Wednesday, October 01, 2008

Fannie/Freddy & the Crooks

Fiascos that are forgotten are always replicated in another time or generation by people who either through sheer incompetence or greed manage to go for broke. In the 1980s – not that long ago – the fiasco was played out in the savings-and-loan debacle, with the government (taxpayers) called on for bailout. The players, however (at least the ones who didn't go to jail), came out okay. The U.S. taxpayers coughed up $124 billion in the bailout, which began ironically during the presidency of another George Bush. The fat cats made their play on the backs of the "little people."

This is from the New York Times of 30 September 1999: "Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called sub-prime borrowers." In other words, a quasi-governmental agency was being virtually coerced to take over loans that would in time go into default, with the U.S taxpayer being the patsy.

Some of the most damning democratic demagoguing concerning the current Fannie Mae fiasco that has brought the financial markets to the brink (at least as alleged) occurred in a hearing of the House Financial Services Committee in 2004, with about eight minutes of the hearing (video) available on the Internet. The democrats actually tried to lynch the regulator who was trying to move them toward a resolution of the problem eventuating in the current mess. New York Representative Gregory Meeks actually made a jackass of himself in the process, is still on the committee, and should be forced to watch that eight minutes the first thing every morning. Indeed, everyone should watch Meeks's histrionics at least once to understand that buffoons actually make it into Congress.

Committee member Maxine Waters – still on the committee – seemed determined in 2004 to convince everyone that Fannie Mae Chairman Franklin Raines was superior to even the Oracle at Delphi and on a par with Michael the Archangel. Raines was finally forced out of his job because of a $6.3 billion accounting scandal, but not until he had reamed the agency in less than seven years for a cool $91 million very golden parachute. Strangely, he's not in some federal prison…indeed, not strangely, he's an Obama financial adviser. Go figure.

For his part in 2004, member Barney Frank could find nothing wrong. Now, as chairman of that same committee, he's blustering all over the place and blaming republicans for not fixing something he helped destroy. Another former Fannie Mae CEO who reaped tens of millions of dollars is Jim Johnson, whom Obama picked, along with Caroline Kennedy and Eric Holder, to find his veep contender. Johnson, also messed up in a scheme at bankrupt Countrywide, had to quit almost before he was named. Ironically, Senator Dodd, chairman of the Senate Banking Committee and also a presidential contender, reaped a windfall from Countrywide himself. Over the terms of his sugar-stick loans, he could make $75,000.

Senator McCain made the effort in 2006 to turn this thing around but he was unsuccessful. Now, he's being saddled with the mess just because he's a republican and George Bush is unpopular. The democrats have had the reins in Congress since January 2007 and they've done diddly-squat to rein-in Fannie Mae and Freddie Mac, but Speaker/Grandmother/doncha-know Pelosi has been about as effective as a bear in hibernation mode. With venom spewing, she wrecked what was supposed to be a bi-partisan approach in a couple of rhetorical disasters featuring condemnation-worthy-of-the-electric-chair of George Bush, who inherited from her Clinton-gang the outgrowth of the fiasco remarked above in the Times article.

In the 2004 video, Frank was the only white democrat to see absolutely nothing wrong with the status quo, which was already devolving into dire straits. The others were blacks who must have had in mind making the Fannie Mae mess a racial thing, not unusual, though, ironically, the current House Black Caucus voted the recent "bailout package" down on the 30th, fearing, no doubt, that taxpayers in their districts were fed-up with being had, just as taxpayers nationwide have had it with the bumblers who call themselves statesmen and whose greatest effort is made toward reelection.

The current fiasco provides proof positive that no government in this country should ever be in charge of health-care. It's instructive that private insurance companies actually administer Medicare and spend the nation's money, not some government agency. Both the FMs should be abolished forthwith and only private lending agencies allowed to make loans to homebuyers. The combination of crooks both in and out of Congress bode only ill for any agency involved in disseminating money, including the Defense Department, and this Fannie/Freddy mess is the most transparent example that can be imagined to prove that fact.

And so it goes.

Jim Clark

1 Comments:

Blogger Avatar said...

To keep up with Wall Street expectations, Fannie Mae held onto more mortgages and mortgage-backed securities for investment purposes. The same practice nearly drove the company into bankruptcy in the early 1980s. Once again it was spared in 2008.
nomedals.blogspot.com

6:33 PM  

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