Obambnomics? How did John Talbott miss this?
Talbott's tall tale of "Obamanomics" has as a cornerstone the idea that the Bush administration did nothing to try to regulate the financial industry.
He points with glee towards an unregulated Fannie and Freddie being out of control and "leveraged" at 100 to 1!
So then, how does he explain this?
"...here's a New York Times story from September 2003, clearly showing that the first substantive Fannie and Freddie reform from inside government came from the Bush administration. Spurred by worries that Fannie and Freddie were cooking their books and taking too many risks, Treasury Secretary John Snow proposed placing the companies under Treasury oversight with strict controls over risk and capital reserves. The NYT labeled the proposal "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago" ...
"So five years ago, there was one of those rare moments in Washington when the branches and personalities of government—in this case, the Bush administration—are less interested in protecting or expanding their turf than in fixing a looming catastrophe. What was Frank's response to the proposal?"
"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 just who was stonewalling legislation to regulate the financial industy ... all those years ago?
Added: As Frank mentions in his press release today, two years after it was first proposed, the House finally voted on a bill reforming the mortgage giants. Alas, the legislation was watered down to the point of being meaningless—that's why it passed the House with such wide margins (122 Democrats and 209 Republicans). But even then, and despite his high regard for bipartisanship now, Barney Frank wasn't among the yeas. (same source)
- Jessica RabbitLv 51 decade agoBest Answer
Yeah we can thank Jimmy Carter for his Community Reinvestment Act of 1977 that started the whole thing. Then our buddy Bill Clinto got ahold of things.
1993: Clinton extensively rewrote Fannie Mae and Freddie Mac's rules turning the quasi-private mortgage-funding firms into semi-nationalized monopolies dispensing cash and loans to large Democratic voting blocks and handing favors, jobs and contributions to political allies. This potent mix led inevitably to corruption and now the collapse of Freddie and Fannie.
1994: Despite warnings, Clinton unveiled his National Home-Ownership Strategy which broadened the CRA in ways congress never intended.
1995: Congress, about to change from a Democrat majority to Republican, Clinton orders Robert Rubin's Treasury Dept to rewrite the rules. Robt. Rubin's Treasury reworked rules, forcing banks to satisfy quotas for sub-prime and minority loans to get a satisfactory CRA rating. The rating was key to expansion or mergers for banks. Loans began to be made on the basis of race and little else.
1997 - 1999: Clinton, bypassing Republicans, enlisted Andrew Cuomo, then Secretary of Housing and Urban Development, allowing Freddie and Fannie to get into the sub-prime market in a BIG way. Led by Rep. Barney Frank and Sen. Chris Dodd, congress doubled down on the risk by easing capital limits and allowing them to hold just 2.5% of capital to back their investments vs 10% for banks. Since they could borrow at lower rates than banks their enterprises boomed.
With incentives in place, banks poured billions in loans into poor communities, often 'no doc', 'no income', requiring no money down and no verification of income. Worse still was the cronyism: Fannie and Freddie became home to out-of work-politicians, mostly Clinton Democrats. 384 politicians got big campaign donations from Fannie and Freddie. Over $200 million had been spent on lobbying and political activities. During the 1990's Fannie and Freddie enjoyed a subsidy of as much as $182 Billion, most of it going to principals and shareholders, not poor borrowers as claimed.
Did it work? Minorities made up 49% of the 12.5 million new homeowners but many of those loans have gone bad and the minority home ownership rates are shrinking fast.
1999: New Treasury Secretary, Lawrence Summers, became alarmed at Fannie and Freddie's excesses. Congress held hearings the ensuing year but nothing was done because Fannie and Freddie had donated millions to key congressmen and radical groups, ensuring no meaningful changes would take place 'We manage our political risk with the same intensity that we manage our credit and interest rate risks,' Fannie CEO Franklin Raines, a former Clinton official and current Barack Obama advisor, bragged to investors in 1999.
Isn't it nice how respondents like Steve are so well informed and are so prepared to blame the economic issues on a GOP controlled house when in fact the problems came from the dems and the dem controlled house?
- Anonymous1 decade ago
Barney Frank is a fraud and a fake hes more interested in rubbing man bellies with Fannie Execs than looking out for the people !
- steve_miller_5Lv 51 decade ago
Your citation answers your own question. The Treasury Secretary may have proposed this, but neither the Bush Administration nor the Republican-controlled Congress acted upon the recommendation.
- 1 decade ago
Republicans during the Bush years were wimps when it came to domestic matters. They never stood up to bloviating morons like Barney Frank and Maxine Waters. I hope they get tough and begin to stand up to Obama.