GOP must fix Fannie, Freddie ignored by Dems
Tuesday, January 25, 2011 at 9:51AM Fannie Mae and Freddie Mac now guarantee all but a small percentage of home mortgages in the U.S.—Reuters said ‘more than 80 percent’ and Citizens Against Government Waste said ‘more than 90 percent.’
These two government-sponsored enterprises (GSEs) are (pardon the rhetoric) ticking time bombs for the US taxpayer. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act touted by Democrats as landmark reform does nothing whatsoever to halt the flow of taxpayer money into the GSEs. As a matter of fact, The New York Times disclosed (according to Money News at Newsmax) taxpayers have funded $160 million in legal fees.
Money News said, “The bulk of the money — $132 million — went to defend Fannie Mae in securities suits and government probes into accounting irregularities allegedly occurring before the subprime meltdown sparked the housing crisis.”
Yet the significance of these GSEs in the housing meltdown is downplayed. No big media outlet will remind the American people some progressive Democrats in Congress blocked action on Fannie or Freddie every time reform was attempted.
The GSE train wreck has been ignored by big media and many in Congress.
We have known since the early 2000s the GSEs needed closer scrutiny. For one thing there were the accounting scandals swirling around executives who got bonuses that far exceeded some of their salaries. CAGW's publication ‘Critical Waste’ (winter, 2010) said, “Investigations revealed that Fannie Mae, for example, had misstated its earnings by $10.6 billion from 1998 through 2004 and had systematically manipulated its accounting activities in order to drive financial bonuses to its executives.”[Pg. 16, 17]
What would happen if executives at a private sector company did that?
CAGW called the GSEs “financial institutions with a social mission.” What’s worse—both institutions had no limits on risk because taxpayers were on the hook to absorb that risk.
In 2008 some Republicans tried to rein in the GSEs. They were met with hostile rhetoric and some regulators like the director of the Federal Housing Enterprise Oversight agency were personally attacked.
Media stayed mum. Shortly before the general election in 2008, a letter from Sen. Chuck Schumer (D-N.Y.) about IndyMac set the financial ball rolling and the next thing we saw was a meltdown. You’d have to be politically clueless to ignore the timing of Schumer’s letter.
Rep. Barney Frank (D-Mass.) had stymied every attempt to do something about Freddie and Fannie. After a report was issued in 2008 with critical findings, Frank said, “I don’t see anything in this report that raises safety and soundness problems.”
Rep. Maxine Waters (D-Calif.) said, “The GSEs have exceeded their housing goals.”
Rather than do something about the meltdown they should have known was coming, Democrats who held absolute control of Congress ignored the warnings. Big media ignored the warnings.
If we ignore current warnings, we run the risk of an unlimited taxpayer bailout for this private-public partnership boondoggle.
Reuters said the Obama administration will soon have a plan. When Republicans had a plan more than a decade ago, Democrats responded with heated rhetoric and refused to pass any bills introduced by GOP congressmen.
Waters was right about one word she applied to the GSEs—“exceeded.” Frank wasn’t right about anything.
I talked to a young couple recently—they have an adjustable rate mortgage. Their property is worth far less—at least 60 percent less—than they paid for it several years ago. They went to the bank to see if they could refinance. They’ve made all their payments on time. They both work. The banker told them they’d need $30,000 to participate in a government re-fi program. And off the record, he told them they might consider just walking away from their property.
That’s the legacy of Fannie and Freddie. And it’s the legacy of the Democrat Congress as well—those government programs in my opinion are not designed to give honest people any relief. Young people may now have a harder time purchasing a home.
The financial reform bill was co-authored by Frank. That is another matter we should not ignore. Hopefully the bill's supporters know what's in it, but I wouldn't place a bet on it.
Related Articles and Sources
...Controversy dogs government woes
Congress refuses hearings on Fannie Mae, Freddie Mac
The US Report
Key House Republican plans Fannie, Freddie wind-down
Reuters
(Analysis by Kay B. Day/Jan. 25, 2011)
Democrats, GOP, Politics, US Business and Economy, US Congress tagged Barney Frank, Fannie Mae, Freddie Mac, GSEs, Maxine Waters
Reader Comments (1)
Barney Frank and Chris Dodd go to prison for what they
have done to our country?
Didn't these guys take 'sweetheart' deals for doing the
wrong thing with our monies and our mortgages?
Didn't this harm our country and our peoples?
C'mom Obama you and Eric Holder have a duty to see
that the law is upheld!