Should congress be looking in the mirror when they point fingers
Nationally syndicated columnist Cal Thomas points out a few things that people keep forgetting when people such as Nancy Pelosi try to lay the blame for the nation’s fiscal crisis at president Bush’s feet:
Democrats would love to blame the Bush administration for a disaster they mostly helped to create. But, according to the White House, as early as April 2001, the administration warned that the size of Fannie Mae and Freddie Mac was “a potential problem,” because “financial trouble of a large (government-sponsored enterprise) could cause strong repercussions in financial markets, affecting federally insured entities and economic activity.” As recently as June of this year, President Bush asked Congress to take the necessary measures to address growing foreclosures. “We need to pass legislation to reform Fannie Mae and Freddie Mac,” he said. In July, Congress passed reform legislation, but too late.
It is an affront to the nation that some of the people who brought on the crisis (and financially and politically benefited from the status quo) were asking the questions at the Banking Committee hearing. They should have been in the witness chair. Dodd said the crisis was “entirely foreseeable and preventable.” Then why didn’t he try to prevent it? He should have been answering questions about the PAC contributions he received from Fannie Mae and Freddie Mac, (according to opensecrets.org, he’s the Senate’s no. 1 recipient of campaign contributions, $133,900, Barack Obama is no. 3, $105,849), his sweetheart Countrywide Financial mortgage rate and whether they influenced his inattentiveness to the growing mortgage crisis.
Read it all here at the Mitchell Daily Republic.
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Comments
Great article, however it would have been nice if he would have hinted on those who wrote a bill to take care of the problem which in a partisan action against taxpayers the Dems blocked it in committee (killing it). Why? It would throw out their gravy train. As I have stated before Frank, Dodd and a few others need to come to the city squares and answer to the people. They should not of had one bit of involvement in drafting the Bill that failed.It was their committee in charge of policy. They were asleep at the helm and had no intention of removing their gravy train. GOT TO GO… Get the Dust Buster!
The problem with this (and the other) attempts to say that the crisis is due to GSEs like Fannie and Freddie is that it overlooks the fundamental problem that caused the meltdown of the big investment banks and AIG – the completely unregulated marketplace of credit derivatives. It was the massive implosion of the credit default swap market that caused the rapid decline of AIG and Lehman – not the failures of Fannie and Freddie.
But taking a step back, at its heart were the decisions made by the major banks to give out loans to 1) individuals without the necessary means to cover the cost of mortgage payments on ARMs when interest rates inevitably rose, and 2) loans given in excess of the amount the property was actually worth. And then the decision to treat these mortgages as relatively safe and to roll them up as mortgage backed securities. These were not decisions made by Members of Congress, or even Fannie or Freddie, but by loan officers and the management that dictate rules for loan officers, as well as individual homeowners who should have known better but didn’t.
The derivative markets are extremely complex, and many of the CEOs of these companies didn’t really understand what they were buying and selling – only that they were making a lot of money and it was better to not ask any questions. I’m sure, at the time, it seemed too good to be true. And it was. Just like it must have seemed to that guy making $80,000 when he learned that he could buy a $500,000 house with no money down and with ridiculously low monthly payments. That too was too good to be true. And when he defaulted, that mortgage triggered a loss on a default swap, and that led to a reduction in value of that security.
In the end, neither Fannie nor Freddie forced that bank to make the loan, or forced that bank to roll up the loan into a security, or forced the big investment banks to buy the loan and hedge against the loss with a CDS. Nor did any member of Congress. That’s not a federal policy. It’s a decision made by banks. Fannie and Feddie do not make loans to homeowners. They’re not allowed to do so.
There is enough blame to go around in Washington for not asking questions about the credit derivative market, for not getting tougher on GSE reform, of for treating low interest rates like the holy grail of monetary policy. The fact is, they’re all politicians, and politicians aren’t going to stop the gravy train of easy (and cheap) money or of the real estate boom (even if it was going to lead to a bust). Sure Frank and Dodd chair the relevant committees today, but they were under GOP control from 1995 through 2007. These problems didn’t start last year. And they won’t be solved this week. But I’m not sure that trying to blame one party or the other is going to do much good. Congress and the White House and the Fed and the SEC all have some blame in this – and it has much more to do with refusing to regulate the derivative markets than it does with Fannie or Freddie (although they’ve got their issues as well). I don’t recall either party campaigning on a promise to bring more regulations to Wall Street.
What truly sucks about all of this is that there are a lot of people (especially in SD) that played by the rules, stayed away from risky ARMs, and didn’t make any money through derivatives during the boom years. Yet they’re the ones stuck with a $700 billion tab.
McCain “warning” ad fact-checked by CNN: True.
http://politicalticker.blogs.cnn.com/2008/09/30/fact-check-did-mccain-warn-about-fannie-and-freddie-2-years-ago/
No mention of all the blame apparently heaped on Nancy Pelosi herself by Republicans?
Republicans should be pointing fingers at themselves and looking at themselves in the mirror for their role in this mess.
Patti,
It is the Dems who have been in charge of the oversight. McCain and 3 or 4 other people brought a bill to committee a few years ago and the Dems being partisan killed the bill. Including Frank, Dodd and the rest. Further those same Dems who have been in charge of the policy “oversight” closed a blind eye to what was going on with F&F. Another point, if the Dems wanted to pass this Bill they did not need Republicans. They where wimps and all they wanted was scape goats.
If you are climbing on the Obama train, tell me why he never votes other than present. He didn’t take stands in the Illinois legislature and he seems to not take votes in the US Senate.
8:17:
There are regulations within the policy. It was Carter and Clinton who wanted to get people in home ownership. F&F held over 40% of the sub prime loans. So yes, congress was infact to be involved since F&F were qusi government businesses. Yes bankers are also part of the problem but don’t say congress isn’t. The fact is congress touches everybody everday and they keep giving themselves more power. That is not how it is to be. This is a simply explanation but I believe that you get the jest of the issue.
Anon 8:17pm,
Excellent comment. Just brilliant. Thanks. You should be signing your name to stuff like that.
Anyhow, I agree with just about every sentence. But there’s a counterargument, and I wanted to hear your response. The counterargument is that federal regs penalized banks that didn’t make enough loans to poor and/or minority borrowers. That, and not greedy banks, was the cause of all this.
I personally don’t subscribe to this view, but I’ve heard it bandied about, and wanted to know what you thought.
Been trying to post this…maybe it will go through this time…CNN fact-check on McCain sounding the alarm..
76 @ 10:07 pm said: “It is the Dems who have been in charge of the oversight.”
Hold on there, old timer. The Republicans were in charge of Congress from 1994-2006. There’s plenty of blame to go around for this “mess.”
Yes, the GOP need some back side kicking too! I also believe that the GOP have brought the issue to to congress including Bush over the last few years, but all effort to reform fell upon closed ears.
You know it seems each post leads to the same topic. It is important, however there are other important issues voice views on. Just an observation of late, but then this is not my blog.
Whoever might be to blame, the simple fact is it’s a mess. Its time for them to all go. every last one of them. no exceptions.
There is a lot of blame to go around for this mess. Politicians from both parties are complicit in the regulatory changes that put us in this mess. Lenders, underwriters, and borrowers played a part in it as well.
The question now is “what are we going to do about it?”
The public, I suspect isn’t necessarily upset about a “bail out” plan on its face. What the public is upset about is the fact that there really isn’t a substantive answer to this mess and we’ve been boxed into a corner by a lot of irresponsible politicians, lenders, underwriters, and borrowers.
We’re trapped and we don’t like it. We know we have to do something that really could have been avoided had our trusted leaders and others been more responsible.
For anyone from either side of the aisle to start pointing fingers at the other without also taking a look in the mirror is darn disappointing though unfortunately not surprising. It kind of tells us what kind of leadership we have on both sides.
A real leader in this situation would be able to successfully sell us a plan instead of preying on our lowest common denominator emotions and then playing politics with it.
It’s been a disappointing couple of weeks as I’ve watched our “leaders” try to tackle this.
I’ve been trying to post a link to CNN’s fact-check of McCain’s claim that he sounded the alarm on this a couple of years ago. It is getting diverted for some reason. But you can look it up yourself. CNN says the claim is true.
7:28 Same thing happens to me sometimes. Try putting your link in quotes or parenthesis. It won’t be “hot” but at least it’ll be there.
OK, here it is in quotes. Hope it works!
“http://politicalticker.blogs.cnn.com/2008/09/30/fact-check-did-mccain-warn-about-fannie-and-freddie-2-years-ago/”
11:20, exactly. Didn’t say I was thrilled with his position. But he did recognize there was a problem and said something…unlike a lot of Dems on the front line of this thing.
Ok, good. So is he now your party’s leader, or what? i.e. If McCain says get behind this rescue effort should John Thune follow his lead in your opinion?
No, he shouldn’t. But he apparently is voting for it. I am not thrilled with either of them on this. But do you agree with your guy Obama on everything?
Anonymous 8:17, your “brilliant” analysis has a few holes. First, I will be in front of people who believe the Republicans have some problems with this, too. However, let us look at one of your points. “Individuals without necessary means”–you are right about banks loaning money to people who could not pay the money back. However, part of this comes from government pressure dealing with “redlining” or deciding there was too much risk based upon an area, race, and income. The greater risks were alleviated by organizations such as Freddie and Fannie. There was no incentive to qualify borrowers. Therein lies the problem. When you mess with the market, you pay. Here people were artificially made more attractive and suddenly they are unable to pay back loans. Remember, banks refusing to make these loans risked sanctions if they tried to expand. More messing with the market.
These loans are risky. The payoff is higher. The promise of guaranteeing of the loans make the risk more acceptable.
As for warning, the Bush administration had warned on several occasions. You can read the quotes if you choose to. The administration went to Congress but was unable to get Congress to move. The bill McCain co-sponsored passed on a party line vote in committee, but was not brought forth because there were not 60 votes to get it done. Dodd was working to block it. BTW, who is the biggest receiver of funds from Freddie and Fannie?
Greed is, of course, much of the problem. However, when you check into the facts, you find the people behind this should be behind bars. Congressional people who blocked the oversight sought by the administration should be held accountable. Congressmen who defended Franklin Raines and accused regulators of racism when regulators accused him of cooking the books need to be scrutinized. There is a lot of blame to go around and most of it needs to looked at in Congress. Let the chips fall where they may, but this is not a problem with the market. It is a problem with people interfering with the market.
YES!!Bush called the Fannie situation, I’m glad he did something with his 8 years
Also if Bush was such a God sent why didn’t he push for regulation which would have actually prevented this entire situation.