Democrats are to blame for financial meltdown

[jreeves]

Bloomberg.com: News

In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Turning Point

Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.


What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.



S.190
Title: A bill to address the regulation of secondary mortgage market enterprises, and for other purposes.
Sponsor: Sen Hagel, Chuck [NE] (introduced 1/26/2005) Cosponsors (3)
Latest Major Action: 7/28/2005 Senate committee/subcommittee actions. Status: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
--------------------------------------------------------------------------------
COSPONSORS(3), ALPHABETICAL [followed by Cosponsors withdrawn]: (Sort: by date)


Hmmm....makes you think.
Sen Dole, Elizabeth [NC] - 1/26/2005 Sen McCain, John [AZ] - 5/25/2006
Sen Sununu, John E. [NH] - 1/26/2005


Search Results - THOMAS (Library of Congress)

 

[editec]

Democrats are to blame for financial meltdown

You're an idiot if you think the blame for this mess falls solely on one party, dude.

 

[sealybobo]

You're an idiot if you think the blame for this mess falls solely on one party, dude.

The gas prices went up because America is addicted to oil. (bush) t or f


The economy is not good because Americans are a bunch of whiners. (Phil Gramm McCain’s advisor, the one that caused this banking crisis) t or f


The housing market crashed because people took out bad loans, not because of predatory lending. (The Republicans) t or f


Companies hire illegal’s and outsource to China/India because the American worker sucks. They don’t work hard and they want too much money. (Karen Smith & Mike Ferguson) t or f

 

[Care4all]

Bloomberg.com: News

In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Turning Point

Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.


What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.



S.190
Title: A bill to address the regulation of secondary mortgage market enterprises, and for other purposes.
Sponsor: Sen Hagel, Chuck [NE] (introduced 1/26/2005) Cosponsors (3)
Latest Major Action: 7/28/2005 Senate committee/subcommittee actions. Status: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
--------------------------------------------------------------------------------
COSPONSORS(3), ALPHABETICAL [followed by Cosponsors withdrawn]: (Sort: by date)


Hmmm....makes you think.
Sen Dole, Elizabeth [NC] - 1/26/2005 Sen McCain, John [AZ] - 5/25/2006
Sen Sununu, John E. [NH] - 1/26/2005


Search Results - THOMAS (Library of Congress)

The republicans were in the majority and had the majority votes in this committee...WHY DIDN'T IT MAKE IT TO THE FLOOR FOR A VOTE? Democrats in the minority in committee could not stop it????????? Not without republicans voting with them to stop it....?????

And it made it to the floor of the senate, chuck hagel introduced it...WHY DIDN'T the Republican Majority bring it up for a vote on the floor of the senate? Why? Hagel introduced it, OUT of committee on to the floor, right?

looks like neither side wanted it to be voted on....especially the republicans, who were in charge of bringing it up for a vote...?

 

[Care4all]

also, the office of the president is in charge of the regulatory agencies governing the banks and markets and picking the presidents of fannie mae and freddie mac....he could have kicked the suckers out as of day one of his presidency, from what i have read...

the regulatory agencies should have put a stop to this mess or made the committees in congress and the senate aware of it many years back....instead, these committee members, both republican and democratic, are saying all they were told by these agencies overseeing the market and banks, is that everything was a okay, until it was too late....

maybe they are making excuses now....these committee members, but both sides of the aisle are saying it...?

 

[jreeves]

You're an idiot if you think the blame for this mess falls solely on one party, dude.

I said Democrats are to blame, I didn't say solely. There is a lot of blame to go around. This specific piece of legislation would have adverted this crisis we find ourselves in today.

 

[jreeves]

The republicans were in the majority and had the majority votes in this committee...WHY DIDN'T IT MAKE IT TO THE FLOOR FOR A VOTE? Democrats in the minority in committee could not stop it????????? Not without republicans voting with them to stop it....?????

And it made it to the floor of the senate, chuck hagel introduced it...WHY DIDN'T the Republican Majority bring it up for a vote on the floor of the senate? Why? Hagel introduced it, OUT of committee on to the floor, right?

looks like neither side wanted it to be voted on....especially the republicans, who were in charge of bringing it up for a vote...?

The Republicans in the Senate enjoyed a slim majority in 2005. Democrats stonewalled the bill in the committee process. I think we all know that minority parties can still create havoc for the majority. Hagel and others knew that if S190 would have been voted on, it would have been defeated due to the fierce opposition in the committee process by the Democrats. This bill is very similar to what both Mccain and Obama are calling for now, of course it's minus the 700 billion dollars.

 

[jreeves]

also, the office of the president is in charge of the regulatory agencies governing the banks and markets and picking the presidents of fannie mae and freddie mac....he could have kicked the suckers out as of day one of his presidency, from what i have read...

the regulatory agencies should have put a stop to this mess or made the committees in congress and the senate aware of it many years back....instead, these committee members, both republican and democratic, are saying all they were told by these agencies overseeing the market and banks, is that everything was a okay, until it was too late....

maybe they are making excuses now....these committee members, but both sides of the aisle are saying it...?

Care with all due respect, there was red flag, after red flag being raised.

Here's Greenspan's comments on Freddie and Fannie from the article in the OP;
The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

 

[Luissa]

Care with all due respect, there was red flag, after red flag being raised.

Here's Greenspan's comments on Freddie and Fannie from the article in the OP;
The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

WHy don't we stop playing the blame game and solve the problem!Or come up with a solution!

 

[jreeves]

WHy don't we stop playing the blame game and solve the problem!Or come up with a solution!

LOL...It's not the blame game. If we don't learn as a country from our mistakes we are doomed to repeat history.

 

[editec]

I said Democrats are to blame, I didn't say solely. There is a lot of blame to go around. This specific piece of legislation would have adverted this crisis we find ourselves in today.

No you said

Democrats are to blame for financial meltdown

Hence, you're a fucking idiot.

But by all means DO keep thinking this is a football game and one team can win and American won't lose if they do.

WAKE UP, FOOL!

 

[PeterS]

I said Democrats are to blame, I didn't say solely. There is a lot of blame to go around. This specific piece of legislation would have adverted this crisis we find ourselves in today.

This bill was targeted at capitalization and accounting practices not sub-prime. The assumption being made is that the 1000's of banks making sub-prime wouldn't have done so without Fannie and Freddie or that Fannie and Freddie would not have done exactly what they did after coming into compliance with this legislation through issuing more stock.

This bill was but one of 8 related bills, one that passed, but the only one with McCains name on it. That is the only reason we are hearing about it or do you really expect us to believe that an individual and party devoted to deregulation suddenly became great regulators?

Since deregulation we've had the S&L crisis in the late 80's, the derivative crisis in the late 90's, the accounting crisis in early 2000's, and the mortgage crisis today all of which were covered by tax payers at a cost the now will run into the trillions. The problem, or solution, isn't one piece of legislation but a collection of legislation made without consideration for unintended consequences. This is a red-herring and nothing more.

 

[editec]

This is a red-herring and nothing more.

Yup!

More politics as any price bullshit.

Some of these people do not yet understand the magnitude of the disaster BOTH PARTIES and their god damned lying class war has brought to this nation.

they have brokent he middle class, for christ's sakes and some people here think that's okay.

 

[DavidS]

Bloomberg.com: News

What's really hilarious about this is that you forgot to include this little part in the article: "Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.) "

Oh, also you forgot to mention this part as well:

OpenSecrets | Fannie Mae and Freddie Mac Invest in Democrats - Capital Eye

Republicans received money from fannie and freddie too.

Lastly, the Gramm-Leach-Billey Act paved the way for this greed to start happening. If it were not for this bill, none of this could've happened. Gramm, as in Phil Gramm, as in the person who created John McCain's economic platform.

Gramm-Leach-Bliley Act - Wikipedia, the free encyclopedia

By the way, John McCain voted YES on this.

In an interview taken just last week with CBS, John McCain, who has been talking about regulation and how he has a proud history of regulation, said this:

Think Progress McCain: I’m glad I deregulated Wall Street.

FACT: John McCain has never ONCE voted for tougher regulations on Wall Street.

 

[editec]

John McCain is not SOLELY responsible for this mess.

neither is bush , neither is obama or Barey FRANK.

Every god damned leader in WASHINGTON is responsible for this mess, folks.

This is NOT just caused by dereivitives, or the FED, or real estate, either.

the root cause of this problem is the fact that the AMERICAN MIDDLE CLASS has been rode hard and put away wet for the last THIRTY YEARS!

Free trade is a disaster!

BOTH PARTIES signed onto this foolish policy and the American people have been borrowing to try to keep going because of that policy.

We're tapped out and the economy is collspsing becuase it that and our government is BROKE because of some spectacularly insane tax policies.

Throw in some foolish wars that cost a fortune, add to that a very real energy problem, and you've got an economic perfect storm that is blowing down the LIES ABOUT HOW AN ECONOMY ACTUALLY WORKS that far too many of us bought into because it was in some of our interests personally, to buy into them.

 

[AllieBaba]

During Bill Clinton's presidency, the democrats, including the president, pressured Freddie Mac and Fannie Mae to lower interest and provide home loans SPECIFICALLY to people who did not qualify...low income and minorities....SPECIFICALLY IMMIGRANTS.

People who had nothing to lose by walking away from mortgages they could not pay, and often walked away to their countries of origin. This is what government interference in the economy gets us, folks. It's socialized economy, and it ALWAYS ends in disaster.

From heritage.org "Morning Bell":

Market Rescue Dos and Don’ts Yesterday leaders of the liberal majorities in the House and Senate tried to claim they had completed a deal with the White House to address the Wall Street crisis. From the beginning, leaders on the left have both demanded that the White House deliver conservative votes for any deal, but then refused to include any conservatives in the negotiations . After yesterday, the leadership on the left now knows it will have to work with conservatives in order to get a compromise done.

If the left is serious about preventing a credit lock down that threatens to cripple our economy, it must adhere to some sound conservative principles when crafting any compromise. At a bare minimum, any financial rescue legislation must:

Provide sufficient market liquidity to comprehensively resolve the financial situation.
Focus on a systemic approach that attacks the entire problem, instead of bailing out specific companies.
Allow the Treasury Department to liquidate the investments in an orderly way.
Return all proceeds from the sale of assets to the treasury.
Specify the types of markets where Treasury can act.
Use objective criteria for how Treasury should price assets for purchase and sale.
Provide for meaningful judicial review.
Sunset all regulatory authority.
Establish an oversight board.
In addition, as the Washington Post editorialized yesterday, a clean bill that contains only items essential to the immediate liquidity crisis, is needed. Any financial rescue legislation must not:

Give the Treasury unbridled discretion to intervene in the economy.
Turn the government into the nation’s largest landlord.
Give the government the power to rewrite contracts.
Make government an equity owner of Wall Street.
Divert revenues from taxpayers into other purposes, especially to housing slush funds.
Dictate the terms of employment for private sector businesses.
Impose new regulations on the financial industry.
Require firms to raise capital.
Ease capital standards.
Heritage’s Bill Beach, director of the Center for Data Analysis, told The New York Times yesterday, “We are in a very serious place. There is risk of contagion to the entire economy.” As a general principle, the federal government should not intervene in markets. But there can be rare situations when government institutions have a critical role in helping to assure the integrity of the market’s infrastructure. The above guidelines will help to reconcile these two principles in light of the critical role in helping to assure the integrity of the market’s infrastructure. The above guidelines will help to reconcile these two principles in light of the current crisis..

sorry, here's the link:
http://blog.heritage.org/2008/09/26/morning-bell-market-clean-up-dos-and-donts/

 

[jillian]

Where's your link?

 

[AllieBaba]

I just added it.

 

[jillian]

I just added it.

Thanks. But it's still the wrong link... it's to the homepage.

 

[sealybobo]

Thanks. But it's still the wrong link... it's to the homepage.

It's true, the Democrats wanted poor people to own homes. That doesn't mean we said give them mortgages they couldn't afford. And do Republicans want to discuss why people lost their jobs, or why things went up in price? People aren't only foreclosing because they lost their jobs. And not everyone has a mortgage that goes up and down. Even 30 year fixed mortgages are foreclosing.

And do Republicans want to discuss what led to houses dropping in value?

I just love how now, "everyone is to blame". I guess that's as close as we will ever get to an I'm sorry from the GOP.

This morning Air America was playing a tape of Bush saying in 2001 that not only did he want poor Americans to own, but he wanted them to own EXCELLENT homes.

Fact is, you can go back and read every speech Bush ever made about the economy, and McCain for that matter, and they were dead fucking wrong about everything.

Now they want 4 more years? No way!!!

McCain wants the bankers to get that $700 billion dollars, no matter what he says today. Those are his bosses after all.