Thread: The Mother Of All Financial Scandals, The Fannie Mae and Freddie Mac racket

Bush Called For Reform of Fannie Mae & Freddie Mac 17 Times in 2008 Alone... Dems Ignored Warnings

http://gatewaypundit.blogspot.com/20...annie-mae.html


Republicans Sought Better Oversight Over Freddie Mac and Fannie Mae; Democrats Opposed It

Barney Frank wants CEOs to reduce their pay if they’re going to get a big government bailout.

It’s a thought. But, then, maybe Frank should consider reducing his own pay — since he and other Democrats opposed Bush Administration efforts to more closely regulate Fannie Mae and Freddie Mac.

Just a reminder:

New York Times, September 11, 2003:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

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.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

Of course, the plan was opposed — by Democrats, including Barney Frank:

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

”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.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Remind me why we care what Barney Frank thinks again?

P.S. Another reminder. Who said this?

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…and the sheer magnitude of these companies and the role they play in the housing market…If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie and Freddie pose to the housing market, the overall financial system, and the economy as a whole.

That’s John McCain from 2005, speaking in support of legislation to control Fannie and Freddie. See Karl from a few days ago for more.

Barack Obama was concerned as well — concerned, that is, to make sure he was collecting as much money as possible from Fannie and Freddie. He did well, too, becoming the third top recipient in the Senate of Fannie and Freddie contributions from 1989-2008. [UPDATE: Make that second top recipient.] (Karl pointed out related figures days ago.) That’s fast work, since he’s been a Senator for only 4 years.

UPDATE: Yes, I know Republicans controlled Congress during this time. But this election is between McCain, who tried to do something, and Obama, who took money from Fannie and Freddie. As Ed Morrissey noted in the post linked above, the 2005 legislation never made it out of committee — and “Chris Dodd, then the ranking member of the Banking Committee and now its chair, was in the middle of receiving preferential loan treatment from Countrywide Mortgage, one of the companies gaming the system in the credit crisis.”

25 Comments »
If McCain neglects to hammer these points home over the next few weeks, he’s toast. Obama and his fawning multitudes among the MSM are trying furiously to suggest otherwise - don’t let them get away with it, Johnny Mac.

Comment by Dmac — 9/21/2008 @ 6:51 pm

So the failure of legislation to make it through the GOP Congress is the fault of….wait for it….the Democrats.

Comment by jpe — 9/21/2008 @ 6:54 pm

jpe,

This election is between Obama, who did nothing, and McCain, who tried doing something. And Obama is trying to tie McCain to Bush, who tried doing something.

Comment by Patterico — 9/21/2008 @ 7:00 pm

Yes, jpe. The Senate had this turncoat named Jeffords. Remember him ?

On May 24, 2001, Jim Jeffords left the Republican Party, with which he had always been affiliated, and announced his new status as an independent. Jeffords discussed this decision during his announcement that he was leaving the Republican party. “I will make this change and will caucus with the Democrats for organizational purposes once the conference report on the tax bill is sent to the president. I gave my word to the president that I would not intercept or try to intervene in the signing of that bill”. Jeffords decided to switch when the Senate Republicans had refused to fully fund the Individuals with Disabilities Education Act. [2]
The independent status of Jeffords changed the Senate composition from 50-50 (with a Republican Vice President, Dick Cheney, serving as President of the Senate to break tie votes) to 49 Republicans, 50 Democrats, and one independent. Jeffords promised to vote for Democratic control after being promised a committee chairmanship by Democratic Leader Tom Daschle. He then handed his chairmanship of the Health, Education, Labor, and Pensions Committee, which he had held since 1997, to Ted Kennedy (D-MA) and was given the chairmanship of the Senate Environment and Public Works Committee, which would have been occupied by ranking minority member Harry Reid. Jeffords held this committee chair until the Democrats lost control of the Senate in 2003 following Congressional elections in 2002.

Once Jeffords could no longer block legislation, others stepped in.

Significant details must still be worked out before Congress can
approve a bill. Among the groups denouncing the proposal today were the
National Association of Home Builders and Congressional Democrats who
fear that tighter regulation of the companies could sharply reduce
their commitment to financing low-income and affordable housing.

”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.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving
something from one agency to another and in the process weakening the
bargaining power of poorer families and their ability to get affordable
housing,” Mr. Watt said.

Yes, jpe, Democrats, with some Republican pussies, blocked the regulation. Do you know what a filibuster is ?

Comment by Mike K — 9/21/2008 @ 7:11 pm

So the failure of legislation to make it through the GOP Congress is the fault of…

The suspense builds - can “it” comprehend?

….wait for it….

Can “it” actually learn?

Democrats.

Guess not.

Comment by Dmac — 9/21/2008 @ 7:22 pm

jpe-

Comment by MartyH — 9/21/2008 @ 7:29 pm

Why do you think Fannie and Freddie spent all that money lobbying if nor at least to block legislation unfavorable to their interests. They certainly got their money’s worth.

Comment by daleyrocks — 9/21/2008 @ 7:54 pm

One might wonder why Dodd and Obama were #1 and #2 in funds bequeathed to them by Fannie and Freddie. What quid pro quo resulted? And why would
the junior senator from Ill. get such a disporportionate amount in a few short years? Will the media bother to query the Anointed One?

Comment by madmax333 — 9/21/2008 @ 8:02 pm

As I’ve linked to before, Fannie and Freddie aren’t the cause of the problem.
And that link contains others. Here’s one.

You’re trying to score political points. Some context, for your readers


Fannie and Freddie had about as much to with the “explosion of high-risk lending” as they could get away with. We are all fortunate that they couldn’t get away with all that much of it. It is a fact that their market share dropped like a brick in the early years of this century, except of course for years like 2003, when fixed rates dropped to cyclical lows, refis boomed, and GSE market share shot up again, only to plummet in the years following during the purchase boom.

But they didn’t like losing their market share, and they pushed the envelope on credit quality as far as they could inside the constraints of their charter: they got into “near prime” programs (Fannie’s “Expanded Approval,” Freddie’s “A Minus”) that, at the bottom tier, were hard to distinguish from regular old “subprime” except–again–that they were overwhelmingly fixed-rate “non-toxic” loan structures. They got into “documentation relief” in a big way through their automated underwriting systems, offering “low doc” loans that had a few key differences from the really wretched “stated” and “NINA” crap of the last several years, but occasionally the line between the two was rather thin. Again, though, whatever they bought in the low-doc world was overwhelmingly fixed rate (or at least longer-term hybrid amortizing ARMs), lower-LTV, and, of course, back in the day, of “conforming” loan balance, which kept the worst of the outright fraudulent loans out of the pile. Lots of people lied about their income (with or without collusion by their lender) in order to borrow $500,000 to buy an overpriced house in a bubble market. They weren’t borrowing $500,000 from the GSEs.

Furthermore, both GSEs were major culprits in the growth of the mega-lenders. Over the years they were struggling so hard to maintain market share, they were allowing themselves to experience huge concentration risks. As they catered more and more to their “major partners”–Countrywide, Wells Fargo, WaMu, the usual suspects–they helped sustain and worsen the “aggregator” model in which smaller lenders sold loans not to the GSEs but to CFC or WFC, who then sold the loans to the GSEs. In large measure this was a function of pricing: the aggregators got the best pricing from the GSEs–the lowest guarantee fees, the best execution options–making it more attractive for a number of reasons for small lenders to sell to the aggregators.

I think it was his connection to ACORN, who was pushing all of those liar loans into the ghetto.



Again: persepctive.

Instead, the Ohio Republican who headed the House financial services committee until his retirement after mid-term elections last year, blames the mess on ideologues within the White House as well as Alan Greenspan, former chairman of the Federal Reserve.

The critics have forgotten that the House passed a GSE reform bill in 2005 that could well have prevented the current crisis, says Mr Oxley, now vice-chairman of Nasdaq.

He fumes about the criticism of his House colleagues. “All the handwringing and bedwetting is going on without remembering how the House stepped up on this,” he says. “What did we get from the White House? We got a one-finger salute.”

The House bill, the 2005 Federal Housing Finance Reform Act, would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.

Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.

Adamant that the only solution to the problems posed by Fannie and Freddie was their privatisation, the White House attacked the bill. Mr Greenspan also weighed in, saying that the House legislation was worse than no bill at all.

“We missed a golden opportunity that would have avoided a lot of the problems we’re facing now, if we hadn’t had such a firm ideological position at the White House and the Treasury and the Fed,” Mr Oxley says.

When Hank Paulson joined the administration as Treasury secretary in 2006 he sent emissaries to Capitol Hill to explore the possibility of reaching a compromise, but to no avail.

http://patterico.com/2008/09/21/repu...ts-opposed-it/

I think we should file charges against the companies, brokers, and apprasiers, that loaned to people that couldnt afford it, gave loans with no proof of income and those that over appraised properties. We need to make those accountable for this mess held responsible for their actions. I also think that its easy to blame just Bush on everything. But many forget it takes congress to agree to get anything passed. What we need is a new congress !

Originally Posted by jeanea33

I think we should file charges against the companies, brokers, and apprasiers, that loaned to people that couldnt afford it, gave loans with no proof of income and those that over appraised properties. We need to make those accountable for this mess held responsible for their actions. I also think that its easy to blame just Bush on everything. But many forget it takes congress to agree to get anything passed. What we need is a new congress !

I completely agree with you jeanea!

(and totally off topic -- your baby's picture in your avatar is just BEAUTIFUL)

FBI investigating companies at heart of meltdown
By LARA JAKES JORDAN, Associated Press Writer
1 hour, 13 minutes ago

WASHINGTON - The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.

The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.

Officials said the new inquiries bring to 26 the number of corporate lenders under investigation over the past year.

Spokesmen for AIG, Fannie Mae and Freddie Mac did not immediately return calls for comment Tuesday evening. A Lehman spokesman did not have an immediate comment.

Just last week, FBI Director Robert Mueller put the number of large financial firms under investigation at 24. He did not name any of the companies under investigation but said the FBI also was looking at whether any of them have misrepresented their assets.

Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. Mueller has previously said the FBI's hunt for culprits in the nation's subprime mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.

The investigations revealed Tuesday come as lawmakers began considering whether to approve emergency legislation that would give the government broad power to buy up devalued assets from troubled financial firms.

The bailout proposed by the Bush administration is aimed at helping unlock credit and stabilize badly shaken markets in the United States and around the globe.

In the past two weeks, the government has taken over Fannie Mae and Freddie Mac, the country's two biggest mortgage companies, with a bailout plan that could require the Treasury Department to put up as much as $100 billion for each of them over time if needed to keep them afloat as mortgage losses mount.

Last week, the Federal Reserve provided an emergency $85 billion loan to AIG, which teetered on the brink of bankruptcy. Lehman Brothers was forced to file for bankruptcy after attempts to engineer a private rescue fell apart. All the companies were laid low from bad bets on complex mortgage-related securities.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to deal with the root cause of all the troubles, billions of dollars of bad mortgage debt sitting on the books of major financial companies. This debt has triggered the worst credit crisis in decades, causing credit markets to essentially freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system.

Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the nation's largest mortgage lender and now owned by Bank of America Corp., is also under scrutiny.

http://news.yahoo.com/s/ap/financial...Xd2749bdKs0NUE

Originally Posted by atprm

I completely agree with you jeanea!

(and totally off topic -- your baby's picture in your avatar is just BEAUTIFUL)

ty.... its my grand daughter

Originally Posted by Loan_Crusa

this is old news. criminal comes first, civil comes second. OJ is still getting sued. About two years ago it was big news.

What is funny about this whole thing is that I started posting about this in June and December of 2006 ... guess it is "Big News" again, eh ?

The crony pseudocapitalists at Fannie Mae and Freddie Mac have been served federal grand jury subpoenas. Better late than never: http://www.reuters.com/article/busin...D20080929.hmtl

Fannie Mae and Freddie Mac, the U.S. mortgage finance giants that were taken over by the government this month, said on Monday they were subpoenaed for documents as part of a federal grand jury investigations into their accounting.

The U.S. Attorney’s office for the Southern District of New York subpoenaed the two on Friday for documents related to accounting, disclosure and corporate governance dating from January 1, 2007 to the present.

The Securities and Exchange Commission is also investigating these matters and directing the companies to preserve the documents…

Related: Fannie Mae and Freddie Mac Invest in Lawmakers

http://www.opensecrets.org/news/2008...d-freddie.html

Published by Lindsay Renick Mayer on September 11, 2008 11:26 AM | Permalink | Comments (25)
When the federal government announced two months ago that it would prop up mortgage buyers Fannie Mae and Freddie Mac, CRP looked at how much money members of Congress had collected since 1989 from the companies. On Sunday the government completely took over the two government-sponsored enterprises, and we've returned to our data to bring you the updates, this time providing a list of all 354 lawmakers who have gotten money from Fannie Mae and Freddie Mac (in July we posted the top 25). These totals are based on data released electronically from the FEC on Sept. 2 and include contributions to lawmakers' leadership PACs and candidate committees from the floundering companies' PACs and employees. Current members of Congress have received a total of $4.8 million from Fannie Mae and Freddie Mac, with Democrats collecting 57 percent of that. This week we also wrote about how much money lawmakers had invested of their own money in the companies last year--a total of up to $1.7 million.

Includes contributions from PACs and individuals. 2008 cycle totals based on data released electronically by the Federal Election Commission on Sept. 2, 2008.