by Melissa Clouthier | January 8, 2009 10:33 pm
Way back during Hurricane Ike, I spent a day sifting through the history of Freddie Mac and Fannie Mae and came to the conclusion that Chuck Schumer, Barney Frank, Chris Dodd and a few others deserved the lion share of the blame. Schumer particularly rotted my socks because he had the unmitigated gall to write a letter spurring a bank run when his policies caused the instability of the bank to begin with. [This was in July.]
In September, Schumer, without irony blamed President Bush for the financial meltdown from the floor of the Senate. But here was the truth;
Guys like Schumer didn’t just like their own wheels greased, they pushed Freddy Mac and Fanny May to take MORE risks. Meanwhile now, Schumer blames the current administration, when it was President Bush in 2003, who sounded the alarm and as noted at Sweetness and Light. The New York Times didn’t look to fondly on President Bush’s attempts. Why, that’s a surprise! Here’s their analysis:
New Agency Proposed to Oversee Freddie Mac and Fannie Mae
By STEPHEN LABATON
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.
Today in the Wall Street Journal, Karl Rove reinforces what I easily found a couple months ago:
Rather than a failure of capitalism, the housing meltdown shows what’s likely to happen when government grants special privileges to favored private entities that facilitate bad actors and lousy practices.
Fannie and Freddie are “government-sponsored enterprises” (GSEs), chartered by Congress. As such, they had an implicit promise of taxpayer backing and could borrow money at rates well below competitors.
Because of this, the Bush administration warned in the budget it issued in April 2001 that Fannie and Freddie were too large and overleveraged. Their failure “could cause strong repercussions in financial markets, affecting federally insured entities and economic activity” well beyond housing.
Mr. Bush wanted to limit systemic risk by raising the GSEs’ capital requirements, compelling preapproval of new activities, and limiting the size of their portfolios. Why should government regulate banks, credit unions and savings and loans, but not GSEs? Mr. Bush wanted the GSEs to be treated just like their private-sector competitors.
But the GSEs fought back. They didn’t want to see the Bush reforms enacted, because that would level the playing field for their competitors. Congress finally did pass the Bush reforms, but in 2008, after Fannie and Freddie collapsed.
What I don’t get now, is why Rove et al, are just now speaking what was so obviously the facts. Once again, Democrat pronouncements impugning Bush went unopposed. McCain allowed the Republicans to take on this issue because Bush’s name was involved when it was the Republicans who were doing something right, for once.
Now, the facts being presented matters little. The ongoing economic malaise is due in large part to Democratic policy. And it will be prolonged by more bad policy. The American people deserved to be informed of this before the election.
Cross-posted at MelissaClouthier.com.
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