSC. In contrast, the Oxley provision, a restatement of current law, provides ample protection against violations of the prohibition on using federal funds for lobbying. The current system — in place for more than 20 years — works well and does not need to be changed, according to opponents of the RSC restriction.

A companion bill, S. 190, passed the Senate Banking, Housing and Urban Affairs Committee on July 28 by a party-line vote of 11-9 without an affordable housing provision. Chairman and sponsor Richard Shelby (R-AL) reportedly has “deep concerns” about creating a program that would encourage Fannie Mae and Freddie Mac to grow larger. This could be a major sticking point should the House bill pass with the AHF provision.

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September 23, 2008 at 9:36 am
(24) Morgan says:

Are comments closed?

September 23, 2008 at 9:46 am
(25) Morgan says:

I’m not certain in what way the following explains how HR 1461 died (which was referenced in a previous comment):

http://www.ombwatch.org/article/articleview/3116/1/396

It focuses on house actions pertaining to the bill, which was eventually passed by the House in 2005, but then stalled in the Senate. It was received in the Senate on 10/31/2005, and then passed to the “Committee on Banking, Housing, and Urban Affairs”. I was not able to find any info on the bill after that point. Perhaps the Senate’s answer to it was S. 190.

The following link provides some info on what I believe is S. 190:
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_hassett&sid=aSKSoiNbnQY0

The Senate Banking Committee, with all of the Democrats opposing it, passed the bill. It never made it to the Senate for a vote, perhaps because a sufficient number of Republicans would have crossed over to defeat it (the article implies this, but doesn’t explicitly state it).

Another interesting link is:

http://www.aei.org/publications/pubID.22514/pub_detail.asp

September 23, 2008 at 12:49 pm
(26) uspolitics says:

Hi, Morgan .. not closed!

September 23, 2008 at 12:56 pm
(27) uspolitics says:

Hi, Presley — thanks for catching the incorrect copy&paste on when 3221 was signed by the President. However, the link to Thomas and the bill’s introduction date were correct.

Don’t know where I got PL 110-140 — the Energy Independence and Security Act of 2007 — as I wasn’t looking at energy bills.

September 24, 2008 at 1:32 pm
(28) Frank says:

Re: the 2005 reform act, it was sponsored by 4 Republican Senators per the congressional journal. The bill had to get past the committee. It did not. The Dems on the committee voted against it. McCain spoke in front of the Senate on 5/25/06 about the need to reform Fannie Mae and Freddie Mac and the fraud that was occurring within. GovTrack.

September 25, 2008 at 7:06 pm
(29) SlouchingtowardBoulder says:

I agree with Frank above. The author of this “article” is clearly biased and a very poor researcher. Certainly good attributes to be on Sen. Obama’s campaign but, at base, a hack job.

September 25, 2008 at 11:55 pm
(30) uspolitics says:

Hi, Frank & Slouching … there were not enough Ds on the Banking Committee to kill a bill, all by themselves.

The Rs had more members, because the controlled the Senate. Here’s the makeup in 108th – it wouldn’t be that different in 109th.

And Morgan, I spent most of my time here on the 108th Congress, because that was when Bush et al said that they were going to do something. It looks like I need to write a separate article about the 109th, but the only way that the Ds could have stopped something would have been if some Rs also wanted the bill stopped (short of a filibuster).

September 26, 2008 at 2:16 am
(31) Morgan says:

Frank, I read your linked article and came to a different conclusion. I believe the bill was passed by the Banking Committe on a party line vote – all Democrats voting no, and all Republicans voting yes. I believe that is the only committe discussed in the article. Am I incorrect?

uspolitics, I came to the same conclusion as you did. Asuming all of the Democrats would have voted against it, it only would have taken four or five Republican senators to prevent the bill from passing (from memory, D-45, R-54, I-1, but I could be a bit off). Howver, where was the Democratic support for it? Should have the entire responsibility of passing the bill be on the Republicans shoulders?

The dynamics of the analgous house bill were interesting. According to one of the articles I previously posted, the Republicans had to add provisions where money was set aside for such things as low income housing or otherwise the committee Democrats would not vote for it. With the modifications, the bill was approved by the committe and passed the House, but it was never addressed in the Senated (perhaps because of the added provisions … I don’t really know). So, we have a situation where nobody was really watching Freddie and Fannie, the Republicans were at least trying to do something about it, and the Democrats were leveraging the situation to force through their own agenda (which really should have been dealt with separately).

September 26, 2008 at 2:46 am
(32) uspolitics says:

Hi,Morgan:

No, it should not be the responsibility of one party to fix FM/FM. Most of the comments are focusing on the 109th Congress, which was not the focus of my article. I looked in-depth in 108th Congress because that was when the R leadership made bold public statements… pronouncements that were set aside.

I agree with you that bills should not be so, umm, complex. Gone are the days that a bill was surgical in scope; now everything is like a shotgun blast. :-/

That said, I don’t know enough about the two 2005-era bills to comment intelligently. Someone (you?) posted a link that said Bush did not like the 2005-era bill from the House and that he would, I believe, have vetoed it. That would explain why it did not come out of committee. (I could be confused; it’s late.)

Based on this discussion, I know I need to write another piece with equal detail on the 109th Congress. I’ve started a piece on FM/FM scandals from 2003 and 2004 … and for the life of me, I don’t know why all of the folks in Congress weren’t demanding more oversight then! Wowza.

Also, see Thursday’s review of Sweden’s response to a similar crisis in the 1990s …and more detail on why oversight was needed, and pushed for, in 2002!

September 30, 2008 at 2:51 pm
(33) Pat says:

USpolitics,
In your future research on this topic you might look at Paul Gigot’s editorial in the July 23, 2008, Wall Street Journal, “The Fannie Mae Gang.” The interesting thing is there is a link to WJS editorials for the period 2002 through 2008 related to this issue. The commmon theme in those editorials is the WSJ critizing Fannie Mae and their Congressional backers, and their importance now is that these are contemporaneous commentaries during the period you are interested in. I have not reread them. I remember reading some of them when they were written. The WSJ was very critical of the risk the GSEs were taking and the GSE’s congressional backers.
Here is a link http://online.wsj.com/article/SB121599777668249845.html?mod=article-outset-box

September 30, 2008 at 4:23 pm
(34) uspolitics says:

Thanks, Pat. Right now there isn’t time for fingerpointing, but I’m hoping to return to this next week.

September 30, 2008 at 4:25 pm
(35) Mega says:

Rule of 60. McCain did give a good speech re: ’05 reform act…that died in Committee and ended with the following paragraph (from the Congressional Record)…McCain
“I 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.”

If you look at some of the legislation from the 90′s you’ll see where the pressure came for lending to persons that didn’t have the recources.

Not everyone should own a home any more than everyone should go to college. We have got to be realistic about the wants and needs of folks. Home Ownership costs more than just a mortgage, and not everyone has the recourses or interest in maintaining a house and yard, etc. One of my very brightest Chemistry students opted out of college and became a natural landscaper with his own business. He is successful has time for his children and plenty of money in the bank…and no ulcer.

September 30, 2008 at 4:51 pm
(36) Patrick S. says:

Yes, the Republicans had a MAJORITY in both branches of Congress as well as the White House in 2003. That is nothing close to the same as CONTROL. Control is how you described the situation. You simply said that under the Republican leadership nothing happened and that “No bill moved out of committee.” You didn’t drop the other shoe.

The other shoe is that a bill never made it out of committee because the Democrats filibustered the issue to death. Hence, the huge difference between a majority in Congress and control of it.

In your reporting you also failed miserably in addressing the fact that during the debates in 2003 one Democrat leader after another stated that Fannie Mae and Freddie Mac were very solid. Praise was showered upon Franklin Rains. Why would Rains want reform when he made $90 million during a six-year period from Fannie Mae and Freddie Mac?

Way back in 1999, Clinton’s Treasury Secretary Summers warned Congress about systemic risks posed by Fannie Mae and Freddie Mac. Hearings were held but nothing happened then either because Fannie/Freddie provided donations in the millions of dollars to key congressmen and radical groups like ACORN. Chris Dodd received the most donations. And during his extremely short period of time as a U.S. Senator Barak Obama has already received the second most money from Fannie and Freddie. John McCain is about 70th on the list.

Fannie and Freddie were created by Democrats, run by Democrats and protected by Democrats. In 2003 the Dems were saying there was no need for reform. It looks like they were wrong.

Dodd said to Wolf Blitzer, “To suggest somehow that [Fannie Mae and Freddie Mac] are in trouble is simply not accurate.” That was on July 13, 2008!

Now the Democrats in Congress and the Senate have the audacity to blame the problem on “eight years of failed Bush policies” even after Bush sent them 17 letters between 2003 and 2005 urging them to reform Fannie and Freddie.

September 30, 2008 at 5:02 pm
(37) Pat says:

If the WSJ editorials are mostly correct, I don’t believe trying to place blame on one of the political parties is going to be very successful. But there seems to a lot of blame that can be placed on individual congresspersons. That is pertinent today because several of them are positioning themselves to have a lot of say in how the bailout money should be used. Would it bother you to have Jeffery Skilling appointed to an agency that would write rules on the proper conduct of corporate executives?

September 30, 2008 at 7:38 pm
(38) uspolitics says:

Hi, Patrick.

No filibuster on record in 2003-2004 — because no bill moved out of committee. Filibuster can happen only when a bill is on the floor.

Again – this article **focuses** on 2003-2004 — it is not intended to be a full analysis of what Congress did or did not. It is an investigation into what happened after three key Republicans said that they were going to pass a bill.

October 1, 2008 at 12:34 am
(39) this is stupid says:

What is funny to me is that everybody is whining about which party has done what wrong and gets angry, then fueled by the biased media everybody takes sides which gets nothing acomplished.
All sides need to come together and suck up their petty “differences” whatever they are and do whats best for the country!
After all isn’t what they are paid huge salaries and benefits to get done?
These people are our employees and are meant to represent us and our wishes…do more than just write blogs and snipe at others…write or email your representative and tell them to get off their butt and work together or find another job!
OK now you can go back to whining at one another here!

October 1, 2008 at 10:08 am
(40) Pat says:

When you read through the WSJ editorials for the period 2002 to 2008 (there are about 30, http://online.wsj.com/article/SB121599777668249845.html?mod=article-outset-box) related to Fannie Mae and Freddie Mac, it appears that generally what happen is that the GSEs had pretty strong Democratic support and enough republicans to kill (sometimes indirectly) numerous attempts by republicans to bring them under some control. The GSEs had a lot of money to channel to the right democrats and republicans.

Here’s one of many ways they went about killing a 2003 attempt.

WSJ Editorial, October 9, 2003

Sober analysts have been saying for years that Fannie Mae and Freddie Mac are dangerous. And so they have always seemed to us — on paper. But this week, when it became clear that the House of Representatives couldn’t get even a modest regulatory bill out of committee, the dangers became clear in reality.
Congress, which has ultimate oversight over these two government-sponsored hedge funds, was moved to act after a year in which Fan and Fred experienced some financial and corporate governance blowups. Earnings surprises and accounting scandals have demonstrated that Fan and Fred’s current regulator, the Office of Federal Housing Enterprise Oversight, was utterly clueless. Obviously stronger regulatory oversight was needed. The Bush Administration and House Financial Services Committee Member Richard Baker (R., Louisiana) proposed that Fan and Fred be brought under Treasury’s authority.
And then the fun began. At first, Fannie Mae took her usual magisterial tone and welcomed stronger regulation. Franklin Raines, Fan’s boss, testified that he supported the move to Treasury and intoned that he “looked forward to working with Congress and the Administration to adopt the proposal into law this year.”
Behind the scenes, however, Fan has been lobbying her head off against the bill. Fan’s chief objection is to a provision moving the power to approve new products from the Department of Housing and Urban Development to Treasury. But in a three-page paper, widely circulated on Capitol Hill, Fan has also raised major objections to other parts of the legislation. Fannie is nothing if not a bossy and effective lobbyist, and various Congress people started caving in, right and left.
No surprise then that the bill was gutted, leaving Treasury with a limp carcass. But Treasury refused to take delivery, arguing that the gutted bill would cripple its ability to provide significant oversight. Quite sensibly, Treasury does not want the responsibility for Fan and Fred without the authority to police them.
The House Financial Services Committee has now postponed a vote indefinitely. And Representative Baker, who had been working in good faith with Fan and Fred to achieve reform, has pretty much thrown in the towel. After the effort fell apart, he put out a statement blaming them for “obstructionism and mendacity.”
Of course it’s all very good theater. Fan and Fred need to find a credible regulator soon, so they can assure investors that the political risk that has been weighing on their stock prices is at an end. This goal, however, is complicated by a Catch-22. They need a credible regulator to convince the markets that they aren’t risky propositions, but a credible regulator might wring some risk out of their operations and make their returns less attractive to the market. Their too-clever-by-half solution has been to welcome Treasury as a strong regulator but to make sure that Treasury didn’t have any real authority.
Fan and Fred have grown fat on the public purse. Their implicit backing from the federal government has subsidized their speedy growth into two of the largest financial institutions in the country. They are now so big and powerful that they can, apparently, dictate the terms of their existence to Congress.
Lack of accountability in any government-connected enterprise is dangerous. And we are now witnessing that danger firsthand in the fight over regulatory authority. What makes this particularly dangerous is that Fan and Fred’s current regulatory setup has allowed them to indulge in all sorts of risky practices. And the taxpayers are on the hook for risks that go sour.
Simply put, Fan and Fred enjoy private profits at great public risk. There are two ultimate remedies for this problem. Either privatize or nationalize. We have always favored privatization. But if the pair can defeat any serious public financial accountability, privatization is even less likely to make it through Congress. So perhaps the Members ought to consider calling these fundamentally public entities what they truly are, government protectorates that taxpayers are guaranteeing even if they don’t realize it. At least nationalizing Fan and Fred would be more honest about who is really on the hook.

October 1, 2008 at 3:09 pm
(41) Pat says:

Kathy (US Politics),
After reading your post “Republican Congress talked about financial reform but did nothing” I posted a couple of quick comments. And then started going back and reading up on the subject written over those years. I think a more pertinent issue is why did so many congresspersons work so hard to stop any meaningful reform? This is very important because many of those congresspersons are today in leadership positions and influencing the pending financial bailout legislation.

October 3, 2008 at 12:43 am
(42) uspolitics says:

I think you are right, Pat.

October 6, 2008 at 6:03 pm
(43) ub says:

Interesting discussion. I saw Michael Oxley’s name mentioned several times above. I think it worth mentioning that he was a subject of illegal campaign contributions in 2000 thru 2003. See the complaint initiated by the group called “Public Citizen” below:

http://www.citizen.org/pressroom/release.cfm?ID=1557

Freddie Mac was fined 3.8 million dollars as a
result of investigations by the FEC related to this complaint. Here is a news article:

http://www.foxnews.com/story/0,2933,192184,00.html

Now why were the chief lobbyists of Freddie Mac contributing so much to republican campaigns at this time?

October 6, 2008 at 9:18 pm
(44) interestedparty says:

This article comments on how the Democrats blocked S.190 in 2005:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0

“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.”

FYI, it takes 60 votes to overrule a filibuster in the Senate. The Republicans didn’t have 60 votes.

October 7, 2008 at 12:21 am
(45) uspolitics says:

Thanks for the link to a contemporary news account for the 2005 bill. I noted (above):

It is not clear if this was a lack of Republican leadership or blockage by Democratic leadership (filibuster threats). (Shout if you have links to illustrate this impasse.)

Next – has anyone seen a comparison between the 2005 bill and the one the Ds pushed through in 2007-2008?

October 8, 2008 at 2:16 am
(46) Middle of Road says:

Rightwingers/90% racist see what they want to see. H.R. 2803 was the first attempt at reform but was shot down by both the right and left. I have researched it and only found the bill literature, nothing on why it was rejected, who voted which way, and why it wasn’t modified and sent through again. What I found was in line with this article, in that rights talk the talk but don’t walk the walk. In fact how do we even begin to have reform/regulation and republicans in the same sentence, its like oil and water(pun intended). republicans are deregulators by nature and free market capitalists, which would be fine if greed never existed. Huge companies exploit workers and free markets, therefore widening the income gap. In 2005, S.190 was proposed but didn’t pass, from my understanding McCain did support this bill but not right away, in fact 6-12 months lapsed before he sponsored it. For anyone to suggest that McCain is this honorable, trustworthy, reformer is just simply not true. I am not saying that Obama is a saint but the alternative, well there is no alternative.

October 8, 2008 at 2:45 am
(47) Larry Weisenthal says:

The following is an excerpt from letter to the editor of the Wall Street Journal, commenting on a WSJ editorial:

http://wsj.net/article/SB121746628592499215.html?mod=todays_us_opinion

>>In “Paulson’s Fannie Test” (Review & Outlook, July 15), you editorialize, “Had Treasury and Congress acted two years ago, or even three or six months, the current panic could have been avoided.” In fact, the House did act. After a successful committee vote, we passed strong, freestanding GSE reform legislation, H.R. 1461, in the House on Oct. 26, 2005, with a bipartisan vote of 331-90. The bill encountered opposition in the Senate, in the administration, and on the Journal’s editorial page. It died in the Senate.

>>I am proud that the Financial Services Committee acted while the housing economy remained robust. In a noncrisis atmosphere, we produced legislation that would have created a stronger regulator with new powers to increase capital, to limit portfolios, and to deal with the possibility of receivership. Had our legislation become law in 2005, a world-class regulator would have been in place, providing better oversight prior to and during the market downturn.

>>Michael G. Oxley
Washington

>>Michael G. Oxley [R] was chairman of the House Financial Services Committee from 2001 through 2006.

October 8, 2008 at 11:56 am
(48) Pat says:

During 2005 the Wall Street Journal wrote a couple of editorials critical of Oxley’s efforts, essentically calling the “forms” being proposed ineffective. In April 2006 they wrote the following.


• REVIEW & OUTLOOK
• APRIL 27, 2006
Freddie’s Friends on the Hill
It’s well-known that Fannie Mae and Freddie Mac have good friends on Capitol Hill. But last week the Federal Election Commission shed some light on how Freddie Mac rewarded its friends. In a settlement with the FEC, Freddie admitted to illegally raising $1.7 million for candidates from both parties between 2000 and 2003. In 2001 alone, Freddie Mac’s Senior Vice President for Government Affairs boasted of holding 40 fund-raisers for House Financial Services Committee Chairman Michael Oxley.
Unfortunately for Freddie, it is explicitly barred by law from political fund-raising. In the settlement, Freddie agreed to fork over $3.8 million in fines. Yet Freddie probably figures it also got its money’s worth. Genuine reform of the two giant “government-sponsored enterprises” is now stalled on Capitol Hill, thanks in large part to Mr. Oxley’s dutiful service.
Which means it’s time for reformers to turn to Plan B. The Bush Administration could itself take the opportunity to rein in Freddie and Fannie. An overlooked provision of the laws that founded the two companies already gives the Treasury Secretary the power to restrict the duo’s mortgage portfolios that now threaten the U.S. financial system.
First, some background. Fan and Fred have lower costs of capital than their competitors because of the market perception that the government stands behind their debt. This, in turn, is indispensable to their business model. Fannie and Freddie between them hold more than $1 trillion worth of mortgage-backed securities that they’ve bought with this cheaper credit.
To make it all work, Fannie and Freddie must carefully balance the risks that arise from interest-rate movements, mortgage prepayments and the different maturities of their debts and assets. The monumental accounting troubles that both companies have had in recent years centered around how they account for those risks and the hedges they use to mitigate them. The danger that those portfolios could melt down has led critics such as Alan Greenspan and his successor at the Federal Reserve, Ben Bernanke, to warn that Fan and Fred pose a “systemic risk” to the financial system if the size of their portfolios is not reduced.
It took Congress just weeks to pass Sarbanes-Oxley in 2002. But — perhaps because Mr. Oxley has been spending so much time at Freddie’s fund-raisers — it can’t seem to deal with the far larger financial problems at Fan and Fred. A watered-down reform bill has passed the House, but a stronger bill in the Senate shows no sign of being brought up for a vote anytime soon. Securities analysts have been telling investors they believe the drive to rein in the duo is losing momentum. Freddie Mac’s president and COO recently concurred in public. He added that strict limits on retained portfolios would not be in the “best interest of the housing finance industry.” By which he meant the best interest of Fannie and Freddie.
Portfolio limits are, however, in the interest of American taxpayers and the integrity of the financial system. The law requires that the bonds that Fannie and Freddie issue explicitly deny that they are backed by the federal government, but plainly no one believes that. Otherwise, who in their right mind would purchase the debt of Fannie Mae, a company with no financial statements and $11 billion in overstated profit?
This type of situation was foreseen when Fan and Fred were chartered. Which is why the same sections of the U.S. Code that require Fannie and Freddie to disavow any government backing of their debts also require the companies to get the approval of the Treasury Secretary before issuing any debt.
Specifically, the law pertaining to Fannie reads: “[T]he corporation is authorized to issue, upon the approval of the Secretary of the Treasury, and have outstanding at any one time obligations having such maturities and bearing such rate or rates of interest as may be determined by the corporation with the approval of the Secretary of the Treasury . . .” (our emphases). The section of the law dealing with Freddie Mac has similar language.
As we read that, Treasury already has the power to limit Fannie’s and Freddie’s borrowing. What’s more, that authority appears to have been granted specifically out of concern that the debts of the pair might someday be laid at Treasury’s doorstep. But without massive borrowing, neither Fannie nor Freddie could afford to hold the hundreds of billions of securities that they currently do. So limiting their borrowing would require them to decrease the size of their portfolios — and hence the risk to the economy of a blow-up. Meanwhile, their regular business of securitizing mortgages and selling them would be unaffected. It is their repurchase of those mortgages with subsidized credit that needs to be limited.
The Bush Administration has been forceful in calling for Congress to reform how Fannie and Freddie are regulated and run. But if it wants its effort to succeed, it is going to have to show Fan and Fred and their friends on the Hill that Treasury will act if Congress doesn’t.

October 8, 2008 at 2:41 pm
(49) Larry Weisenthal says:

Here’s the reality. There was a bipartisan bill which passed the House in 2005, which would have regulated Fannie Mae and improved its lending standards. This wasn’t a Democratic bill, it was a bipartisan bill.

Now, there were elements of this bill which the White House and Senate Republican leadership didn’t like. So the Republicans killed the House Fannie Mae regulation bill in the Senate. The floated a different bill, instead, and the Republican sponsor of the House-passed Fannie Mae regulatory bill (Rep. Michael Oxley) claimed his bill was opposed by White House “ideologues” (his word) who wanted to privatize Fannie and Freddie and who opposed a bigger government role.

Now, lots of blogosphere Urban Legendists claim that Democrats “killed” this latter bill. They’ve yet to provide the slightest bit of evidence to support this charge. Not a single Republican Senator, including John McCain has made this charge. Given the very high level of GOP support in the House for the Oxley bill, it is entirely plausible that there were insufficient GOP Senate votes to support the bill. What typically happens when there is a disagreement between House and Senate bills, there are meetings and compromises to hammer out a deal. Obviously, the majority of Democrats didn’t oppose substantive regulation of Fannie Mae, despite the exisistence of old CSPAN clips of a few House members saying stupid things from time to time. The obvious truth is that no one — President, McCain, Senate leadership — cared enough circa 2005 – 2006 to do a deal with the House to reform Fannie Mae regulation.

So both Democrats and Republicans favored Fannie Mae regulation. Talk is cheap. Getting the votes is what counts. Fannie Mae regulation was favored in the House by a Democratic majority and a strong Republican minority. A final bipartisan regulatory bill passed by a huge margin. But this bill was killed — truly killed — by the Republican controlled Senate, who obviously did not make a priority of putting together a regulatory bill which would be acceptable to the majority of both Houses of Congress and which the President would sign. The Senate Republicans could have passed a strong regulatory bill along the lines of the House bill. They chose not to do so.

- Larry Weisenthal/Huntington Beach, CA

October 9, 2008 at 12:49 pm
(50) Mark Casper says:

Responding to…
48) Larry Weisenthal says:
Here’s the reality. There was a bipartisan bill which passed the House in 2005, which would have regulated Fannie Mae and improved its lending standards. This wasn’t a Democratic bill, it was a bipartisan bill.

It was NOT a bipartisan bill.

Look here…

http://clerk.house.gov/cgi-bin/vote.asp?year=2005&rollnumber=546

This is the vote you should always look at if you are looking for TRUE partisan interest.

It is called “A motion to recommit” – (ie: kill the bill)

ZERO D’s present that day voted to even HAVE a vote on this bill.

ZERO. Every one (197 for 197) of Pelosi’s minions voted to kill the bill in this procedure called “Motion to Recommit ”

The D’ votes in the final passage were all from those who – only 13 minutes earlier – voted to kill it.

Its called covering your six.

October 9, 2008 at 8:56 pm
(51) Larry Weisenthal says:

I believe that you are in error.

The vote was to recommit WITH INSTRUCTIONS.

Please Google “The motion to recommit”

If the intent were to kill the bill, the motion would be recommit WITHOUT INSTRUCTIONS.

I dont’ have time to explain. But good links will pop up immediately on Google. Be sure to read one which describes modifications by the 104th Congress.

- Larry Weisenthal/Huntington Beach, CA

October 9, 2008 at 9:36 pm
(52) Larry Weisenthal says:

duhh. The other thing worth noting was that Oxley’s Fannie Mae regulatory reform bill had a majority of Democrats voting “yes” but only a minority (albeit substantial minority) of Republicans voting yes. Had the intent been to kill the bill, then the Democrats wouldn’t have had to resort to a “motion to recommit.” All they’d have had to do was vote no, along with the majority of Republicans who voted no. Regulatory reform of Fannie Mae passed the House NOT in spite of the Democrats but rather thanks to the Democrats. Which is why the bill’s author (Oxley) correctly described the bill as being a bipartisan bill.

- Larry Weisenthal

October 22, 2008 at 1:04 pm
(53) Larry Weisenthal says:

Hi, Guys.

Little follow up:

http://ap.google.com/article/ALeqM5jRzoY3Qvz0l_IFNXguiYMSK9ur5AD93TNP1O0

Basically, it was Bill Frist who ultimately “blocked” the Senate bill. There were 25 Republican Senators who signed Senator Hagel’s letter and 29 Republicans who did not sign it, including not only the then-GOP majority leader (Frist), but also the current GOP minority leader (Mitch McConnell).

We now have the complete story of the 2005 attempts to regulate Fannie Mae. A regulatory bill passed in the House, with a majority of Democrats joining with a majority of Republicans to approve the bill, despite speeches against the bill by Barney Franks and Maxine Waters. Some Democrats said dumb things, but a majority of Democrats voted in favor. According to the Bill’s sponsor, Republican Michael Oxley, the bill was opposed by the Bush White House and by the Senate.

We now know the details of the Senate opposition. (story above).

The Democrats did NOT “block” financial reforms in 2005. Which is precisely why neither John McCain nor any Senate Republican running for re-election (including Mitch McConnell) is making that charge. McCain said that he signed a letter supporting reform. We now know what the letter was. And we now know why it didn’t go anywhere.

- Larry Weisenthal/Huntington Beach CA

October 22, 2008 at 3:30 pm
(54) uspolitics says:

Thanks, Larry. I need to return to this – maybe Friday – and talk specifically about the assertions that nothing bad would have happened if Congress hadn’t decided to make it easier for lower income folks to buy homes. I’ve just re-read that argument as offered up by Orson Scott Card, a science fiction writer I respect in his genre — but I have doubts about this argument. I’ve seen only one analysis that looks at the % of “bad” loans that came from this group … and it wasn’t significant.

How can anyone say with a straight face that the problem is _deadbeat homeowners_ when the banking system has leveraged, through “insurance,” liabilities that are several multiples (10?) of the global GDP (all without regulation OR transparency OR any real understanding of underlying risk)?

November 10, 2008 at 10:43 am
(55) BritC says:

Many thanks to the author and all of the contributors to this thread. I have learned more here than in many other blogs about this terrible calamity. As a very partisan R I was distressed to come to the realization that there really was blame to share on our side as well.

One additional fact not mentioned anywhere I’ve seen was the testimony of Treasury Secretary Snow when advocating for reform in 2005 (http://www.treas.gov/press/releases/js2362.htm). In his testimony he makes quite clear that his goal is to limit the portfolios of FM/FM…but then he goes on to say that they could continue to insure mortgages as a means to achieve their affordable housing goals.

“n addition to protecting our financial system against potential systemic risk, it is also very important that our national housing finance system continues to function smoothly and that the GSEs are able to accomplish their missions – in particular their support for affordable housing. Our recommendation to limit the investment portfolios of Fannie Mae and Freddie Mac does not in any way limit their ability to guarantee mortgage-backed securities. In that regard, it is worth noting that Freddie Mac operated a successful credit guarantee business throughout the 1980s with a retained mortgage portfolio that was only a small fraction of its current size. Therefore, given that these core functions of the GSEs are preserved, we see no reason why limits on the GSEs’ retained mortgage portfolios should impair their ability to provide support for affordable housing, including the ability of Fannie Mae and Freddie Mac to meet their affordable housing goals set by HUD.”

If owning 1000 subprime mortgages was risky, what in the world did he think INSURING 1000 subprime mortgages would be? It would seem that even if the Treasury had gotten everything it wished for, we still would have had the collapse and — because of the presumed imprimatur of the US Govt. behind FM/FM securities — the need to bail out investors worldwide.

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