The Timeline Project

Let's collaboratively build a timeline of this disaster, starting with when these agencies were formed, tracking the legislation that was not only passed, but proposed, and quotes from who supported and opposed it.

1938 Fannie Mae, or the Federal National Mortgage Association, was founded in 1938. http://www.law.cornell.edu/uscode/html/uscode12/usc_sup_01_12_10_13_20_III.html

1970 Freddie Mac, or the Federal Home Loan Mortgage Corporation, was established in 1970

1990, James A. Johnson went to work for Fannie Mae as the CEO and quickly became its $5 million-a-year chairman. His compensation rose to a reported $21 million by his final year, 1998.

1992 The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 Pub. L. No. 102-550, 1311, 106 Stat. 3941, 3944 (Oct. 28, 1992) codified at 12 U.S.C. 4511.

OFHEO was established by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act). [1] The act gives OFHEO oversight responsibilities over two government-sponsored enterprises, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (hereinafter referred to as the enterprises), to ensure their capital adequacy and financial safety and soundness. 12 U.S.C. 4513. Among OFHEOs duties are to conduct annual on-site examinations of the enterprises, to conduct enforcement proceedings and take enforcement actions. 12 U.S.C. 4517, 4631, 4636.

1995 In 1995, President Bill Clinton's HUD agreed to let Fannie and Freddie get affordable-housing credit for buying subprime securities that included loans to low-income borrowers. The idea was that subprime lending benefited many borrowers who did not qualify for conventional loans. HUD expected that Freddie and Fannie would impose their high lending standards on subprime lenders.

2001 Superior Bank of Chicago went belly up in 2001 with over $1 billion in insured and uninsured deposits. This collapse came amid harsh criticism of how Superiors owners promoted sub-prime home mortgages. Penny Pritzker

Back on January 26, 2005 McCain cosponsored and introduced the Federal Housing Enterprise Regulatory Reform Act (S.190) to regulate Government-sponsored entities such as Fannie Mae and Freddie Mac.

Quote: Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

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.

2007 BAPCPA "is directly responsible for the rising foreclosure rate since the end of 2005," concluded a 2007 study by Credit Suisse.

2008 BAPCPA "is directly responsible for the rising foreclosure rate since the end of 2005," concluded a 2007 study by Credit Suisse. The law "increased foreclosures and the number of homes for sale," echoed a July 2008 study by U.S. Treasury researcher David Bernstein. That study estimated the law had pushed foreclosures or forced sales on 200,000 homeowners since it went into effect.

Okay, since the Congressional record only gives temporary links, I uploaded PDF versions of the transcripts from Lexis onto a website I just created for this purpose.

The website is Bailout - Investigation Portal

HOUSE COMMITTEE ON FINANCIAL SERVICES HOLDS A HEARING ON TREASURY DEPARTMENT'S VIEWS ON THE REGULATION OF GOVERNMENT SPONSORED ENTERPRISES SEPTEMBER 10, 2003

And I now will recognize the ranking member, the gentleman from Massachusetts, Mr. Frank.

FRANK: Thank you, Mr. Chairman.

I appreciate hearing from the two Cabinet secretaries, but I just say at the outset that before we move on any legislation, I would hope we would have some additional hearings. And in particular, I think it's important that the variety of groups in our country who care about housing be invited, because that's my major focus here, as it's been during my service on this committee.

I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government-sponsored enterprises that we're talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We recently had an accounting problem with Freddie Mac that led to people being dismissed, as appears to be appropriate.

I do not think at this point there is a problem with a threat to the treasury. I'm going to say, we have an interesting example of self-fulfilling prophecy.

Some of the critics of Fannie Mae and Freddie Mac say that the problem is is the federal government is obligated to bail-out people who might lose money in connection with them.

I do not believe that we have any such obligation. And as we said that it's a self-fulfilling prophecy based on people. So let me make it clear: I'm a strong supporter of the role that Fannie Mae and Freddie Mac play in housing.

But nobody who invested in them should come looking to me for a nickel, nor anybody else in the federal government.

And if investors take some comfort and want to lend them a little money at less interest rates, because they like this center (ph) affiliation, good, because housing will benefit. But there is no guarantee, there's no explicit guarantee,there's no implicit guarantee, there's no wink-and-nod guarantee. Invest and you're on your own.

I believe that we, as the federal government, have probably done to little, rather than too much, to push them to meet the goals of affordable housing, and they set reasonable goals.

I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios.

I think that's a (OFF-MIKE) problem, the federal government doesn't bail them out. But the more pressure there is there, then the less I think we see, in terms of affordable housing. I want Fannie Mae and Freddie Mac to continue with its government-sponsored enterprises, with some beneficial arrangements with the federal government, in return for which we get both the general lowering of housing costs and some specific attention to low-income housing.

HOUSE COMMITTEE ON FINANCIAL SERVICES HOLDS A HEARING ON H.R. 2575, THE SECONDARY MORTGAGE MARKET ENTERPRISES REGULATORY IMPROVEMENT ACT AND THE ADMINISTRATION'S PROPOSALS ON GSE REGULATION

SEPTEMBER 25, 2003

FRANK: I think this is a very important hearing. And I appreciate the Chairman's willingness to have it under the auspices of the full committee.

I joined this committee in 1981 because I am interested in housing. And I guess I wouldn't want to boast about my accomplishments, because the situation regarding housing, particularly people who are of moderate and low income, has gotten worse during my tenure. I won't accept the blame, but I clearly haven't done a great deal of good.

And it makes it all the more important that we use every tool that we do have to try improve the housing stock.

And Fannie Mae and Freddie Mac are two of the very important tools that we have.

And there are people I know who are critical of the arrangements that we have. I, frankly, welcome the fact that we have in Fannie Mae and Freddie Mac a means of bringing down housing costs that doesn't put a hit on the federal budget.

Essentially, there are people in the country who are prepared to lend money to Fannie Mae and Freddie Mac at less interest rates than they might get elsewhere. I thank those people for doing that. I must tell them that I hope they are not doing that on the assumption that if things go bad, I or my colleagues will bail them out. We will not.

FRANK: Let me ask Mr. Gould and Mr. Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?

Mr. Raines? RAINES: No, sir.

FRANK: Mr. Gould? GOULD: No, sir.

U.S. REPRESENTATIVE RICHARD H. BAKER (R-LA) HOLDS HEARING ON ACCOUNTING AND MANAGEMENT ISSUES AT FANNIE MAE

October 6, 2004 Wednesday

Ranking Member Frank?

FRANK: Thank you, Mr. Chairman.

First, I want to address a little history here. The committee here was well on the way to adopting legislation that would have enhanced the regulatory structure for Fannie Mae and Freddie Mac. In the Senate, in fact, the committee actually voted out a bill. There was some disagreement between the parties over I think a relatively minor section over receivership. I think that could have been worked out.

I believe we were well on the way, the chairman and I and the staffs, to putting together a bill that would have enhanced the regulator and could have passed. What stopped progress on a new bill was the Bush administration's determination to go beyond safety and soundness and into provisions that would have restricted the housing function.

What is powerful here are not Fannie Mae and Freddie Mac, but the interests of a majority of the members of this committee in housing at two levels. First of all, in housing in the conventional market, is very important, and the continuance of Fannie Mae and Freddie Mac are important to that. We also have a subset of issues involving affordable housing, and those are very important to many of us.

What derailed the legislation was an insistence by the Bush administration on going beyond safety and soundness and giving the regulators, for example, particular power to say, "Well, they're going beyond their charter in housing; they should not do these new products." There were specific issues here that transcended safety and soundness or went under it, but the administration was seeking powers that were not related to safety and soundness.

If they were to have dropped that, we would have a law already signed and in place, because on the question of safety and soundness regulation, there has not been a significant dispute.

Mr. Bachus?

BACHUS: I thank the chairman.

First of all, chairman, there have been several remarks made that we would have addressed these issues had it not been for the Bush administration. It is my recollection that the Bush administration actually urged this committee and this Congress to take strong action and that at that time that was in the sort of post-Freddie Mac. At that time, many of the Democratic members accused the Bush administration of going on a witch hunt against Fannie Mae of saying that things were right at Fannie Mae, and that OFHEO was doing a wonderful job, and that there was sufficient regulation, that this was simply to accuse the Bush administration of wrong motives.

It was actually a combination of those in the Senate that did not want to take action, and members of this committee that disagreed with the Bush administration. One thing the Bush administration was concerned about is the new products that Fannie was offering, and they wanted Treasury to approve those new products. It is my recollection that the minority members almost to a person resisted those reforms.

I do think, and I commend Mr. Frank. Mr. Frank actually had it right and more accurately when he said the Bush administration wanted to go further than this committee. I think that is absolutely true. And now all of a sudden, some of the things that the Bush administration wanted to do it seemed like they would have been very prudent things to have done.

So to try to, a month before an election, to try to somehow create a smokescreen that the Bush administration had done something wrong would be inaccurate and would not be factual. Of course, it probably is not surprising either.

HOUSE COMMITTEE ON FINANCIAL SERVICES HOLDS A HEARING ON GOVERNMENT-SPONSORED ENTERPRISES REFORM APRIL 13, 2005

Now I recognize the gentleman from Massachusetts, the ranking member, Mr. Frank?

FRANK: There are three sets of concerns that have been brought out with regard to the government-sponsored enterprises, and I will talk particularly Fannie Mae and Freddie Mac.

But there are two other agendas at stake here. One is the notion that it is inappropriate for the federal government to interfere with the allocate of functions of the capital market. I believe this partly motivates Mr. Greenspan.

There is obviously a very respectable, intellectual tradition that says: The market knows all, the market is smart and government is dumb -- to quote a former majority leader from Texas, a former majority leader from Texas, a current former majority leader from Texas -- and he said the markets are smart and the government is dumb.

And the view is that Fannie Mae and Freddie Mac, with a particular set of legislative and executive arrangements, biases capital allocation towards housing. And there are people who want to stop that. I very much disagree with that.

There are also competitors. There are organizations of people who compete or resent the fact that Fannie Mae and Freddie Mac can borrow money more cheaply than others, because of a perception in the market that we're going to bail them out. I am not going to bail them out, and if they want to lend money to Fannie and Freddie cheaper, that's their judgment. Don't come to me if it doesn't work out.

MARKETPLACE MORNING REPORT SHOW: Marketplace Morning Report 6:50 AM EST SYND May 26, 2005 Thursday

HEADLINE: House committee gives green light to legislation that would tighten regulation of Fannie Mae and Freddie Mac

ANCHORS: KAI RYSSDAL

KAI RYSSDAL, anchor:

A new framework for Fannie and Fred.

Announcer: The MARKETPLACE MORNING REPORT is produced in association with the University of Southern California.

RYSSDAL: From American Public Media in Los Angeles, I'm Kai Ryssdal.

A House committee has given the green light to legislation that would tighten regulation of mortgage giants Fannie Mae and Freddie Mac.

Conspicuously absent from the bill, though, was something both the White House and Federal Reserve Chairman Alan Greenspan have been calling for: sharply limiting how large those companies' holdings can be. Fannie Mae, you might have heard, is an underwriter of this program.

FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 -- (Senate - May 25, 2006)

Mr. McCAIN. Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were ``illusions deliberately and systematically created'' by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

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.

I urge my colleagues to support swift action on this GSE reform legislation.

U.S. SENATE COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS HOLDS A HEARING ON GOVERNMENT-SPONSORED ENTERPRISES REFORM (PART II) APRIL 7, 2005

SHELBY: Senator Schumer?

SCHUMER: Thank you, Mr. Chairman. And I join our ranking member, Senator Sarbanes, in thanking you for holding these extensive and timely hearings.

First, I'd like to say that what I smell in the air is a campaign to virtually eliminate Fannie and Freddie. It's been chosen at an opportune time because they both have regulatory and accounting problems. But many of those who are on this campaign have been out to disable Fannie and Freddie long before the regulatory problems appeared. They are in a sense behaving like opportunistic predators.

And I think there are a whole lot of questions out there that the normally convincing Alan Greenspan really didn't answer yesterday -- or didn't answer at least I think to the satisfaction of many of us -- and there are a lot.

SNOW: OK. Well, let me take the one that -- number four on your list that seemed to be the heart of your concerns.

It isn't anybody's preference that GSEs, quote, "make less money." The preference is that they reflect less systemic risk to the housing market and to the larger financial system.

From my point of view, Senator, that's the heart of the reason why we're meeting here today, it's the heart of this legislation that's being proposed. And this is...

SCHUMER: Sir, are you talking about interest-rate risk?

SNOW: No, I'm talking about the -- well, take a minute and talk about this.

The GSEs have, as reflected in the marketplace, paper that sells for the best spreads except U.S. treasuries, the best spreads, which reflects the market's premium for that paper, saying it's the very best paper except the best paper in the world, which is the U.S. treasuries.

Now, that creates...

SARBANES: I thought the president went somewhere yesterday and looked at these IOUs...

SNOW: West Virginia.

SARBANES: ... and U.S. treasuries and cast doubt about their validity.

SNOW: He cast not one iota of doubt. What he said was, they will be paid, but the question is, how will they be paid, from what financing source and at what burden to the fisc (ph) of the United States?

But the GSEs have this lower borrowing ability. And they have used that over the course of the last decade and a half to accumulate a very, very large portfolio of assets unrelated to making the secondary market. Those are assets that have interest-rate risks to them. And in order to protect against those interest-rate risks, they have wisely engaged in massive hedging activities, derivative trading and hedging activities.

SCHUMER: Is that any different than private sector banks and their hedging activities.

SNOW: Senator, it's different in this regard: They are playing off a sizable advantage which allows them to borrow at rates that are lower than those other institutions.

JACKSON: I think, Mr. Chairman, if I can add...

SHELBY: Go ahead.

JACKSON: ... to what Secretary Snow says -- if we use just common sense terms, major banks can leverage 11 to 1 probably at the most. Fannie and Freddie, in some cases, are leveraging 50 to 1, 60 to 1. That's clearly out of whack.

SCHUMER: Would risk-based capital solve that?

JACKSON: Absolutely. I think it surely would.

SBD

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