Conservative Watchdog
The Obama Presidency - This site is to show the truth about this man, the administration and what they truly stand for.
Odd Couple Demands Probe of Rahm Emanuel at Freddie as More Money Rolls In
WASHINGTON -- Two strange bedfellows have asked Attorney General Eric Holder to investigate President Obama's right-hand man, chief of staff Rahm Emanuel, for his potential role in the near collapse of mortgage giants Fannie Mae and Freddie Mac.
The letter by Jane Hamsher, founder of the liberal Firedoglake Web site, and Grover Norquist, Americans for Tax Reform Chief, was sent Wednesday, one day before the Treasury Department announced that it will lift the $400 billion financial cap on loans to the government-sponsored enterprises to make sure they stay afloat.
It also arrived just before the Federal Housing Financial Authority announced Thursday that it would place salary caps on 11 of the companies' top executives.
Hamsher and Norquist want to know now whether the bailout was in part the result of corrupt practices by Emanuel while he was a board member at Freddie in 2000-2001.
They cited a Chicago Tribune story that described a plan by the executives and the board to use accounting tricks to show shareholders they were reaping massive profits even as they continued down a path of risky investments. The profits were then used to justify the executives' big bonuses. When Emanuel left the board to enter Congress in 2002, he was qualified for $380,000 in stock and options and $20,000 cash.
The two wrote they would like the Justice Department to "begin an investigation into the cause of Fannie and Freddie's conservatorship, into Rahm Emanuel's activities on the board of Freddie Mac (including any violations of his fiduciary duties to shareholders), into the decision-making behind the continued vacancy of Fannie and Freddie's inspector general post, and into potential public corruption by Rahm Emanuel in connection with his time in Congress, in the White House, and on the board of Freddie Mac."
Since the financial bailout began, Fannie and Freddie have received $111 billion in taxpayer loans. In August, the administration projected the cost for rescuing Fannie and Freddie would total $170 billion.
Treasury Department officials said the cap will be replaced with a flexible formula to ensure the companies can stand behind the billions of dollars in mortgage-backed securities they sell to investors.
"The amendments to these agreements announced today should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during the current crisis," the department said in a statement.
FHFA issued its own ruling Thursday that the base salary for officers besides the CEO, CFO and COO cannot exceed $500,000 a year. That means five officers are exempt and 11 will now face a cap.
The capped executives will be allowed to get up to one-third of their salary in additional incentive bonuses. Any deferred cash salary -- like stock salary received by private company executives who received bailouts -- will be paid partly as a means to keep executive officers working at the GSEs.
FHFA acting chief Edward DeMarco said the compensation deal is to mimic the one set up by pay czar Kenneth Feinberg for private companies.
"The enterprises must attract and retain the talent needed to accomplish (their) objectives. We have worked with the enterprises' boards and sought the guidance of the Special Master of TARP Executive Compensation, to develop competitive compensation packages that benefit from the structural standards created for the TARP-assisted firms," DeMarco said.
Eight of the then-top 11 executives at Fannie Mae left the company just before the U.S. government stepped in with its bailout, as did the four highest paid executives at Freddie
Mac.
Treasury officials will provide an updated estimate for Fannie and Freddie losses when President Obama sends his 2011 budget to Congress in February. The formula Treasury will use will provide the institutions with a sufficient cushion based on the losses they may incur over the next three years.
In their letter to Holder, Hamsher and Norquist wrote that the White House has stonewalled any inquiries into Emanuel's role on the board, noting that the acting inspector general was "stripped of his authority earlier this year by the Justice Department, relying on a loophole in a bill Mr. Emanuel cosponsored and pushed through Congress shortly before he left for the White House."
The White House has not appointed a new inspector general to determine whether crimes were committed by the board to defraud investors, the two noted, and the statute of limitations for empaneling a grand jury is about to run out.
"Under the influence of Rahm Emanuel, the White House is moving a trillion-dollar slush fund into corruption-riddled companies with no oversight in place. This will allow Fannie and Freddie to continue to purchase more toxic assets from banks, acting as a back-door increase of the TARP without congressional approval," Hamsher and Norquist wrote.
Asked about the letter on Thursday, White House spokesman Bill Burton did not address the allegations, saying, "I have the feeling that Rahm's job is very safe."
U.S. promises unlimited financial assistance to Fannie Mae, Freddie Mac
The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.
The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.
But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.
The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac's chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.
The administration faced a congressionally mandated deadline of Dec. 31 to increase the amount of aid it could provide to Fannie Mae and Freddie Mac, which together have already received $111 billion in assistance.
Treasury said Thursday that its decision did not mean the firms would need $200 billion or more apiece, but that it instead was seeking to assure markets that the government would stand behind the companies. In a statement, Treasury said the move "should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."
By promising to keep the companies solvent, the government can maintain its sweeping power over the housing market. Fannie Mae and Freddie Mac have played a central role in Obama administration policies to keep mortgage interest rates low, restructure unaffordable mortgages, stop foreclosures and funnel money to housing programs around the country.
The Bush administration took over the firms in September 2008 as the financial crisis entered its most severe phase and promised $200 billion to keep the companies solvent. The Obama administration later doubled that figure.
While the ultimate cost of the bailouts is unknown, the administration estimated earlier this year it would cost $171 billion, and some officials said they expect it could rise further. Analysts have said it could be much higher. The cost will depend in part on how aggressively the administration continues to use the firms to stimulate the housing market because these steps could curtail profitability.
Under the terms of the latest decision, the administration's open-ended commitment will expire in 2012. Then, the firms will only be allowed to receive the balance of the $400 billion remaining today -- about $290 billion.
The administration is set to release broad principles in February for reforming the companies. Many experts predict that the government will have no choice but to hold on indefinitely to many of the companies' most troubled assets -- mortgage investments made during the housing bubble to less-than-worthy borrowers.
But an administration official said it could take several years to resolve the future of the companies, especially if Congress isn't keen to take up the politically charged issue during the 2010 midterm election year, and if the government wants to preserve the ability to influence the housing market. The companies together own or insure the majority of home loans, and no viable private system exists that could replace them.
Privatizing Fannie, Freddie Could ‘Mitigate’ Risks Caused by Government Intervention, Says GAO
“The extent to which privatizing or terminating the enterprises mitigates current safety and soundness and financial stability risks is difficult to determine,” said GAO.
“Under one scenario, such risks would be mitigated because large and complex enterprises, which might engage in risky business practices due to the implied federal guarantee on their financial obligations, would not exist,” the report concluded. “Instead, private lenders would be subject to market discipline and consequently would be more likely to make credit decisions largely on the basis of credit risk and other market factors.
“However,” GAO continued, “this scenario would be complicated if a federal entity were established to insure mortgage debt. If the federal mortgage insurer did not set appropriate premiums to reflect the risks of its activities, then lenders might have incentives to engage in riskier business practices than otherwise would be the case.
“In similar situations, such as the National Flood Insurance Program, federal agencies have faced challenges in establishing appropriate premiums to compensate for the risks that they underwrite,” said GAO. “If large private-sector financial institutions assumed responsibility for key enterprise activities or purchased a significant portion of their assets, the perception could arise that the failure of such an institution would involve unacceptable systemic financial risks. Therefore, markets’ perceptions that the federal government would provide financial assistance to such financial institutions could undermine market discipline.”
The report, issued Thursday and circulated to key members of Congress, examined three competing proposals for the fate of Fannie Mae and Freddie Mac: Make them full-fledged federal agencies; keep them as GSEs; or privatize them.
While the GAO does not make policy recommendations, it did examine the positives and negatives of each option, weighing how well each option might achieve federal mortgage lending policy against the risks to taxpayers should something go wrong.
Making Fannie and Freddie pure government agencies, it said, would be the most direct route toward achieving federal policy. In that scenario, however, the government might not be able to manage the task of securitizing millions of mortgages, possibly exposing the taxpayers who would have to pay for any losses the agency incurred.
“Nevertheless, successfully managing a large conventional mortgage purchase and MBS [mortgage-backed securities] issuance business still may be a complex and challenging activity for a government entity,” the report says.
“[T]he failure to adequately manage the associated risks could result in significant losses that could be the direct responsibility of taxpayers,” it says.
If this new government mortgage company were to do as Fannie and Freddie have done and continue purchasing and securitizing mortgages during economic slowdowns, the risk to taxpayers would be amplified because poor economic conditions would make mortgage lending much more risky.
“This risk may be heightened if a government entity were expected to continue purchasing mortgages and issuing MBS during stressful economic periods when the potential for losses may be greater than would otherwise be the case.”
Keeping Fannie and Freddie as they are, the report found, would also allow the government to pursue its goals. However, keeping Fannie and Freddie as government-backed corporations would do nothing to address the problems which helped cause the current recession.
“When mortgage credit markets stabilize, the enterprises as reconstituted GSEs might be expected to perform functions that they have performed for many years,” it says. However, “[c]ontinuing the enterprises as GSEs could present significant safety and soundness concerns as well as systemic risks to the financial system.
“In particular, the potential that the enterprises would enjoy explicit federal guarantees of their financial obligations, rather than the implied guarantees of the past, might serve as incentives for them to engage in risky business practices to meet profitability objectives.”
Privatizing Fannie and Freddie would make it very difficult for the federal government to pursue housing and mortgage policies which favor one group--usually low-income borrowers--the report finds. This might not be a bad thing however, since Fannie and Freddie lost massive amounts of money on just those types of loans.
Fannie and Freddie “embarked on aggressive strategies to purchase mortgages and mortgage assets with questionable underwriting standards. For example, they purchased a large volume of what are known as Alt-A mortgages, which typically did not have documentation of borrowers’ incomes and had higher loan-to-value ratio or debt-to-income ratios.”
These Alt-A mortgages “served targeted groups” according to GAO, but also accounted for massive losses eventually covered by American taxpayers.
“Alt-A mortgages accounted for nearly half of Fannie Mae’s $27.1 billion in credit losses of its single-family guarantee book of business in 2008.”
Privatization, the report suggests, could prevent such a thing from happening again.
“This option also could eliminate the traditional legislative basis for requiring that they facilitate the flow of mortgage credit serving targeted groups, particularly through the numeric mortgage purchase program.”
New Documents Uncovered by Judicial Watch Show Congress Ignored Corruption at Fannie Mae and Freddie Mac for Years
Congress Warned on Fannie and Freddie Misdeeds, yet Liberals in Congress Blocked Attempts to Rein in the Government Sponsored Enterprises
Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that as part of its ongoing investigation of the government's role in the financial crisis it has uncovered new documents. The documents show that members of Congress for years were aware that Fannie Mae and Freddie Mac were playing fast and loose with accounting issues, risk assessment issues and executive compensation issues, even while liberals in Congress continued to block attempts to regulate the two Government Sponsored Enterprises (GSEs).
Judicial Watch obtained the documents from the Federal Housing Finance Agency (FHFA) in response to a Freedom of Information Act (FOIA) request dated December 4, 2008. Judicial Watch requested records related to members of Congress activity regarding the policy of Fannie Mae and Freddie Mac to increase lending to individuals with poor credit risk, as well as correspondence and records about contacts between FHFA and Fannie and Freddie. Among the important documents:
- FHFA letter, dated March 26, 2007, from the director of the Office of Housing Enterprise Oversight (OHFEO), James B. Lockhart, to U.S. Senators Elizabeth Dole, Chuck Hagel, Mel Martinez and John Sununu: "This is a very serious issue. Freddie Mac's inadequate systems and controls make it a significant supervisory concern. Furthermore, its lack of timely public disclosures deny market participants the essential financial information made available by all other publicly traded companies so that investors may make informed judgments." The letter also mentions, "...Fannie Mae still has not filed financial statements for 2005 and 2006 and thus, they are not timely filers either."
- FHFA letter, dated December 3, 2004, to Congressman Barney Frank: "On November 15, 2004 Fannie Mae filed a Form 12b-25 with the Securities and Exchange Commission (SEC). Fannie Mae indicated that its external auditors could not complete their reviews of its financial statements and noted the possibility of up to a $9 billion loss dating back to 2001. As a result, OHFEO has determined it will not provide a monthly capital classification at this time."
- Letter dated June 16, 2006, from OHFEO Director Lockhart to Senator Chuck Hagel: "...In January 1999, Chairman and CEO Franklin Raines approved a recommendation made by the Chief Financial Officer (CFO) (Tom Howard) and the Controller (Leanne Spencer) to defer recognition of $200 million in amortization expense. This deferral, along with other accounting decisions made at that time relating to provisions for loan losses and the recognition of low-income housing tax credits, allowed management to meet the EPS threshold for maximum bonuses."
Overall, these documents show that Congress was made aware of the massive problems at Fannie Mae and Freddie Mac over the last six years. Yet liberals, led by Congressman Barney Frank, repeatedly blocked attempts to rein in Fannie Mae and Freddie Mac.
For example, during a hearing on September 10, 2003, before the House Committee on Financial Services considering a Bush administration proposal to further regulate Fannie and Freddie, Rep. Frank stated: "I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury."
"These new documents show that liberals in Congress were reckless when it came to the massive taxpayer liabilities related to Fannie Mae and Fannie Mac," said Judicial Watch President Tom Fitton. "Government officials at FHFA repeatedly sounded the alarm regarding fraud, abuse and corruption at these two GSEs while liberals in Congress, led by Barney Frank, blocked attempts to address the situation in a meaningful way."
All of the Documents Uncovered
- Documents regarding a specific case
- Documents from Feb 2003 - Dec 2003
- Documents from Mar 2004 - Dec 2004
- Documents from Feb 2005 - Apr 2005
- Documents from April 6, 2005 Congressional meeting
- Documents from Mar 2006 - Dec 2006
- Documents from Feb 2007 - Mar 2007
- Documents from Mar 2007 - Apr 2007
- Documents from Apr 2007 - Nov 2007
- Documents from Nov 2007 - Dec 2007
- Documents from Mar 2008 - Oct 2008
- Documents from Oct 2008 - Dec 2008
Credit unions fight off 'punitive' act
Conservatives have tried to blame the subprime mortgage crisis on the 1970s law, which obligated banks to do business in underserved communities, saying it forced lenders to make irresponsible loans. On the opposite end of the argument is the National Community Reinvestment Coalition, which believes the law should be expanded to all financial service providers because it will prevent the abuses that helped cause the crisis. Now credit union lobbyists are jumping into the fray, rejecting the idea that the lending rules meant for distressed areas should apply to everyone, especially them.
“CRA was established, basically, as a punitive measure” for institutions that had disinvested in lower-income communities and participated in redlining, said Brad Thaler, director of legislative affairs for the National Association of Federal Credit Unions. “Redlining” is a term used to describe racial bias in lending, referring to the use of red markers to draw lines on city maps around poor minority areas where banks would not invest.
Thaler’s group and the other major credit union trade group, the Credit Union National Association, argue that their members don’t engage in the bad behaviors that CRA was designed to correct and, therefore, the law would place an undue regulatory burden on them. But Reps. Luis V. Gutierrez (D-Ill.) and Eddie Bernice Johnson (D-Texas) are championing legislation that would expand CRA to nonbank financial institutions, including mortgage companies, insurers, securities firms and credit unions.
It’s not the first time the bill has been introduced — a similar bill died in the 107th Congress. But like many housing proposals these days, this legal expansion is now being pushed as an antidote to the recklessness and wrongdoing that sparked the current economic crisis. “In recent months, we have seen the catastrophic effects that unsound loans can have on families and communities,” Johnson said. “Today, we take another step toward ensuring that financial institutions lend responsibly while continuing to encourage them to invest in all the communities in which they operate.”
Explosive Audio Unearthed
After the Sub Prime Crisis already started in 2007 Obama says Sub Prime Mortgages that gave houses to people WHO COULDN'T AFFORD THEM what a GOOD IDEA!!
Carter-Era Housing Policies Helped Spark Sub-Prime Crisis, Expert Says
“I see the [current financial] mess as an example of the government’s attempt to engineer housing outcomes,” said Roberts, an economics professor at George Mason University. “People spend other people’s money much less carefully than they spend their own.”
“When politicians ran up against budget constraints of deficits, taxation, or borrowing, they regulated,” said Roberts. “By doing so they were able to spend other people’s money, without giving up the projects they already had going.” LINK
Barack Obama's Fannie Mae/Freddie Mac Connection
Freddie and Fannie used huge lobbying budgets and political contributions to keep regulators off their backs.
A group called the Center for Responsive Politics keeps track of which politicians get Fannie and Freddie political contributions. The top three U.S. senators getting big Fannie and Freddie political bucks were Democrats and No. 2 is Sen. Barack Obama.
Now remember, he's only been in the Senate four years, but he still managed to grab the No. 2 spot ahead of John Kerry — decades in the Senate — and Chris Dodd, who is chairman of the Senate Banking Committee.
Fannie and Freddie have been creations of the congressional Democrats and the Clinton White House, designed to make mortgages available to more people and, as it turns out, some people who couldn't afford them.
Fannie and Freddie have also been places for big Washington Democrats to go to work in the semi-private sector and pocket millions. The Clinton administration's White House Budget Director Franklin Raines ran Fannie and collected $50 million. Jamie Gorelick — Clinton Justice Department official — worked for Fannie and took home $26 million. Big Democrat Jim Johnson, recently on Obama's VP search committee, has hauled in millions from his Fannie Mae CEO job.
Now remember: Obama's ads and stump speeches attack McCain and Republican policies for the current financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain — Sen. Obama — was at the head of the line when the piggies lined up at the Fannie and Freddie trough for campaign bucks.
Sen. Barack Obama: No. 2 on the Fannie/Freddie list of favored politicians after just four short years in the Senate.
Next time you see that ad, you might notice he fails to mention that part of the Fannie and Freddie problem. LINK
More Obama ties to Freddie and Fannie
1. Friday, July 11 (long before these current events):
WASHINGTON (Reuters) - U.S. presidential candidate Barack Obama considers mortgage giants Fannie Mae and Freddie Mac "essential" in the effort to ensure housing affordability for Americans, his campaign said on Friday.
"Sen. Obama has long believed we should take all necessary steps to ensure affordable homeownership for millions of American families, and that includes an essential role for Fannie Mae and Freddie Mac," Obama campaign spokesman Bill Burton said in a statement.
So, Obama is FOR Fannie Mae and Freddie Mac? Backs them 100%, until now so he can state, "We hate the people you hate, and once we're in power we'll be sure to screw them over for you. So be sure to vote for us. God bless America." to the little guy (while flying off to Hollyhood for a, what, $30,000/plate dinner and show?)
I guess the taxpayers who made sure they could afford the house they were buying will now have to bail out those that couldn't afford a house to begin with. Ya, sure, there are those that, for medical reasons, loss of jobs, couldn't do it, but the majority are those that either just couldn't afford it, or looked at it as an investment tool.
2. Obama's two economic advisors are former Fannie Mae and Freddie Mac CEO's who may have pulled strings to give Obama a "heads up" on the recent government bail-out plan.
Sources inside of Treasury reporting that Paulson briefed Sen. Barack Obama and his campaign advisers on the Fannie Mae and Freddie Mac bailout plan.
McCain campaign had sought a similar briefing several days ago as word spread that a bailout plan was to be unveiled and had been turned down by Paulson's senior staff.
Democratic bi-partisanship at its best. LINK
Democrats Defend Fannie/Freddie from Regulation - 2004 Video - Can you say lying through their teeth?
Burning Down The House: What Caused Our Economic Crisis?
They have tried NUMEROUS times to ban this video!!! It's long but this explains everything in a nutshell.
DEMOCRATS NOT TO BLAME? NONSENSE
Now .. .about Nancy Pelosi. She says the Democrats share absolutely none of the blame for the current financial goings-on. She's wrong. In fact, she's lying because she knows here statement to be untrue. I'm going to unload on this when I get back, but here's your primer:
1. Almost all of the financial problems we see today are based on bad mortgage lending. That would be lending money to people to buy homes who didn't qualify for a loan.
2. The Democrats, under Clinton, strengthened a government-created monster called the "Community Reinvestment Act." This law was then used by "activists" and "community organizers" (like Obama?) to coerce lending institutions to make these bad loans ... millions of them.
3. Now we see what happens when political "wisdom" supplants good loan underwriting. When private financial institutions are virtually forced to make loans to people with a bad credit and job history .. this is what you get. Enjoy it.
The Democrats have offered us a candidate who is very anti-private sector. Obama believes that America is great because of government and those who, like him, deride the profit motive. If Americans are stupid enough to believe his socialist drivel and put him in office .. .then we will get just what we so richly deserve. This week is just a preview.
Nancy Pelosi actually believes that the Democrats bear absolutely none of the responsibility
for the current situation on Wall Street. Unbelievable.
McCain Letter Demanded 2006 Action on Fannie and Freddie
And guess who's signature is NOT on it?
Sen. John McCain's 2006 demand for regulatory action on Fannie Mae and Freddie Mac could have prevented current financial crisis, as HUMAN EVENTS learned from the letter shown in full text below.
McCain's letter -- signed by nineteen other senators -- said that it was "...vitally important that Congress take the necessary steps to ensure that [Fannie Mae and Freddie Mac]...operate in a safe and sound manner.[and]..More importantly, Congress must ensure that the American taxpayer is protected in the event that either...should fail."
Sen. Obama did not sign the letter, nor did any other Democrat. LINK
Would the Last Honest Reporter Please Turn On the Lights? By Orson Scott Card
October 20, 2008
Orson Scott Card is a Democrat and a newspaper columnist, and in this opinion piece he takes on both while lamenting the current state of journalism.
An open letter to the local daily paper -- almost every local daily paper in America:
I remember reading All the President's Men and thinking: That's journalism. You do what it takes to get the truth and you lay it before the public, because the public has a right to know.
This housing crisis didn't come out of nowhere. It was not a vague emanation of the evil Bush administration.
It was a direct result of the political decision, back in the late 1990s, to loosen the rules of lending so that home loans would be more accessible to poor people. Fannie Mae and Freddie Mac were authorized to approve risky loans.
What is a risky loan? It's a loan that the recipient is likely not to be able to repay.
The goal of this rule change was to help the poor -- which especially would help members of minority groups. But how does it help these people to give them a loan that they can't repay? They get into a house, yes, but when they can't make the payments, they lose the house -- along with their credit rating.
They end up worse off than before.
This was completely foreseeable and in fact many people did foresee it. One political party, in Congress and in the executive branch, tried repeatedly to tighten up the rules. The other party blocked every such attempt and tried to loosen them.
Furthermore, Freddie Mac and Fannie Mae were making political contributions to the very members of Congress who were allowing them to make irresponsible loans. (Though why quasi-federal agencies were allowed to do so baffles me. It's as if the Pentagon were allowed to contribute to the political campaigns of congressmen who support increasing their budget.)
Isn't there a story here? Doesn't journalism require that you who produce our daily paper tell the truth about who brought us to a position where the only way to keep confidence in our economy was a $700 billion bailout? Aren't you supposed to follow the money and see which politicians were benefiting personally from the deregulation of mortgage lending?
I have no doubt that if these facts had pointed to the Republican Party or to John McCain as the guilty parties, you would be treating it as a vast scandal. "Housing-gate," no doubt. Or "Fannie-gate."
Instead, it was Sen. Christopher Dodd and Congressman Barney Frank, both Democrats, who denied that there were any problems, who refused Bush administration requests to set up a regulatory agency to watch over Fannie Mae and Freddie Mac, and who were still pushing for these agencies to go even further in promoting subprime mortgage loans almost up to the minute they failed.
As Thomas Sowell points out in a TownHall.com essay entitled "Do Facts Matter?" (http://snipurl.com/457to): "Alan Greenspan warned them four years ago. So did the Chairman of the Council of Economic Advisers to the President. So did Bush's Secretary of the Treasury."
These are facts. This financial crisis was completely preventable. The party that blocked any attempt to prevent it was ... the Democratic Party. The party that tried to prevent it was ... the Republican Party.
Yet when Nancy Pelosi accused the Bush administration and Republican deregulation of causing the crisis, you in the press did not hold her to account for her lie. Instead, you criticized Republicans who took offense at this lie and refused to vote for the bailout!
What? It's not the liar, but the victims of the lie who are to blame?
Now let's follow the money ... right to the presidential candidate who is the number two recipient of campaign contributions from Fannie Mae.
And after Fred Raines, the CEO of Fannie Mae who made $90 million while running it into the ground, was fired for his incompetence, one presidential candidate's campaign actually consulted him for advice on housing.
If that presidential candidate had been John McCain, you would have called it a major scandal and we would be getting stories in your paper every day about how incompetent and corrupt he was.
But instead, that candidate was Barack Obama, and so you have buried this story, and when the McCain campaign dared to call Raines an "adviser" to the Obama campaign -- because that campaign had sought his advice -- you actually let Obama's people get away with accusing McCain of lying, merely because Raines wasn't listed as an official adviser to the Obama campaign.
You would never tolerate such weasely nit-picking from a Republican.
If you who produce our local daily paper actually had any principles, you would be pounding this story, because the prosperity of all Americans was put at risk by the foolish, short-sighted, politically selfish and possibly corrupt actions of leading Democrats, including Obama.
If you who produce our local daily paper had any personal honor, you would find it unbearable to let the American people believe that somehow Republicans were to blame for this crisis.
There are precedents. Even though President Bush and his administration never said that Iraq sponsored or was linked to 9/11, you could not stand the fact that Americans had that misapprehension -- so you pounded us with the fact that there was no such link. (Along the way, you created the false impression that Bush had lied to them and said that there was a connection.)
If you had any principles, then surely right now, when the American people are set to blame President Bush and John McCain for a crisis they tried to prevent, and are actually shifting to approve of Barack Obama because of a crisis he helped cause, you would be laboring at least as hard to correct that false impression.
Your job, as journalists, is to tell the truth. That's what you claim you do, when you accept people's money to buy or subscribe to your paper.
But right now, you are consenting to or actively promoting a big fat lie -- that the housing crisis should somehow be blamed on Bush, McCain and the Republicans. You have trained the American people to blame everything bad -- even bad weather -- on Bush, and they are responding as you have taught them to.
If you had any personal honor, each reporter and editor would be insisting on telling the truth -- even if it hurts the election chances of your favorite candidate.
Because that's what honorable people do. Honest people tell the truth even when they don't like the probable consequences. That's what honesty means. That's how trust is earned.
Barack Obama is just another politician, and not a very wise one. He has revealed his ignorance and naivete time after time -- and you have swept it under the rug, treated it as nothing.
Meanwhile, you have participated in the borking of Sarah Palin, reporting savage attacks on her for the pregnancy of her unmarried daughter -- while you ignored the story of John Edwards' own adultery for many months.
So I ask you now: Do you have any standards at all? Do you even know what honesty means?
Is getting people to vote for Barack Obama so important that you will throw away everything that journalism is supposed to stand for?
You might want to remember the way the National Organization of Women (NOW) threw away their integrity by supporting Bill Clinton despite his well-known pattern of sexual exploitation of powerless women. Who listens to NOW anymore? We know they stand for nothing; they have no principles.
That's where you are right now.
It's not too late. You know that if the situation were reversed, and the truth would damage McCain and help Obama, you would be moving heaven and earth to get the true story out there.
If you want to redeem your honor, you will swallow hard and make a list of all the stories you would print if it were McCain who had been getting money from Fannie Mae, McCain whose campaign had consulted with its discredited former CEO, McCain who had voted against tightening its lending practices.
Then you will print them, even though every one of those true stories will point the finger of blame at the reckless Democratic Party, which put our nation's prosperity at risk so they could feel good about helping the poor, and lay a fair share of the blame at Obama's door.
You will also tell the truth about John McCain: that he tried, as a senator, to do what it took to prevent this crisis. You will tell the truth about President Bush: that his administration tried more than once to get Congress to regulate lending in a responsible way.
This was a Congress-caused crisis, beginning during the Clinton administration, with Democrats leading the way into the crisis and blocking every effort to get out of it in a timely fashion.
If you at our local daily newspaper continue to let Americans believe -- and vote as if -- President Bush and the Republicans caused the crisis, then you are joining in that lie.
If you do not tell the truth about the Democrats -- including Barack Obama -- and do so with the same energy you would use if the miscreants were Republicans -- then you are not journalists by any standard.
You're just the public relations machine of the Democratic Party, and it's time you were all fired and real journalists brought in, so that we can actually have a daily newspaper in our city.
Where Was Sen. Dodd?
Playing the Blame Game On Fannie and Freddie
Taxpayers face a tab of as much as $200 billion for a government takeover of Fannie Mae and Freddie Mac, the formerly semi-autonomous mortgage finance clearinghouses. And Sen. Christopher Dodd, the Democratic chairman of the Senate Banking Committee, has the gall to ask in a Bloomberg Television interview: "I have a lot of questions about where was the administration over the last eight years." 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 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? 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. Nor were others silent: As chairman of the Federal Reserve, Alan Greenspan regularly warned about the risks posed by Fannie and Freddie's holdings.
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.
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.
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.
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. 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.
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."
That passage was published in February 2004. Dodd can find it on Page 82 of the budget's Analytical Perspectives. 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."
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.
How did Fannie and Freddie counter such efforts? They flooded Washington with lobbying dollars, doled out tens of thousands in political contributions and put offices in key congressional districts. Not surprisingly, these efforts worked. Leaders in Congress did not just balk at proposals to rein in Fannie and Freddie. They mocked the proposals as unserious and unnecessary. Rep. Barney Frank (D-Mass.) said the following on Sept. 11, 2003: "We see entities that are fundamentally sound financially. . . . And even if there were a problem, the federal government doesn't bail them out."
Sen. Thomas Carper (D-Del.), later that year: "If it ain't broke, don't fix it." As recently as last summer, when housing prices had clearly peaked and the mortgage market had started to seize up, Dodd called on Bush to "immediately reconsider his ill-advised" reform proposals. Frank, now chairman of the House Financial Services Committee, said that the president's suggestion for a strong, independent regulator of Fannie and Freddie was "inane." Sen. Dodd wonders what the Bush administration did to address the risks of Fannie and Freddie. Now, he knows. The real question is: Where was he?
