In 2003 and 2004, hearings were held before the U.S. House Financial Services Committee on the practices of Fannie Mae. There were concerns that Fannie Mae, in keeping with its mission of expanding home ownership, was encouraging too many banks to loan too much money to too many unqualified borrowers. Some legislators feared the huge assets and profits Fannie Mae was showing on paper were suspect, given the uncertain ability of the borrowers to repay.
It shaped up along party lines, with Republicans urging more restraint and a greater degree of oversight and Democrats defending Fannie Mae’s practices, saying they helped low-income people and minorities own homes.
Some quotes from those hearings:
U.S. Rep. Richard Baker, R-La., reacting to a report from the Office of Federal Housing Enterprise Oversight (OFHEA), that was investigating practices at Fannie Mae. “It is indeed a very troubling report. But it is a report of extraordinary importance not only to those who wish to own a home but to the taxpayers of the country who would pay the cost of cleaning up an enterprise failure.”
U.S. Rep. Ed Royce, R-Calif., asking for more oversight of Fannie Mae. “I hope that we will move swiftly to create a new regulatory structure for Fannie Mae and (similar enterprise) Freddie Mac and the Federal Home Loan Bank.” And, “There is a very simple solution. Congress must create a new regulator with powers at least equal to those of other financial regulators such as the OCC and the Federal Reserve.”
U.S. Rep. Maxine Waters, D-Calif., defending Fannie Mae. “Mr. Chairman, we do not have a crisis at Freddie Mac and in particular Fannie Mae under the outstanding leadership of Mr. Franklin Raines.”
Waters went on to praise Fannie Mae and other Government Sponsored Entities (GSE) for finding more ways for low-income people to buy homes, including issuing loans with no down payment and using software that allowed loans to be processed in minutes, rather than days or weeks. “Under the outstanding leadership of Mr. Franklin Raines, everything in the 1992 act has worked just fine. In fact the GSEs have exceeded their housing goals. What we need to do today is focus on the regulator and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish, from desktop underwriting to 100 percent loans.”
U.S. Barney Frank, D-Mass. “You seem to be saying, ‘Well, these are in areas that could raise safety and soundness problems.’ I don’t see anything in your report that raises safety and soundness problems.” And, “I do think I do not want the same kind of focus on safety and soundness that we have in (other type of investments). I want to roll the dice a little bit more in this situation toward subsidized housing.”
U.S. Rep. Lacy Clay, D-Mo. “This hearing is about the political lynching of Franklin Raines.” And, “I get the feeling the markets are not worried about the safety and soundness of Fannie Mae as OFHEA says that it is. But of course, the markets are not political.”
In the weeks that followed the hearings, Raines resigned as CEO of Fannie Mae over accounting irregularities that allowed the company to overstate its profits by $9 billion.
Would the regulation Republicans were seeking have prevented the recent meltdown? That’s another thing I don’t know. But at least one person thinks it might have. “I think the responsibility the Democrats have may rest more in resisting any effort by Republicans in the Congress and by me when I was president to get some standards and tighten up a little on Fannie Mae and Freddie Mac,” former President Bill Clinton said on Good Morning America last month.
Ok perhaps that's what the elite WANT to believe to keep control over the masses. It's nonsense.
