Skip to comments.Pressured to Take on Risk, Fannie Hit a Tipping Point
Posted on 10/04/2008 1:42:07 PM PDT by reaganaut1
[In 2004, Daniel] Mudd, [new CEO of Fannie] made a fateful choice. Disregarding warnings from his managers that lenders were making too many loans that would never be repaid, he steered Fannie into more treacherous corners of the mortgage market, according to executives.
Capitol Hill bore down on Mr. Mudd as well. The same year he took the top position, regulators sharply increased Fannies affordable-housing goals. Democratic lawmakers demanded that the company buy more loans that had been made to low-income and minority homebuyers.
When homes are doubling in price in every six years and incomes are increasing by a mere one percent per year, Fannies mission is of paramount importance, Senator Jack Reed, a Rhode Island Democrat, lectured Mr. Mudd at a Congressional hearing in 2006. In fact, Fannie and Freddie can do more, a lot more.
Lawmakers, particularly Democrats, leaned on Fannie and Freddie to buy and hold those troubled debts, hoping that removing them from the system would help the economy recover. The companies, eager to regain market share and buy what they thought were undervalued loans, rushed to comply.
The White House also pitched in. James B. Lockhart, the chief regulator of Fannie and Freddie, adjusted the companies lending standards so they could purchase as much as $40 billion in new subprime loans. Some in Congress praised the move.
Im not worried about Fannie and Freddies health, Im worried that they wont do enough to help out the economy, the chairman of the House Financial Services Committee, Barney Frank, Democrat of Massachusetts, said at the time. Thats why Ive supported them all these years so that they can help at a time like this.
(Excerpt) Read more at nytimes.com ...
I hope Franklin Raines turns out to be the Ken Lay-type fall guy in all this.
Wowee! This was in the New York Times!!
“The White House also pitched in. James B. Lockhart, the chief regulator of Fannie and Freddie....”
This is a sentence that combines two statements, one unverified, to, in fact report a lie!!!!!! AND THIS STATEMENT, THIS LIE IS WHY THEY DID THIS ARTICLE AND WHY THEY DID IT NOW.
“The White House also pitched in” (unverified) is written as though it is legitimately connected to the sentence that follows: “James B. Lockhart, the chief regulator of Fannie and Freddie...”
The lie is in the fact that the chief regulator of Fannie and Freddie, whoever that is at any time, IS NOT APPOINTED BY AND DOES NOT REPORT TO “The White House” - THEY RECEIVE THEIR MANDATE FROM AND REPORT TO CONGRESS.
And why were housing prices skyrocketing? It couldn't be because Fannie and Freddie were already doing too much?
This is a buried story: Saturday paper.
Bring the battleships out of mothballs and start firing sone braodsides in to the Obama camp. There is plenty of ammo out there.
this NYT article is definitely worth the read.
How can that NOT be the lead sentence in any story involving Fannie Mae?
What's Bawney's Committees names?
I do remember Bawney testifying that there was nothing to "fix" at Fannie Mae, back in 2004...
The GOP needs to run an ad with the following and every GOP and conservative needs to parrot these as well:
“Fannie & Freddie. Way bigger than Enron.”
“You just paid $850 billion because of the Democrats protection of Fannie and Freddie.”
“Barney Frank’s lust for Fannie led to the taxpayer getting screwed.”
The lie is in the fact that the chief regulator of Fannie and Freddie, whoever that is at any time, IS NOT APPOINTED BY AND DOES NOT REPORT TO The White House - THEY RECEIVE THEIR MANDATE FROM AND REPORT TO CONGRESS..
McCain & Palin need to jump all over this article. They should reference this article for the next week. If McCain won’t, then Palin has to.
Dammit, use what you got.
I can’t believe this in the NYT
“Lenders were threatening to sell directly to Wall Street unless Fannie bought a bigger chunk of their riskiest loans.”
First off: No one - no one had the market clout that Freddie and Fannie had. And this statement, anecdotally true or not, is a cover for the fact that the “toxic” exposure in Freddie and Fannie was, in the main, derived from mandates, including goals, from Congress.
NY Slimes half-truths amounting to a lie, in this article - #3
The series of statements: “But earlier this year, Treasury Secretary Henry M. Paulson Jr. grew concerned about Fannies and Freddies stability. He sent a deputy, Robert K. Steel, a former colleague from his time at Goldman Sachs, to speak with Mr. Mudd and his counterpart at Freddie. . . . “Mr. Steels orders, according to several people, were to get commitments from the companies to raise more money as a cushion against all the new loans. But when he met with the firms, Mr. Steel made few demands and seemed unfamiliar with Fannies and Freddies operations, according to someone who attended the discussions.
Rather than getting firm commitments, Mr. Steel struck handshake deals without deadlines......”That misstep would become obvious over the coming months. Although Fannie raised $7.4 billion, Freddie never raised any additional money.”
Is intended to convey another lie - that at the time of Mr. Steels discussions with Fannie and Freddie, the horse - the crisis (the extent of toxic assets on the books), was not already out of the barn; and Paulson and Steele could have prevented Freddie and Fannie from collapsing then, without placing them into conservatorship as Paulson later did. The rot in both Freddie and Fannie was already too deep by then. The only “opportunity” Paulson missed was not shutting them down then.
Another clueless Congress criminal hoping nobody is paying attention.
Take the graph from Burning Down the House of when the price of homes, relative to the CPI went off the charts, corelated to the skyrocketing activity of Fanny Mae and Freddie Mac.
Then think about the effect of government involvement in the price of anything: hammers, wrenches, toilet seats and now... Freakin' Health Care!
Anybody besides me know what "red flags" look like?
Makes one wonder how the intervention through Medicaid and Medicare have already affected health care costs.
Yep, but until heads roll, it's just more spitting in our faces.
"Yeah. We did it. So what? What are you rubes gonna do about it?"
I know, sad but true.
This will never happen. As far as the msm, and therefore, the general public are concerned, Enron was the worst corporate scandal ever despite the fact that the effects of the FNM accounting scandal and subsequent government take over have far surpassed Enron's by several orders of magnitude.
Add to that the baseless assertions made by the dems (such as in the video link here: Dems Defending Fannie Mae) that any criticism of Raines is akin to a "lynching" and will not be tolerated. This will silence any critics lest the be labeled "racist".
Raines will be able to live comfortably with his massive severance package without having to account for any of this mess. Such is the reality of a media controlled public awareness. Perception is reality. There is no major accounting scandal unless the media says there is.
The poor writer will be told to clean out his desk tomorrow.
The NYT finally is starting to do some reporting on this, though the conservative blogs have been on this from the start.
The NYT article is now a “permission slip” for the tv networks to “report” on the issue. Reporting here is defined as repeating whatever the Times says in its article.
No mention of John McCain here . . how come? Didn’t he try to reform FNMA?
We can blame the NY Slimes and Salzberger all we want. But McCain and Bush have the bully pulpit and they can bypass the media.
It’s not his fault that McCain had a national TV audience with Americans watching and failed to tell anxious Americans the truth. He could have reminded Americans of what he himself said.
John McCain, on May 25, 2006, warned the nation about Fannie Mae and Freddie Mac. McCain’s warnings came in this bill which the Democrats defeated:
“...For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac—known as Government-sponsored entities or GSEs—and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.
I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole...”
Instead he talked about earmarks for half an hour.
It’s not the left’s fault that McCain is stupid.
The debate on Tuesday is his last chance to address the issue, assuming that he understands it. :)
He understands it perfectly.
He said it before anybody else in America saw it coming.
If he won’t tell the sheeple, than he doesn’t deserve to be leader of the free world.