Posted on 10/02/2008 4:39:35 PM PDT by Jean S
“If your neighbor’s house is burning, you’re not going to spend a whole lot of time saying, ‘Well, that guy was always irresponsible, he always left the stove on, he always was smoking in bed’ … There will be time to punish those who set this fire, but now is the moment for us to come together and put the fire out.”
So says Sen. Barack Obama (D-Ill.) about the Great Financial Crisis. And he’s right. But once the fire is out, I want to learn a lot more about what happened at Fannie Mae and Freddie Mac.
We know that in May 2006, the Office of Federal Housing Enterprise Oversight released a report detailing extensive fraud at Fannie Mae under Franklin Raines, the former Clinton White House budget chief who ran Fannie from 1999 to 2004.
We know that many lawmakers ignored signs of trouble at Fannie and Freddie before that. In a 2004 video now playing on YouTube, California Democratic Rep. Maxine Waters lit into a regulator, saying, “We do not have a crisis at Freddie Mac, and in particular at Fannie Mae under the outstanding leadership of Mr. Frank Raines.”
We know that in 2005, some lawmakers tried hard, but unsuccessfully, to impose discipline on Fannie and Freddie. “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,” said Sen. John McCain (R-Ariz.), a co-sponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005.
And we know that Fannie and Freddie, with significant support on the Hill, stiff-armed all who questioned them. And as they did, they took more and more risks.
Last week, Federal Housing Finance Agency director James Lockhart testified before the Senate Banking Committee.
He told the panel that in 2006 and 2007, Fannie Mae and Freddie Mac ignored “repeated warnings about credit risk.” In those years, Lockhart said, Fannie and Freddie “bought or guaranteed many more low-documentation, low-verification and non-standard [adjustable-rate] mortgages than they had in the past.”
In the first half of 2007, Lockhart continued, 33 percent of Fannie’s and Freddie’s new business was in funky mortgages — compared to 14 percent in 2005.
That suggests that executives from Fannie and Freddie — and mind you, these were the people who came after Franklin Raines — became more brazen even as they faced harsh assessments from regulators and calls for reform from lawmakers.
And then, it all went to hell. “The capacity to raise capital to absorb further losses without Treasury Department support vanished,” Lockhart testified.
As we come to terms with all this, some lawmakers are facing up to what has happened.
Criticized for his role in that 2004 hearing, Alabama Democratic Rep. Artur Davis released an extraordinary statement to Fox News.
“Like a lot of my Democratic colleagues, I was too slow to appreciate the recklessness of Fannie Mae and Freddie Mac,” Davis said. “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 that when it comes to Fannie and Freddie, we were wrong.”
Now, that is a stand-up thing to say.
Davis also sent some blame Republicans’ way, which is surely deserved.
After the fire is put out, there’s going to be a lot more of it.
York is a White House correspondent for National Review. His column appears in The Hill each week.
E-mail: byork@nationalreview.comThis email address is being protected from spam bots, you need Javascript enabled to view it
Yeah, sure. If the RATs win the trifecta in Nov and I can assure you, this will go the way of CHICOM CAMPAIGN MONEY and John Huang.
OW Fatso Freddie and sister Fattie Fannie used exactly the Chicago-style politics Obama uses. That’s so phat!
WRONG Byron. We need to know NOW. GWB should make it the last thing he does as POTUS starting NOW.
Yeah, but in this case, my neighbor is an arsonist.
Think of it this way. Remember in the Godfather movie when people would ask Don Corleone for a favor. A return favor sometime in the future would be expected. It is the same here.
If these corrupt Senators and Congressmen were to go against the big money, it would dry up. So, it is better to screw the voter/taxpayer than to screw up the money tree.
Couldn’t be more wrong.
We need to put out the fire first.
Glad you’re not my neighbor.
I respectfully disagree. Protect your property boundary, and let the arsonist neighbor's house burn itself out. Convict the perp who gave your neighbor the Molotov cocktail. I owe nothing to the irresponsible (or simply moronic) neighbor.
I do not agree that this is the time for us to come together and put the fire out without finding out how the fire started in the first place. Otherwise the same stupid if not criminal behavior will continue.
Bump......
The ARSONIST is on the loose still and poiting fingers at the people trying to put out the fire. The arsonist has planted a BOMB so that the firemen will be BLOWN UP!
Wow Ann, your analogy is 10 times better than York’s.
And in the years mentioned, the housing bubble inflated prices tremendously in some areas. That makes it impossible for the owners of the mortgages (Freddie/Fannie) ever to get back anything close to the amount they loaned on these inflated houses.
Letting the Arsonist put out the fire w/gasoline is a insanity.
Pray for Gov Palin and Our Troops
Raines will probably be Obama’s sec treasury.
“If your neighbor’s house is burning, you’re not going to spend a whole lot of time saying, ‘Well, that guy was always irresponsible, he always left the stove on, he always was smoking in bed’ … There will be time to punish those who set this fire, but now is the moment for us to come together and put the fire out.”
No, if the house is already burning, you immediately get the people out of the burning house and let the house burn. . . .
Laughable, the Democrats engineered this failure by injecting political will into business decisions.
Nothing bad will happen to any Democrat involved, a promotion of some kind and/or a boost of campaign funds from the DNC, but that's it.
Shout this from the mountain tops.
Put the fire out?
Dreamer!
This fire ain’t goin’ to be put out.
The Bail out will only keep our economy together
until shortly after Nov 4th.
This is a major grift, and a hoodwinking of the US public.
700 Billion is not nearly enough to reverse the credit crisis. Its like pissing into a force 5 wind.
We are on a banking crisis irreversable track.
Throwing 700 billion at it to banks that have shareholders who will sell their stock back to the banks as soon as the bail out happens, is what will cause continued failure.
The 250,000 FDIC insurance limit increase is to make sure that bank shareholders will get their money when the SEC shuts down a bank without notice, so the major shareholders ( Bank executives and directors who hold major share blocks in their own banks) will still get their money.
If you want to understand what happens in such a bank crisis read this. Then you will understand.Japan had an identical crisis from 1990 to 2000.
http://www.imf.org/external/pubs/ft/wp/2000/wp0007.pdf
How can you put a fire while the arsonist is still out and about tossing Molotov cocktails? Shoot the arsonist first. Then worry about the fire.
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