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Congress ignored regulators' repeated warnings on Fannie, Freddie

Examiner Editorial
-
April 17, 2009

On Sept. 29, 2008, House Speaker Nancy Pelosi, D-CA, praised House Financial Services Committee chairman Barney Frank, D-MA, for his “leadership.” In the next breath, she blamed the sub-prime mortgage meltdown on a supposed lack of Wall Street regulation by right-wing ideologues in the Bush administration. Turns out Pelosi had it exactly wrong. The collapse of government-guaranteed  Fannie Mae and Freddie Mac, which helped send the U.S. economy into a nose-dive, was a preventable man-made disaster, according to documents obtained by Judicial Watch under the Freedom of Information Act.
 
In fact, for at least six years prior, officials at the Federal Housing Finance Agency (FHFA) warned key members of Congress – in letters, congressional testimony and email  - that post-Enron financial controls at the two mortgage giants were “inadequate.” They also found that neither Fannie nor Freddie were even filing disclosure documents required of all public companies in a timely fashion. Despite FHFA’s multiple alarms, Congress failed to rein in such illegal and reckless behavior. Prominent among Fannie and Freddie’s congressional defenders was Frank, who said on September 10, 2003 that Fannie and Freddie were “not in crisis.”
 
The same day, then-Treasury Secretary John Snow testified in favor of reforms for Fannie and Freddie. Then on Dec. 3, 2004, Frank was warned in an FHFA letter noting that outside auditors at Fannie and Freddie could not complete their reviews of its financial statements and “noted the possibility of up to a $9 billion loss dating back to 2001.” We are aware of no public statement by Frank correcting his earlier declaration that Fannie and Freddie were “not in crisis.”
 
“If Barney Frank was the head of a private company and he got a letter like this from his accountant, and the company later went belly-up and cost taxpayers $200 billion, I don’t think he’d be given a pass,” Judicial Watch president Tom Fitton told The Examiner. “He’d be up on SEC charges, to say the least.” Yet what Fitton described as “interlocking, incestuous relationships” between Fannie and Freddie executives and members of Congress continue to this day. Recent ads for zero down, no credit, no appraisal, no income verification mortgages indicate that the wily-nily cash handouts continue with tacit government approval, since no legitimate private lending institutions would dare repeat the same mistake that bankrupted so many of their counterparts.
 
Instead of investigating malfeasance, in February Treasury Secretary Tim Geithner rewarded Fannie and Freddie by raising the ceiling on the amount of taxpayer money they can receive from $100 billion to $200 billion. We will all be paying for Congress’ failure to listen to federal regulators for a long time to come.


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Reader Comments

All comments on this page are subject to our Terms of Use and do not necessarily reflect the views of the Examiner or its staff. Comment box is limited to 250 words.

Don L

Apr 18, 2009

Not to worry - the majority of Americans have faith that Obama will fix our finance system by spending our great grandchildrens freedom -don't you.

 

Mike

Apr 19, 2009

The all powerful banks have the democrats in one pocket and the republicans in the other. They are easy to buy when you have a license to print money and the cooperation of a central bank that is run as a co-op for bankers to make more money. Lots of people were worried about Fannie/Freddie including warren buffet and milton friedman. But 'less regulation' was the rule for years. the GOP wanted an 'ownership society' and the democrats wanted wide access to credit. No one wanted to end the party.

 

TexRancher

Apr 20, 2009

Not to worry; Barney Frank is in charge. He'll tell us the truth AS HE DETERMINES WE NEED TO KNOW IT. Maybe this time we can set a new record on how many illegals can benefit from this sham! 5 million the last time..... But what do I care? Obama's going to pay my mortgage, car payment and grocery bills. Has he paid your's yet? How do you like the change so far?

 

GWS

Apr 20, 2009

Shows how weak the republican congress and President were. Warnings? That's it? Finding a scapegoat in Frank is the easy answer. We all were responsible for this mess. Dems and Reps and Wall Street, Paulson, Binacke (sp) (opps, I forgot they are Republicans, don't mention them in this article),greedy speculators and stupid home owners suckered into the American Dream of buying a home with no money down. But if forget. This is the Examiner. What should I expect but half truths.

 

kuhnkat

Apr 22, 2009

Mike,

the article pointed out the REGULATORS tried to blow the whistle but were blocked by Congress. There are other sources who have come to the same conclusion. There were plenty of Regulators and Regulations to shut them down. They were BLOCKED!!! How can more regulation help if the people overseeing them have their political axes to grind??

Additionally, Regulators are Bureaucrats themselves. One of them claims that he allowed Mortgage Banks to continue with their ludicrous Debt Exchanges and other fun and games based on the Banks assurances that everything was OK.

?????????????????


WHAT DON'T YOU UNDERSTAND ABOUT REGULATION BEING USED AS A POLITICAL RUSE TO GRAB MORE POWER!!!!!!

DO YOU KNOW WHAT FASCISM IS????????????

Until we dump both Dems and Repubs and go back to limited Fed we are SLAVES!!!!

 


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