Monday, September 29, 2008
Why The Bailout Rush?
Dems Are Afraid Of Blame!
The Dems are scrambling to fix this because they know they are to blame for this mess.
And by the way, in case you haven't noticed - especially all you Obama Cultists and dyed in the wool Liberals - IT'S THE REPUBLICANS WHO ARE LOOKING OUT FOR THE BEST INTERESTS OF THE CONSUMER, AVERAGE AMERICANS AND MAIN STREET in this bailout legislation.
IT'S THE DEMOCRATS WHO WANT TO BAIL OUT WALL STREET.
It is President George W. Bush who also wants to rush this legislation through, and if you've been paying attention to this blog and you are objective, you will know that I have been as critical of Bush on many issues as I have been of Liberals.
All of sudden the Democrats - Pelosi and Reid and others - are on the side of Bush in the bailout. IT'S THE REPUBLICANS WHO ARE SAYING, "WHOA...LET'S PULL BACK AND TAKE A SECOND AND THIRD LOOK AT THIS."
Isn't it paradoxically ironic that the Dems are on the side of the President they love to hate on this bailout?
The Bush Administration, in April of 2001 warned congress of a potential financial crisis. In their 2002 budget requests they declared the size of Fannie Mae and Freddie Mac "A potential problem... and can cause strong repercussions in the financial markets."
In 2003, the White House upgraded the warning on real estate mortgage loans. Their experts said that the way loans were being handled could spread beyond the housing sector. In fall of 2003 the Bush Administration was pushing congress hard to create a new federal agency that would monitor and supervise Fannie Mae and Freddie Mac; both are Government Sponsored Enterprises (GSE).
John Snow, Treasury Secretary at the time called for regulations and supervision of GSEs. He said in September 2003 "We need a strong world-class regulatory agency to oversee the prudential operations of the GSEs and the safety and the soundness of their financial activities."
Snow was pushed back from this position, by then ranking member, but the eventual Chairman of the Senate Banking Committee, Barney Frank (D) from Massachusetts.
Frank denied there was any problem and was quoted as saying, "Fannie Mae and Freddie Mac are not in crisis."
In fact, Barney Frank was encouraging the government to do more to get low income families into homes.
"The more people, in my judgment, exaggerate the threat of safety and soundness, the more people conjure up the potential for serious financial losses.... [a problem] I do not see. We see entities that are fundamentally sound financially and would stand some of the disastrous scenarios. But, even if there were a problem the government wont bails them out. The more pressure we see there then there is less, I think, we see in terms of affordable housing," Barney Frank said in September of 2003.
The creation of a regulatory agency to oversee GSEs was ultimately blocked.
In February of 2005, Alan Greenspan spoke about the dangers of Fannie Mae and Freddie Mac after Fannie leaders admitted to accounting screw-ups.
Greenspan said, "Enabling these institutions to increase in size, and they will, once the crisis in their judgment passes. We are placing the total financial system of [in] the future at a substantial risk."
Later that year Greenspan warned, "If we fail to place GSE regulation, we increase the possibility of insolvency and crisis."
Fannie Mae and Freddie Mac had some strong defenders. One of them was democrat New York Senator Charles Schumer.
In April 2005 Schumer said, "I think Fannie and Freddie have done an incredibly good job, and are an intrinsic part of making America the best housed people in the world. If you look over the last 20 or whatever years, they've done a very, very good job."
Senator John McCain co-sponsored legislation pushing for regulation of GSEs like Freddie and Fannie.
In a speech on the senate floor, McCain said, "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... the GSEs need to be reformed without delay."
In 2006, Barney Frank took over the chairmanship of the Senate Banking Committee and on his first day declared that he was going to work on making housing more affordable for low-income owners and that loans would be easier to get by relaxing loan regulations.
That bill (THE FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT) made it out of the senate banking committee with a party line vote. All the democrats voted against it. By then there had been an election and democrats had won back control of the Senate.
Republicans, knowing they did not have the numbers to get the bill passed, did not even bring it up for a vote that 2006 session.
Well, then try this account of the Fannie-Freddie Fiasco from Bloomberg:
...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.''
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.
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.
Then again, why should Liberals and Obama Cultists care about facts when they make up their own "truths"? It's much easier for them to keep their heads firmly ensconced deep in the recesses of their colons, isn't it Libs? Isn't it Obama Cultists?
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