Freddie Mac

Many investors are nervous because of the current
uncertainty in the stock market, and the general lack of liquidity in the
financial markets. Now, however, is NOT the time to sell. There are some unique
buying opportunities in a market that has lost 20% of its value. If you can avoid the herd mentality fueled by
the same type of speculation that caused this crisis, there are good profits to
be gained in the future - if you are prudent and patient. The American economy
is still the strongest in the world. Success from Wall Street to Main Street,
however, may have something to do with who is elected President in 2008.

READ THE ENTIRE OP ED HERE!

Is this the first volley in the October Surprise? 

David Asman of Fox News has put together a scathing, devastating documentary which completely exposes the Democrats' responsibility for destroying our economy including FDR, Lyndon Johnson, Jimmy Carter, Bill Clinton, Chuck Schumer, Barney Frank, Chris Dodd, and yes - Barack Obama, our favorite community organizer who was single-handedly responsible for ACORN forcing banks to lend to unqualified buyers which has now mushroomed into today's economic disaster. 

It's called Saving Our Economy: What'$ Next?   It airs in about 15 minutes, and will air again tonight. Check the link for local time. 

UPDATE:  These videos were taken down from YouTube.  If you didn't have an opportunity to watch this program in its entirety, you'll be able to to see it this coming Saturday, October 11, at 9 pm EST.

Saving Our Economy: What'$ Next?  Part 2, Part 3, Part 4, Part 5, Part 6

In the excerpts from hearings to investigate Fannie Mae and Freddie Mac's illegal bookkeeping, Rep Richard Baker (R-LA) says "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 this country who would pay the cost of a clean-up of an enterprise failure. The analysis makes clear that more resources must be brought to bear to ensure the high standards of conduct are not only required, but more importantly, they are actually met."

Rep Maxine Waters (D-CA): "Through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke..." [no pun intended there, I'm quite sure]

This is a long video, but well worth the effort. It clearly indicates Republicans attempting to oversee and obtain accountability for Fannie Mae and Freddie Mac, with complete resistance on the part of Democrats. One of the most chilling scenes involves the praise heaped upon the now completely discredited (and sacked) Obama campaign advisor and former Fannie Mae CEO Franklin Raines. When questioned as to why Fannie Mae's capital had fallen below the absolute minum level of 5%, Franklin Raines said "These investments are so riskless that the capital for holding them should be under 2%".

Note: there are already 800 comments on YouTube for this video. As of this post, it's only been up for two days.

While John McCain is rightfully criticizing Barack Obama for his ties to the Freddie Mac and Fannie Mae debacle, he has yet to fess up to his own Freddie/Fannie connections. What gives here?

Does John McCain think we are just too stupid to understand his own duplicity in such matters or is he simply telling us what we want hear, while he will do what is necessary after the election to earn those Freddie/Fannie contributions?

The moral of the story is: Let's have the whole truth, John, and nothing but the truth before you tell us what you would do if elected President.

 It's just the right thing to do.

ex animo

davidfarrar

Free framing/messaging advice for Republicans: don't let Democrats get away with turning this into conventional wisdom...

[I]t is certainly not too soon to look beyond the current crisis to the flaws and fallacies of the anti-regulatory ideology that has held Washington in its grip since the Reagan years and allowed the financial excesses that are now stressing the system to the breaking point.

Every time somebody cries "if only we had regulated!", they need to be asked two questions...

1. What regulation would have prevented this economic problem without creating even greater problems?
2. When, prior to this crisis, did you propose it?

I told you so isn't a very valuable contribution if you did not, in fact, tell us so.

It is particularly dumb to reflexively blame this problem on Republicans, as Nancy Pelos did, or to reflexively assume Democrats must be better, as Paul Krugman does.  Especially when facts like this, from 2003, are readily available...

• "The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."
• "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."
• "[Representative ] Oxley [and] [Senator] Shelby ... announced their intention to draft legislation... [...] ''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing."  [NOTE: Oxley and Shelby are Republicans]
• "Among the groups denouncing the proposal today were the ... Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing."
• ''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''"
• "[Representative Melvin L. Watt, Democrat] 'I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing.""

Republicans advocated reform, Democrats blocked it.   Then there's this, from 2006.

• "[Fannie Mae and Freddie Mac] are entities that have demonstrated over and over again that they are deeply in need of reform.
• "[T]he 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.  I urge my colleagues to support swift action on this GSE reform legislation."

That quote comes from....John McCain.  Barack Obama did not sign onto the legislation.

The meltdown of Fannie and Freddie should be a transformative moment in American politics. It should discredit the whole Democratic economic agenda. It is too bad that it happened in the middle of the most interesting Presidential election in a generation because there are lessons to learn from it. Several points.

Let's start with some numbers. Contributions since 1989(!) to ALL members of Congress. Note that this is an aggregate over time. Note how a guy who has been in Congress for 3 years manages to come in 3rd on the list.

First, this is a Democratic scandal. In yesterday's WaPo Al Hubbard and Noam Neusner ask "Where was Senator Dodd?" The answer is clear. On the take. Open Secrets notes who gets money from these guys:

Fifteen of the 25 lawmakers who have received the most from the two companies combined since the 1990 election sit on either the House Financial Services Committee; the Senate Banking, Housing & Urban Affairs Committee; or the Senate Finance Committee. The others have seats on the powerful Appropriations or Ways & Means committees, are members of the congressional leadership or have run for president. Sen. Chris Dodd (D-Conn.), chairman of the Senate banking committee, has received the most from Fannie and Freddie's PACs and employees ($133,900 since 1989). Rep. Paul Kanjorski (D-Pa.) has received $65,500. Kanjorski chairs the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, and Freddie Mac and Fannie Mae are government-sponsored enterprises, or GSEs.

But they miss the important point. The GSEs give to Democrats primarily.

And this is the second point. These are partisan instituttions. Republicans tried to reform it, but got out lobbied every time. Hubbard and Neusner described how this works:

The administration did not accept half-measures. In 2005, Republican Mike Oxley, then chairman of the House Financial Services Committee, brought up a reform bill (H.R. 1461), and Fannie and Freddie's lobbyists set out to weaken it. The bill was rendered so toothless that Card called Oxley the night before markup and promised to oppose it. Oxley pulled the bill instead.

When there was a Republican Congress, Congressional leadership tried to do the right thing, but Fannie and Freddie's lobbyists picked off some weak Republicans. With a Democratic Congress, Fannie and Freddie just feed at the trough.

Third, these guys are some of the most powerful figures in the Democratic lobbyist-operative firmament. Obama was forced to fire James Johnson, his first VP Vetter. Johnson had been CEO of Fannie Mae.  But it doesn't stop there. Johnson, while a consultant for Fannie and Countrywide, was passing out below market loans to Senator Dodd, among others.

The recent CEO of Fannie was Franklin Delano Raines. (what do you bet his parents politics were?) Raines was a Clinton OMB Director and worked in the Carter White House. Raines was replaced with an actual business guy.

Fourth, it doesn't stop there. Not only that, but the affordable housing racket is also used as a way to launder government money into corrupt Democratic voter registration practices. One of the organizations pushing subprime loans and other "affordable housing" financial vehicles... ACORN, which got a sweet deal in the Housing Bill.

What is the upshot of all of this?  The housing meltdown has both causes and effects that are ideologically aligned with Democratic objectives.  While gutting the regulatory apparatus for a huge segment of our economy, leading Democrats were receiving contributions and below market loans from the very people whose regulations their were gutting. It was used to move money into Democratic grassroots campaign vehicles. And it moved substantial parts of the economy into government control. According to financial analyst Barry Richoltz, "socialism for the rich."

This should be a long-term stain on the credibility of Democratic Party's economic management.  Too bad no one has the attention span to notice.

Chris Bowers complains about "the corporate welfare style typical of American government--privatize the profits, socialize the risk".  This is not a left-wing criticism - it's a genuine problem, both for the country (as illustrated by Freddie Mac and Fannie Mae going "under government control") and for the Right (which sets itself up to lose a fight about the size of government with every intervention in industry).

This is how government grows...

1. Socialize Risk: Government intervenes in an industry to "solve" some apparent and visible problem.  This is done "for the people."
2. Unintended Consequences: This intervention merely shifts the costs to new areas and sweeps problems under the carpet, where they accumulate.
3. Blame The Market: Government intervention is not blamed, because the people who support it assume their good intentions could not be responsible for bad things.
4. Socialize Profit: The Left demands Something Be Done by people with Good Intentions. Politicians comply.  This is done "for the people."

Unfortunately, our political structure comes at this from four different places.

• Democratic politicians, organizations and activists are happy to go along with Steps 1-4, because, hey, #4 was their goal in the first place.
• Republican politicians and organizations go along with Steps 1-3, only objecting at Step #4.  By which time it is too late.
• Business goes along with Step #1, and attempts to use Step #2 to get more of Step #1.
• Libertarians believe the problem occurs at Step #1.  Once Step #1 is conceded, we've already lost on steps 2-4.  But libertarians and limited government conservatives have relatively little power.

Now, we are at Step #4 - essentially nationalizing Freddie Mac and Fannie Mae.  As Chris Bowers writes, "nationalizing industries ... is the literal definition of socialism and big government".  Of course, he thinks that is a good thing, also writing that "nationaliz[ing] the mortgage industry ... actually seems like a good idea to me."