Given the recent mess that’s been made of the financial markets, a little digging is being done by folks all over. Bloomberg’s Kevin Hassett has done his own digging into the beginning of the end for Fannie May and Freddy Mac.
Fannie and Freddie became, “the primary customer of all AAA-rated subprime-mortgage pools.”
trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.
In 2005,
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.
Completely unacceptable. What about the “leading” members of congress that were supposed to protect the country from this mess?
But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.
The Senate Banking Committee chairman and the Democratic nominee for president received more contributions than anyone else? How does this make any sense? How is that even legal? What about the bill that would have prevented this? Senate Bill 190, the Federal Housing Enterprise Regulatory Reform Act of 2005, had 3 cosponsors, one of them the Republican presidential nominee. Even if you know nothing about financial markets but this, who would you rather have in charge of the county?
