Terry Jones at the Investor’s Business Daily has a nice, clean, concise and accurate description of what happneed at Freddie Mac and Fannie Mae and why we taxpayers are being cajoled into paying for it.
The truth is that depspite the shrill calls from Barack Obama, Christopher Dodd and Barney Frank that it is “all the Republicans fault,” it has been the Democrats at the center of the maelstrom. It was the Democrats who, at least twelve times, derailed Republican efforts at reforming Freddie and Fannie and as we showed in a previous blog post, Barney Frank was one of those opposed that reform very ferociously.
So, why did the Dems opposed the reform of Freddie and Fannie? Money. That’s it. That’s the whole reason.
Here is the history in a nutshell:
|It all started, innocently enough, in 1994 with President Clinton’s rewrite of the Carter-era Community Reinvestment Act.
Ostensibly intended to help deserving minority families afford homes — a noble idea — it instead led to a reckless surge in mortgage lending that has pushed our financial system to the brink of chaos.
Fannie and Freddie, the main vehicle for Clinton’s multicultural housing policy, drove the explosion of the subprime housing market by buying up literally hundreds of billions of dollars in substandard loans — funding loans that ordinarily wouldn’t have been made based on such time-honored notions as putting money down, having sufficient income, and maintaining a payment record indicating creditworthiness.
With all the old rules out the window, Fannie and Freddie gobbled up the market. Using extraordinary leverage, they eventually controlled 90% of the secondary market mortgages. Their total portfolio of loans topped $5.4 trillion — half of all U.S. mortgage lending. They borrowed $1.5 trillion from U.S. capital markets with — wink, wink — an “implicit” government guarantee of the debts.
This created the problem we are having today.
As we noted a week ago, subprime lending surged from around $35 billion in 1994 to nearly $1 trillion last year — for total growth of 2,757% as of last year.
No real market grows that fast for that long without being fixed.
And the part about money for the Dems? Read on:
|Fannie and Freddie became huge contributors to Congress, spending millions to influence votes. As we’ve noted here before, the bulk of the money went to Democrats.
Meanwhile, Fannie and Freddie also became a kind of jobs program for out-of-work Democrats.
Franklin Raines and Jim Johnson, the CEOs under whom the worst excesses took place in the late 1990s to mid-2000s, were both high-placed Democratic operatives and advisers to presidential candidate Barack Obama.
Clinton administration official Jamie Gorelick also got taken care of by the Fannie-Freddie circle. So did top Clinton aide Rahm Emanuel, among others.
And yet, despite the fact that the Dems are in the middle of this whole fiasco, Obama, Dodd and Frank are insistent that it is a Republican problem. Unfortunately, their surrogates in the media are spreading this misleading (or outright false) message.
But, do you remember all those campaign ads by Barack Obama about how their were lobbyists on John McCain’s staff? Well, Obama should change his campaign slogan of “Change we can believe in” to “Hypocrisy for our own cause.” Here is how Obama deals with those lobbyists:
|Over the span of his career, Obama ranks No. 2 in campaign donations from Fannie and Freddie, taking over $125,000. Dodd, head of the Senate Banking panel, is tops at $165,000. Clinton, ranked 12th, has collected $75,000.
It emerged that Clinton aide Raines, who took Fannie Mae’s helm as CEO in 1999, took in nearly $100 million by the time he left in 2005. Others, including former Clinton Justice Department official Gorelick, took $75 million from the Fannie-Freddie piggy bank.
Today, Raines is a top advisor for the Obama campaign.
So, the next time somone accuses the Republicans of this Freddie and Fannie mess, ask the accuser what happened to all the money that the Dems made off of Freddie and Fannie and ask when was the last time the Dems tried to reform them.
You can access the complete article on-line here:
‘Crony’ Capitalism Is Root Cause Of Fannie And Freddie Troubles
Investor’s Business Daily
September 22, 2008