American Elephants


Forgotten history, dredged up once again. by The Elephant's Child

As we wait to see what the Congress will do in addressing the mortgage crisis, it is worthwhile noting a little history.  The New York Times reported in 2003: ” New Agency Proposed to Oversee Freddie Mac and Fannie Mae”.

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

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies.  It would exercise authority over any new lines of business.  And it would determine whether the two are adequately managing risks of their ballooning portfolios.

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.

“There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,”Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

Do read the whole article.  This is a real crisis, though it is mostly confined to the housing and financial sectors of the economy. It’s important to do your homework, and understand what it’s about.

The debate is very much up in the air.  Economists are begging for a “clean” bill, free of extraneous language. Democrats are anxious for Government to take over financial organizations, and relieve everyone of any liability for their bad decisions, and Socialize our form of government. 

They want to bail out homeowners whose mortgages are in default, people who owe too much on their credit cards, and promise any other goodies that may help Democrats to get reelected.

Obama’s understanding of this financial crisis is very shallow. He is more interested in protecting those who bought more house than they could afford.  He is unaware that raising taxes on an economy in trouble is not the best idea, for the government may need more money.  But, he says, a new President will take over in 40 days.  Um, January 20, Mr. Obama.

He is anxious to blame everything on President Bush, for much of his campaign appeal has been to attempt to portray the Bush economy as “terrible”, in spite of all evidence to the contrary.  The Bush tax cuts have been wildly successful, enabling the economy to shrug off the damages of 9/11, the War in the Mideast, and Katrina.  And even in the current trouble, the underlying economy remains strong.



Market Meltdown Explained. by The Elephant's Child

It is always wise to consult more than one source. Experts will differ in their conclusions, and will express the problem differently, so listening to several experts will help your understanding.

(h/t: The Daily Bayonet)



Who is Responsible for the Fannie/Freddie Mess? by American Elephant

Yes! Democrats are up to their eyeballs in this crisis. Republicans warned about it, Republicans tried numerous times to do something about it, Democrats blocked them every time!

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. 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. [read the whole thing]

This is important. Polls show Americans currently favor the very same Democrats who got us into this mess to get us out of it. The very same Democrats who promise more of the same, who promise to do the exact same thing to healthcare.

But polls also show 18% of voters are undecided. Dems are furiously telling them that capitalism, and the same Republicans who tried to reform Fannie and Freddie are the ones responsible for this crisis. Now is the time to make sure they get accurate information.

(h/t Powerline)




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