G.W. Bush wasn't even on the political horizon when the
groundwork was laid for the housing mortgage meltdown.

Yet he bought into it big time. He had 8 years in office, the
first 6 he could have done a lot to stop it, instead he
contributed to it.

Al Hubbard and Noam Neusner - Where Was Sen. Dodd? -
washingtonpost.com

Two Bush administrators. Goes back to the old truth, "If a
conservative says it, it's misstated, misleading, or just plain
wrong." Only with the Bush administration that was in spades.

By Al Hubbard and Noam Neusner

Friday, September 12, 2008

Taxpayers face a tab of as much as $200 billion for a
government takeover of Fannie Mae and Freddie Mac, the

In 2008, as compared to that much for the S&L bailout in the
late '80s, when that was a lot more money.

...

We will save the senator some trouble. Here is what we saw
firsthand at the White House from late 2002 through 2007:
Starting in 2002, White House and Treasury Department
economic policy staffers, with support from then-Chief of
Staff Andy Card, began to press for meaningful reforms of
Fannie, Freddie and other government-sponsored enterprises
(GSEs).

The then 100% republican controlled congress could have given it
to them. Why didn't they?

Senate R 221 D 212 House R 50 D 50 Cheney casting deciding vote.

Oh, because the right did not want reform, they wanted
abolition.

The crux of their concern was this: Investors believed that
the GSEs were government-backed, so shouldn't the GSEs also
be subject to meaningful government supervision?

Yes, they should have been. Why didn't the republicans arrange
it?

This was not the first time a White House had tried to
confront this issue.

During the Clinton years, Treasury Secretary Larry Summers
and Treasury official Gary Gensler both spoke out on the
issue of Fannie and Freddie's investment portfolios, which
had already begun to resemble hedge funds with risky
holdings.

So, why didn't the congress, republican controlled from 1995 on,
do something about it?

Nor were others silent: As chairman of the Federal Reserve,
Alan Greenspan regularly warned about the risks posed by
Fannie and Freddie's holdings.

Greenspan's primary purpose in office was to keep people out of
work to fight inflation. Thanks, don't care what he thought.
OTOH, Greenspan also believe whole heartedly in the ability of
the market to police itself, which he has since recanted.

"Greenspan's epitaph should be his statement to Congress in July
1998 that "regulation of derivatives transactions that are
privately negotiated by professionals is unnecessary.""
Robert Sheer, The Nation, June 3, 2009.

President Bush was receptive to reform. He withheld
nominees for Fannie and Freddie's boards -- a presidential
privilege. While it would have been valuable politically to
use such positions to reward supporters, the president put
good policy above good politics.

How does withholding nominees accomplish anything? Why didn't he
just nominate people who would act as he thought responsibly?

In subsequent years, officials at Treasury and the Council
of Economic Advisers (especially Chairmen Greg Mankiw and
Harvey Rosen) pressed for the following:

Requiring Fannie and Freddie to submit to regulations of
the Securities and Exchange Commission; to adopt financial
accounting standards; to follow bank standards for capital
requirements; to shrink their portfolios of assets from
risky levels; and empowering regulators such as the Office
of Federal Housing Oversight to monitor the firms.

Yet republicans were the primary purveyors of deregulation. Was
that why it didn't happen? Was it because the republicans in
congress would not tolerate it?

The administration did not accept half-measures. In 2005,
Republican Mike Oxley, then chairman of the House Financial
Services Committee, brought up a reform bill (H.R. 1461),
and Fannie and Freddie's lobbyists set out to weaken it.
The bill was rendered so toothless that Card called Oxley
the night before markup and promised to oppose it. Oxley
pulled the bill instead.

Nice little fraud. Give the number of the bill instead of the
name. HR 1461 was the Home Financing Reform Bill of 2005.
Remember that? It was the bill McCain so proudly claimed to have
co-sponsored. Michael Oxley co-authored that bill with Barney
Frank, and it' passed the house overwhelmingly. It was in the
Senate where it died, after the Bush administration asked the
Senate to kill it. Seems the Bush administration wanted *MORE*
money going into those low income mortgages the right claims
were responsible for the mortgage crises.

Remember how Oxley, when asked about the bill's failure, said,
"President Bush gave us a one fingered salute."?

During this period, Sen. Richard Shelby led a small group
of legislators favoring reform, including fellow Republican
Sens. John Sununu, Chuck Hagel and Elizabeth Dole.

IOW, most republicans, the majority party, were against them.

Meanwhile, Dodd -- who along with Democratic Sens. John
Kerry, Barack Obama and Hillary Clinton were the top four
recipients of Fannie and Freddie campaign contributions
from 1988 to 2008 -- actively opposed such measures and
further weakened existing regulation.

How did the minority party weaken regulations. Seems Hubbard and
Neusner might be playing a bit fast and loose with the truth.

The president's budget proposals reflected the nature of
the challenge. Note the following passage from the 2005
budget: Fannie, Freddie and other GSEs "are highly
leveraged, holding much less capital in relation to their
assets than similarly sized financial institutions. . . . A
misjudgment or unexpected economic event could quickly
deplete this capital, potentially making it difficult for a
GSE to meet its debt obligations. Given the very large size
of each enterprise, even a small mistake by a GSE could
have consequences throughout the economy."

Which has what to do with his budget proposals? Just what did
Bush intend to do about it, and how would that be part of his
budget proposals anyway?

That passage was published in February 2004. Dodd can find
it on Page 82 of the budget's Analytical Perspectives.

Yes, when congress was controlled by republicans in both houses.
Republicans controlled the entire federal government.

The administration not only identified the problem, it also
recommended a solution. In June 2004, then-Deputy Treasury
Secretary Samuel Bodman said: "We do not have a world-class
system of supervision of the housing government- sponsored
enterprises (GSEs), even though the importance of the
housing financial system that the GSEs serve demands the
best in supervision."

That's not a solution. What was the solution?

Bush got involved in the effort personally, speaking out
for the cause of reform: "Congress needs to pass
legislation strengthening the independent regulator of government-sponsored enterprises like Freddie Mac and
Fannie Mae, so we can keep them focused on the mission to
expand home ownership," he said in December. He even
mentioned GSE reform in this year's State of the Union
address.

Independent regulator? Isn't that more allowing the financial
system to regulate itself? Isn't that an admission by Bush that
he can'd do his job?

Yet he didn't do a damn thing.

BTW, the real cause of the financial meltdown was not Fannie May
or Freddie Mac, that 200 billion was a small portion. It was the
deritives and such as credit default swaps that republicans have
consistently and overwhelmingly opposed regulating.

And of the top 25 subprime lenders, only one was subject federal
regulations on those loans.


BOB KLAHN bob.klahn@sev.org http://home.toltbbs.com/bobklahn

... Remember, the post WW2 debt load went up only under anti-tax presidents.
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