Fannie and Freddie Amnesia (Great Rebuttal Piece For When Dems blame GOP for Sub Prime Mess)

Taxpayers are on the hook for about $400 billion, partly because Sen. Obama helped to block reform.

Now that nearly all the TARP funds used to bail out Wall Street banks have been repaid, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac stand out as the source of the greatest taxpayer losses.

The Congressional Budget Office has estimated that, in the wake of the housing bubble and the unprecedented deflation in housing values that resulted, the government's cost to bail out Fannie and Freddie will eventually reach $381 billion. That estimate may be too optimistic.

Last Christmas Eve, Treasury removed the $400 billion cap on what the government might be required to invest in these two GSEs in the future, and this may tell the real story about the cost to taxpayers. In typical Washington fashion, everyone has amnesia about how this disaster occurred.

The story is all too familiar. Politicians in positions of authority today had an opportunity to prevent this fiasco but did nothing. Now—in the name of the taxpayers—they want more power, but they have never been called to account for their earlier failings.

One chapter in this story took place in July 2005, when the Senate Banking Committee, then controlled by the Republicans, adopted tough regulatory legislation for the GSEs on a party-line vote—all Republicans in favor, all Democrats opposed. The bill would have established a new regulator for Fannie and Freddie and given it authority to ensure that they maintained adequate capital, properly managed their interest rate risk, had adequate liquidity and reserves, and controlled their asset and investment portfolio growth.

These authorities were necessary to control the GSEs' risk-taking, but opposition by Fannie and Freddie—then the most politically powerful firms in the country—had consistently prevented reform.

It is just utterly galling the media has ignored this part of the story, the way in which Democrats were complicit for the sub prime mess and the way in which their protection of their campaign donors at Fannie and Freddie bought them off and as a result left taxpayers on the hook for $400 billion or more. Can anyone imagine if Republicans were similarly complicit in the failure of Fannie and Freddie and the whole housing economy generally that the media would give them a pass? But no, the media scum will make no connection there, but it's enough to blame Republicans for the mess just simply because a Republican president was in office when the Democrats' corruption exploded all over the US economy. And keep in mind, it's the media/Democratic narrative that it was a lack of regulations under Bush and GOP Congressional control that lead to this mess--while they leave out the part where Democrats opposed the very regulations that could have mitigated alot of the damage done.

But hey, you've got to hand it to the Dems. They set themselves up nicely for this one--they caused this mess starting with Jimmy Carter's CRA and later Bill Clinton's supercharging of the regulation and then Dems protecting Fannie and Freddie while taking campaign cash from them hand over fist---and then benefitted from it all in getting their candidate elected president and bigger majorities in Congress in 2008. Brilliant.

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