Thursday, October 2, 2008

"if It Ain't Broke"

The Wall Street Journal has a compendium of who said what in it's article What They Said About Fan and Fred. The problems of Fannie Mae and Freddie Mac were known 5 years ago as House hearings clearly show. Representative Maxine Waters(D) of California had this to say:

Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban Development Secretary Mel Martinez:

Secretary Martinez, if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals

Rep. Barney Frank (D., Mass.): I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . . .

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .

Barney Frank and many other Democrats in the House of Representatives wanted to "roll the dice" instead of fixing a major, major problem. From the words of Representative Barney Frank, it is somewhat mind-boggling that he has received praise in the past few days:

It is the height of irony that in recent days, as the chairman of the House Financial Services Committee, Barney Frank gets praise for his role as a key figure in the bailout talks, scrambling to avert the disastrous consequences of Bush Administration policy. Barney Frank is the portrait of congressional complicity, if not outright corruption, in this crisis. The Wall Street Journal closely covered his ties with the corrupt CEOs of Fannie Mae and Countrywide, Franklin Raines and Angelo Mozilo.

Could it be that all those enticing ties Barney Frank had made sure he was willing to "roll the dice" 5 years ago? Who else was willing to "roll the dice"? In Blame D.C. Not New York Democrats Dodd and Obama are shown to be top recipients of the largess of funds from CEO's of Fannie Mae and Freddie Mac:

Fannie Mae’s fate illustrates the political roots of market failure. In an instance of blatant political cronyism, Mr. Raines, Clinton’s White House budget director, became the CEO of Fannie Mae. Raines exposed the company’s balance sheet to insane risks while deliberately exaggerating earnings to receive astronomical bonuses. Why not? Fannie Mae had an implied guarantee from the US Federal Government – the taxpayers would bail him out. To shore up that promise, Fannie Mae and Freddie Mac have showered Congress with money for decades and incidentally, Senators Chris Dodd and Barack Obama top the list of recipients since 1989. Sure, Raines was corrupt, but politicians like Frank who shielded him from oversight and regulation deserve ultimate responsibility

Now, the Senate has passed it's version of the bailout, oh excuse me, the rescue package. It includes a provision to increase FDIC insurance. But some in the House want to increase the scope of the bailout.

Something does need to be done. Banks in Europe are facing the same problem. Like the Senate, the governments are acting swiftly and responsibly. They are focused on trying to ease the situation and not add earmarks. It seems they are acting like adults and not spoiled brats like Waters who saw nothing that needed to be fixed and Barney Franks who wanted to roll the dice 5 years ago.

Now, we are faced with a bigger repair job and rolling the dice wasn't a very good option. Perhaps, if tighter controls had been enacted 5 years ago, we would be seeing a economic boom now.

Watching this mess unfold, I couldn't help but hope that there was just one Congressman like Jefferson Smith in Mr. Smith Goes to Washington. Sadly, no one measured up. McCain came the closest. He did seem willing to make a truly bi-partisan effort to do what needed to be done. Obama seemed to be sitting on the fence until he knew which way the political wind was blowing. Plus, he was one of the largest recipients of contributions from Fannie Mae and Freddie Mac.

Democratic Speaker of the House Nancy Pelosi did her job very well in blaming the Republicans and the latest poll numbers for Obama reflect that. Political expediency at its worst was in action. My question is, can we really afford the "change" Obama keeps speaking about? The Democrats have shown they are more than willing to throw the United States under the bus to gain political power. Pelosi showed that very well on Monday.

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