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February 2, 2009

More From the NY Times Archives: W Tried to Stop Fannie and Freddie

Posted by Dave Blount at February 2, 2009 7:27 AM

The Gray Lady might want to do some scrubbing of her archives. Just as she predicted a decade ago that race-based mortgages would cause the government to have to bail out Fannie Mae, she let it slip back in 2003 that unlike the Dems, W was trying to do something about it:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. …

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

Unfornately the proposal…

would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws.

But even limited efforts to reign in these government-sponsored enterprises were bitterly resisted by Democrats, who characteristically raised a smokescreen by bleating about "affordable housing":

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
''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.''

The real reason Democrats defended Fannie and Freddie from regulation?

''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies.

This lobbying entailed paying off corrupt Democrats, prominently including Barney Fwank, Chris Clod, Hanoi John Kerry, Shrillary Rotten, and of course, Chairman Zero.

Nonetheless, future generations will be told by their history books that Republicans caused the economy to collapse.

On a tip from xantl.