Pointing the Finger

We all know that in an election year it’s standard practice to blame the current occupant of The White House for all the Country’s ills. The financial mess is no exception. We hear much about Bush and McCain being responsible because of their support of deregulation.

But, as one of those occupants, John Adams, said, facts are stubborn things.
And those facts refute the afore-mentioned accusations and, in fact, demand that the fingers should be pointing at some Democrats.

There is no one cause of the current situation, but, as the principal players in the mortgage market, Fannie Mae and Freddie Mac are clearly at the heart of the problem. With encouragement from Democrats in Congress, F&F executives repeatedly lowered lending standards, enriching themselves and their shareholders while hiding behind the mantra of helping more people achieve the American dream.

As early as 2001, President Bush in his first budget message started warning of the potential problems at Fannie & Freddie. Later, on September 11, 2003, The New York Times reported, “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 proposal called for a new regulatory agency to supervise F&F.

In 2005, Senator McCain sponsored legislation to reform Fannie and Freddie. On the Senate floor, McCain argued, “If Congress does not act, American taxpayers will continue to be exposed to…enormous risk…”

What happened to these efforts by Bush and McCain to rein in these out-of-control behemoths? Barney Frank and Chris Dodd, heads of the two Congressional committees responsible for over-seeing F&F, with an assist from Chuck Schumer, blocked every attempt at reform. Sen. Frank’s confidently asserted that F&F “…are not facing any kind of financial crisis.”

Campaign contributions and sweetheart loans spoke louder than Republican danger warnings and proposed reform legislation.