Posted on 09/24/2008 4:19:03 PM PDT by NoobRep
Seems I’ve gotten a ton of correspondence regarding the nations current financial fiasco and where to ’stick the blame’. We may not be good at a ton of things but man can we assign blame like nobodies business.
I’m curious to see the reaction to this article and the implications that are clear both party wise, and more specifically candidate wise.
Sept. 22 (Bloomberg) — The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.
Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.
But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.
Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.
In the times that Fannie and Freddie couldn’t make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.
The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.
Turning Point
Take away Fannie and Freddie, or regulate them more wisely, and it’s hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.
It is easy to identify the historical turning point that marked the beginning of the end.
Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.
Then legislative momentum emerged for an attempt to create a “world-class regulator” that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.
Greenspan’s Warning
The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn’t be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie “continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,” he said. “We are placing the total financial system of the future at a substantial risk.”
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.
That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: “It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.”
Mounds of Materials
Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.
But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.
Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.
There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.
Oh, and there is one little footnote to the story that’s worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.
I wish he had put in the 2003 statements by Bush and Barney Frank.
I kind of want to see Shilling run for office. He’s a megalomaniac...but I think he’d be great.
He is a solid fellow - Campaigned for W in 2004
But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.
Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.
We all need to print this out & keep it on hand.
*** Steeerike! ***
Not Obama, he opposed it for political donations. We can actually blame Obama for this whole mess, proving he's unfit and too easily corrupted to ever be allowed near the white house
Doesn’t matter. The press whores have flooded the airwaves and papers with the lie that it is all the Repubs’ fault. And the public believes it. Obama has gained an additional 7 points on McCain on the economy in the past week. Win or lose this time, we must destroy the press whores’ hold on the news.
Never doubt that the Democrats will sacrifice the economy of this nation (and thus the world) for the callow purpose of retaking the White House.
They have already demonstrated their willingness to lose the most important military struggle of our time, just for the sake of power.
They know they have the press in their pockets, and can spin an economic collapse (that will have no effect on their checkbooks) any way they want.
They are so far beyond corrupt, it can’t even be measured anymore. It’s way past anything as simple as money, it’s all about absolute power.
Great article. The mainstream media (big corporate socialist media) are working 24/7 to make sure these facts are hidden.
These commidiots have been caught with their pants down. (If enough people are paying attention.)
The next Jim Bunning? Both former Phils, BTW.
From OpenSecrets.com
QUOTE “Fannie Mae and Freddie Mac Invest in Democrats
Published by Lindsay Renick Mayer on July 16, 2008 5:27 PM
The federal government recently announced that it will come to the rescue of Freddie Mac and Fannie Mae, two embattled mortgage buyers that for years have pursued a lobbying strategy to get lawmakers on their side. Both companies have poured money into lobbying and campaign contributions to federal candidates, parties and committees as a general tactic, but they’ve also directed those contributions strategically. In the 2006 election cycle, Fannie Mae was giving 53 percent of its total $1.3 million in contributions to Republicans, who controlled Congress at that time. This cycle, with Democrats in control, they’ve reversed course, giving the party 56 percent of their total $1.1 million in contributions. Similarly, Freddie Mac has given 53 percent of its $555,700 in contributions to Democrats this cycle, compared to the 44 percent it gave during 2006.
Fannie Mae and Freddie Mac have also strategically given more contributions to lawmakers currently sitting on committees that primarily regulate their industry. Fifteen of the 25 lawmakers who have received the most from the two companies combined since the 1990 election sit on either the House Financial Services Committee; the Senate Banking, Housing & Urban Affairs Committee; or the Senate Finance Committee. The others have seats on the powerful Appropriations or Ways & Means committees, are members of the congressional leadership or have run for president. Sen.Chris Dodd (D-Conn.) chairman of the Senate banking committee, has received the most from Fannie and Freddie’s PACs and employees ($133,900 since 1989). Rep. Paul Kanjorski (D-Pa.) has received $65,500. Kanjorski chairs the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, and Freddie Mac and Fannie Mae are government-sponsored enterprises, or GSEs.
Top Recipients of Fannie Mae and Freddie Mac
Campaign Contributions, 1989-2008
Name Office Party/State Total
1. Dodd, Christopher J S D-CT
$133,900
2. Kerry, John S D-MA
$111,000
3. Obama, Barack S D-IL
$105,849
4. Clinton, Hillary S D-NY
$75,550
5. Kanjorski, Paul E H D-PA
$65,500
6. Bennett, Robert F S R-UT
$61,499
7. Johnson, Tim S D-SD
$61,000
8. Conrad, Kent S D-ND
$58,991
9. Davis, Tom H R-VA
$55,499
10. Bond, Christopher S ‘Kit’ S R-MO
$55,400
11. Bachus, Spencer H R-AL
$55,300
12. Shelby, Richard C S R-AL
$55,000
13. Emanuel, Rahm H D-IL
$51,750
14. Reed, Jack S D-RI
$50,750
15. Carper, Tom S D-DE
$44,389
16. Frank, Barney H D-MA
$40,100
17. Maloney, Carolyn B H D-NY
$38,750
18. Bean, Melissa H D-IL
$37,249
19. Blunt, Roy H R-MO
$36,500
20. Pryce, Deborah H R-OH
$34,750
21. Miller, Gary H R-CA
$33,000
22. Pelosi, Nancy H D-CA
$32,750
23. Reynolds, Tom H R-NY
$32,700
24. Hoyer, Steny H H D-MD
$30,500
25. Hooley, Darlene H D-OR
$28,750
Includes contributions from PACs and individuals.
2008 cycle totals based on data downloaded from the
Federal Election Commission on June 30, 2008.”
I am a Red Sox fan and saw him pitch his first near no-hitter until he didn’t listen to Jason Varitek and Shannon Stewart hit a single. (Sucked, but Sox won 1-0)
I digress...
Barney Frank was on Charlie Rose last night, and I swear he said “REGULATION” at least 50x and never once mentioned HIS mandates high-risk lending profile. This guy really believes his own bull crap...he needs to leave office, with Dodd.
This is the line that caught my eye:
“It is a classic case of socializing the risk while privatizing the profit.”
And now, I get to jump in with both feet...and help pay for this mess!
Bump.....
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