Cox, Greenspan, Snow Agree: Freddie Mac And Fannie Mae Did Not Cause The Financial Crisis
Cox, Greenspan, Snow Agree: Freddie Mac And Fannie Mae Did Not Cause The Financial Crisis
According to conservatives, Freddie Mac and Fannie Mae’s audacity to loan to low-income Americans is to blame for the current financial crisis. During the final presidential debate, for example, Sen. John McCain (R-AZ) called the lending giants “the catalyst for this housing crisis.”
Today in a House Oversight Committee hearing with former Fed chairman Alan Greenspan, SEC chairman Christopher Cox, and former Treasury secretary John Snow, Rep. John Mica (R-FL) revived that argument. He also tried to tie the crisis to Sen. Barack Obama (D-IL), holding up a chart called “Follow the Money Trail.” He pointed that Obama has been the largest recipient of donations from Freddie and Fannie. (Actually, he’s the second highest.)
Committee chairman Henry Waxman (D-CA) chastised Mica for trying to turn the financial crisis into a political issue. He noted that Freddie and Fannie “certainly played a role” in the current situation, but then asked the witnesses, “Do any of you believe that they were the cause of this financial crisis?” All three men said no. Watch it:
Federal housing data back up this conclusion — that “the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.” As Center for American Progress Senior Fellows Michael S. Barr and Gene Sperling explain, Freddie and Fannie weren’t even securitizing subprime mortgages en-masse until 2005:
The subprime boom was led by investment banks and mortgage brokers, not by government-sponsored enterprises. Fannie and Freddie became unhinged in the middle of this decade when they tried to play catch-up. Their shareholders and managers pushed them to recover the securitization market share they had lost to unregulated investment banks getting absurd AAA ratings for packaging subprime dross. From 2005 to 2008, Fannie Mae purchased or guaranteed $270 billion in loans to risky borrowers — triple the amount in all its earlier years combined.
As Center for Economic and Policy Research co-director Dean Baker has written, “Fannie and Freddie got into subprime junk and helped fuel the housing bubble, but they were trailing the irrational exuberance of the private sector. They lost market share in the years 2002-2007, as the volume of private issue mortgage backed securities exploded.” More here on “how did this happen.”
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Yet we will continue to hear McCain talk about Fannie and Freddie as the culprits, straight through ’til the election. Fannie, Freddie, and the Democratic Congressional Hijacking of 2007. I’ve never heard this much misinformation from a campaign in my life.
October 23rd, 2008 at 2:20 pm.
Funny that Rep. John Mica (R-FL) made it a point to say that it isn’t Dodd but that it is supposed to be Obama who is the top recipient. Funny how “REAL” facts don’t matter to Republicans.
Q U E S T I O N:
Are we supposed to believe that it was a coincidence that Rep. John Mica (R-FL) spoke of Dodd?
.
October 23rd, 2008 at 2:23 pmAnd as McC*nt spews more misinformation about the Freddie & Fannie, he never mentions the $15,ooo / month his campaign manager / lobbyist received from them. Never.
Wall St greed was the problem, Senator.
Much like you influencing regulators with the Keating_5 scandal…
October 23rd, 2008 at 2:25 pmAll of mebbe 1,000 people will hear about this.
Hunderds of thousands hang on every word Brill-O, Limbot, and the rest utter.
Now which “facts” do you think will occupy the spotlight?
October 23rd, 2008 at 2:28 pmSorry for the OT but, methinks McCain is starting to lose his cool folks.
Damn, almost makes me wish I could be there this evening.
October 23rd, 2008 at 2:28 pmWhat was it Twain said: A lie cirles the planet before the truth gets out of the house?
October 23rd, 2008 at 2:29 pmOh yes, let’s pin the problem on the little people. CEO’s get off scott free, complete with golden parachutes. The average American citizen gets nothing but the blame.
October 23rd, 2008 at 2:29 pmSomeone better inform FOX and Limbaugh about this.
¶ AIO
October 23rd, 2008 at 2:30 pmI’ve never heard this much misinformation from a campaign in my life.
October 23rd, 2008 at 2:20 pm
You musta been born after 1990…
October 23rd, 2008 at 2:31 pmThis only matters if the media calls McCain and his posse on it every time they mention it.
I’m not holding my breath.
October 23rd, 2008 at 2:33 pmI’m not holding my breath.
October 23rd, 2008 at 2:33 pm
ALWAYS a good plan, when awaiting principle behavior from the SCUM or the Dims…
October 23rd, 2008 at 2:35 pmFunny how this is ANOTHER great point by TP, yet we hear NOTHING coming from the Obama campaign to hammer back at this when McCain smears Obama over Fannie & Freddie. Less than 2 weeks and Obama has so much more $$, he should be DROWNING him out.
October 23rd, 2008 at 2:36 pmBill O’Reilly will now apologize to Barney Frank any minute now, right?
October 23rd, 2008 at 2:39 pmI think that most Americans have already figured this out with the information that has been floating around the last few months.
Americans are blaming the republicans, as they should. How else do you explain Obama’s poll numbers.
doom and gloom tokin…..You just can’t see a chance in the world that this could turn out ok can you?
October 23rd, 2008 at 2:57 pmThis site explains in terms most can understand the financial crisis in the stock market. It is a long video and is what the feds do not want the public to know or understand.
In summary the SEC has not regulated as it was suppose to do and trading funds have become FTD’s or Failure To Deliver therefore creating a mass of empty funds.
Again, the link is:http://www.businessjive.com/
October 23rd, 2008 at 2:58 pmIt’s really absurd: McCain has been riding the Deregulation Express since he got into Congress over a quarter-century ago, and yet he has the gall to point his corrupt finger at Obama…
The housing/mortgage bubble was pumped up by Greenspan’s continually cutting the interest rates, and by corrupt realtors, appraisers, mortgage lenders and banks all conspiring to keep the real estate prices rising. Well, all bubbles eventually burst, and so the real estate bubble burst. Since the Fed and Bush refused to allow small recessions to occur after his first one, the tinder and fuel gathered in thicker and thicker layers and it finally caught on fire and the economy burned down.
October 23rd, 2008 at 3:13 pmAt 2:05 into the hearing, why is Rep Mica hiding his face from the camera, using the photo’s that he had held up when he had the floor, while Rep. Waxman is talking?
October 23rd, 2008 at 3:22 pmlet me get this straight…nitwitted republicans are claiming too much government intervention caused this while drumming for a government bailout? that’s pretty funny
October 23rd, 2008 at 3:22 pmBut, but, but if the republicans cannot blame blacks and other minorities who can they blame? Didn’t you know that blacks, hispanics and other minorities are to blame for all of our countries ill’s. It’s NEVER the republikkkan party that is ever at fault for anything. Phil Gramms was only trying to help blacks, hispanics and poor white Americans live the American dream with deregulation. *snark*
October 23rd, 2008 at 3:23 pmIt’s NEVER mentioned that when states, like New Mexico, passed anti-predatory lending laws, they were overruled by the Federal government at the behest of the sub-prime lenders. (I remember, I’m one of those dreaded mortgage brokers who are always mentioned as a (if not THE) culprit in the mortgage melt-down. Funny how the un-regulated mortgage BANKERS never get a mention. But that’s another kvetch.)
Anyway, Fannie & Freddie still maintained higher lending standards than most mortgage lenders, even while expanding the criteria to allow more people to qualify to own a home. They are not the cause of this situation, by a longshot!
October 23rd, 2008 at 3:31 pmWhen I worked as a bank accountant, we refinanced mortgages at 125%. I thought it was strange because the 25% is basically free money. It wasn’t just the new cashing in.
BTW
Still crooks are incharge.
October 23rd, 2008 at 3:33 pmAverageTodd Says:
I’ve never heard this much misinformation from a campaign in my life.
So you missed Ronnie “Trees cause pollution” Reagan’s Campaign for President?
October 23rd, 2008 at 3:34 pmYou have to chuckle when the republikkkans go and blame the democtratic congress for this crisis when they have only been in the majority since Jan 2007. Are we to believe that from 2000-2006 everything was all peachy keen under a republikkkan majority? Bah ha ha ha ha! Puh-leeeeeeeeeeeeeeeeeeeeze!
October 23rd, 2008 at 3:34 pmConservatives like to pretend banks made loans to subprime borrowers because Congress made them. That’s bullsh*t. They made subprime loans because they could securitize them and earn hundreds of millions of dollars by doing so. Fannie and Freddie were definitely part of the equation because they held tiny amounts of capital reserves relative to their risks but the real culprit in this debacle was the lack of transparency and oversight of the derivatives markets. Had the SEC and other regulators done their jobs, the whole mess could have been avoided. Banks sold these things because doing so made them tons of money. Rating agencies gave them quality ratings because they earned a fee from the process. Institutional investors bought them because they had triple A ratings and they could hedge their risks using Credit Default Swaps insurance. Everyone had a vested interest in making more and more risky loans. We shouldn’t expect Wall Street bankers to look out for the common good, it’s not their job. That’s the job of the regulators in Washington. They were either unaware of the problem or too weak to do anything about it. Why? Because Republicans hated regulation of any kind. In their simplistic worldview, the market would correct itself of any excesses. The market just might do that and in the process make the entire financial system insolvent. That’s unfettered capitalism. Apparently even Republicans are beginning to see the potential downside to that idea.
October 23rd, 2008 at 3:35 pmPS – It was Greenspan who kept encouraging people to take out adjustable rate mortgages, even though fixed rate mortgages were very attractive, at the time. Those ARMs are now a big part of the problem, especially the sub-prime ones.
October 23rd, 2008 at 3:37 pmjiminnm,
“I’m one of those dreaded mortgage brokers who are always mentioned as a (if not THE) culprit in the mortgage melt-down.”
Mortgage brokers just did what they’re supposed to do, get their clients loans. All of us are a product of our environments. If banks lower their standards, if there is lax or non-existent regulation, if clients who were turned down for a mortgage before suddenly qualified for loans, it’s not a brokers fault for facilitating the process. Look at it this way, if you’re working as a broker and you refused clients because you felt they were poor risks even though a lender approved the loan application, you would have been fired. It wouldn’t have prevented that person from getting their loan. They would have found another broker but you would have been out of a job. When a player cheats blame the player. When the rules allow cheating, blame the people who made the rules.
October 23rd, 2008 at 4:11 pmI’m older than many of those buying homes for the first time but I alway had the impression that getting an ARM was akin to buying a house and putting it on a credit card…..
much more money involved though and thus the problem.
October 23rd, 2008 at 4:18 pmNot good for Gramps McSame now that Cox, Snow, and Greenspan all agreed that Freddie Mac and Fannie Mae are not the cause of the financial crisis rather they played a role in the financial crisis as well as others such Lehman Brothers, Bear Stearns, and so on. But, Gramps McSame will turned off his hearing aid as usual from the testimonies of Cox, Snow, and Greenspan and will still say that this is Freddie and Fannie’s fault through out this election race. I only hope that Waxman will revisit Eliot Spitzer’s Op-Ed so time ago on his probe into preditory lending. It is interesting timing of Spitzer’s scandal in the Emperor VIP Club probe, his pursuit into the predictory lending, and the billions of dollars giving by the FEDs to bailout financially Carlyle Capitol, a subsidiary to Carlyle Group. Follow the money.
October 23rd, 2008 at 4:19 pmSomebody get the racist right wingers on the phone…..
October 23rd, 2008 at 4:21 pmWhat would they do without Cox…
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October 23rd, 2008 at 4:38 pmFor the past ten years, I steered my borrowers (especially the sub-prime borrower) AWAY from ARMS. It’s not helping my business, right now, because I didn’t put my clients in the position of HAVING to refinance because their interest rate just jumped up by 6% – But, I’m also NOT seeing my clients’ names in the newspaper’s legal notices section, either.
I did turn down alot of borrowers, rather than put them into something I knew they couldn’t handle – and maybe they did go elsewhere. But I live in a small town, and I can face everybody I dealt with, with a clear conscience.
October 23rd, 2008 at 5:54 pm______
mk3872 Says:
Funny how this is ANOTHER great point by TP, yet we hear NOTHING coming from the Obama campaign to hammer back at this when McCain smears Obama over Fannie & Freddie. Less than 2 weeks and Obama has so much more $$, he should be DROWNING him out.
October 23rd, 2008 at 2:36 pm
______
Obama is doing ok as it is. Remember, they said Fannie and Freddie were significant factors, just not the main cause of the financial situation. Best not to try to use that slight distinction to bolster his candidacy if it can be avoided.
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