The financial crisis-looking back 5 years

The center of the financial crisis is Fannie Mae and Freddie Mac.  The New York Times carried a story on September 11, 2003 on the Bush administration's proposal to overhaul the housing finance industry.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

Rep. Barnie Frank's point of view back then which reflected that many of his democratic colleagues and a big reason why this attempt at reform died in congress in 2005:

"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

So what was John McCain's response from the Congressional Record: "For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole."

Barack Obama's campaign slogan aimed at McCain says McCain will be "more of the same."  The financial breakdown we're facing right now makes Obama right and wrong.  Right that McCain saw the problem, as did the Bush Administration (like it or not) and wanted to fix it before the worst came.  Obama and his group did not want to fix it and now the worst has come.

James Johnson, former CEO of Fannie Mae and current Obama advisor.

Franklin Raines, former CEO of Fannie Mae and current Obama advisor.

Just what--"more of the same" don't we want.

Comments

[LBarclay]

How would the ranking democrat kill a bill in 2005? The republicans were still in the majority and would not even have had to come up with 60 votes to override a veto. Unless of course President Bush would have vetoed it? Your argument seems like a strawman? John McCain has been a eager proponent of derregulation for all of his time in congress. It does his candidacy no good to all of the sudden become something he is not.

[Displaced Texan...]

Barclay's comments might be interesting if they weren't just blatant talking points. Sad when you can't think for yourself and put your own comments out there for public consumption.

[Wayne]

In McCains own words...

"So, I'd like to tell you that I did anticipate it, but I have to give you straight talk, I did not."

-- McCain, in an interview with Keene Sentinel on the mortgage crisis in December 2007.

[Ron]

Diane, you are right. This is a case were the democrats blocked every attempt to reform Fannie and Freddie.
Barclay your argument doesn't hold water. It could have and should have been voted on and the democrats blocked it. How cdould a ranking democrat kill the bill in the senate. Duh! Have you ever heard of the filbuster?
There are many who were at fault. But the bottom line is the Democrats did everything to block reform and protect the executives, who were democrats and huge contributors to the democrats. Obamo received the highest amount of contributions in the last 20 years from them. Over $186,000 versus $20,000 for McCain.
Wayne, I assume Obama didn't anticpate it either or he would have surely done something about it.

[StraightTalk]

"We want everybody in America to own their own home," Bush said at a housing conference sponsored by the White House in October 2002. Earlier that year, he issued a "challenge" to lenders and others in the industry: Create 5.5 million new minority homeowners by the end of the decade. In 2003, he signed the American Dream Downpayment Act, creating a program that would offer money to the poor so they could secure a first mortgage... and to be financed by Fannie & Freddie.

McCain like many politicians voiced concern but did nothing to stop the seeds of the financial tsunami from being planted as standards were lowered to support the President's goals.

[Ron]

Straight talk. Obama voiced no concern and did nothing, but block reforms.

[LBarclay]

Texan and Ron,
It is not enough to claim "just talking points". That is to say no two people can have the same idea. It is not enough to say you were for legislation. Show me the congressional record where it came to the floor, was voted on, and the democrats "killed it". It had to be with quite a few republicans crossing party lines to vote against it or with even more republicans voting to override a veto. It has to be the former correct? President Bush did not veto any bills until Oct. of 2005. So say it is talking points if it makes you feel better, but you should also prove that the talking points are incorrect. And that burden is on you.

[LBarclay]

Speaking of talking points, this entry is very similar to several I have seen on other right leaning blogs. I did not reference my initial post by just claiming it was republican talking points. I used a traditional debate term "strawman" and got the usual "talking points" from Ron and Texan. Why?

[Diane]

Actually, in regard to talking points I was getting the distinct impression today that some of the commenters here were carrying out a talking point sent to them from the Obama campaign to find blogs with this issue and asking them to their daily memo. Just as they ask their people to flood radio talk shows with calls when someone they don't like is a guest.

As for my post, I heard a KMOX radio program on Tuesday where some of this was mentioned and it took me a couple of days to find the sources.

Don't put this point of view in with the Obama Campaign's current practice of inundating radio and blogs with the same talk.

[StraightTalk]

Confusing facts with accusations of spreading talking points is a common tactic used by those who remain intentionally uninformed.

The President's goal of expanding home ownership was strongly supported by a Republican Congress. How a party that preaches smaller government inevitably causes bigger government is the ultimate irony. Good intentions though can be easily destroyed. Republicans, who controlled Congress, blocked antipredatory legislation, arguing it would interfere with legitimate lending.

"Don't apologize when you make a loan above the prime rate to someone that has a marginal credit rating," Texas Republican Phil Gramm, then chairman of the Senate Banking Committee, told a group of bankers: "In the name of predatory lending, we could end up denying people with moderate income and limited credit ratings the opportunity to borrow money."

The next important steps occurred when NY insurance regulators opened the door for bond transformers. A legal loophole was discovered that allowed municipal bond insurers to diversify into mortgage bond insurers. Immediately, conservative AAA-rated insurers like Ambac, AIG, etc. saw huge revenue potential and began issuing insurance policies on collateralized debt obligations. The CDO market ballooned from $1 trillion in 2000 to over $46 trillion by the summer of 2007.

Unfortunately insurance regulators and the rating agencies like S & P could not keep pace with the changes in the marketplace. The CDOs were sold in layered tranches to public and private pension funds seeking higher yields in a declining interest rate environment.

The demise of the subprime mortgage market was the first in a series of dominoes that began to fall in late 2006.

[Ron]

Straight talk Where was Obama during this time? Doing absolutely positively nothing about this issue. Period.