Bailout - Who Is Responsible For Fannie Mae & Freddie Mac Crisis

(The following are all quotes from the following articles. Note the dates on the articles. See my comments as well as links to full articles at end of email)


President Clinton Pressures Fannie Mae To Give Risky Loans


New York Times Excerpts  September 30, 1999  Footnote 1 (footnotes contain link to entire articles in this email)


"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people.


"Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times.  But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.


"From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''


"Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.


"In July [1999 under Clinton presidency], the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.


"Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent…In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent."


Fannie Mae Resists Hiking Risky Loans


Los Angeles Times Excerpts May 31, 1999  Footnote 2


"The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now [1999] required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.


"But with discrimination in the banking system not yet eradicated, maintaining the momentum of the 1990s will also require a continuing nudge from Washington. One key is to defend the Community Reinvestment Act, which the Senate shortsightedly voted to retrench recently. Clinton has threatened a veto if the House concurs.


"Barry Zigas, who heads Fannie Mae’s low-income efforts, is undoubtedly correct when he argues, “There is obviously a limit beyond which [we] can’t push [the banks] to produce.”


Bush Recommended Regulatory Overhaul of Fannie & Freddie In 2003

But Barney Franks & Congressional Democrats Defeated the Proposal


New York Times Excerpts Sept 11, 03  [Under Bush's Administration]  Footnote 3


"The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.


"Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

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. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.


"Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and 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.''   [Barney Franks is Chairman of the Banking Committee and received huge sums of money from Fannie Mae & Freddie Mac and is the one pushing this bailout bill through the House] Representative Melvin L. Watt, Democrat of North Carolina, agreed.


McCain Co-Sponsored A Bill to Prevent the Fannie and Freddie Crisis


Bloomberg News Excerpts from article entitled "How the Democrats Created the Financial Crisis September 22, 08   Footnote 4, 5 & 6


"It is easy to identify the historical turning point that marked the beginning of the end.


"Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes… The Securities and Exchange Commission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then [2005] legislative momentum [S.190 which McCain co-sponsored] emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.


"The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''


"What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.


"Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain  was one of the three cosponsors of S.190 , the bill that would have averted this mess.


See footnote 5 for link to McCain's speech on the floor on this bill and footnote 6 for text of bill.


[Note: Senate Democrats blocked the passage of the Bill and while it passed in the House it failed in the Senate because of the Democrats.]


Powerful Democrats Receive Huge Levels of Financial Support

From Fannie Mae and Freddie Mac


Bloomberg News Footnote 7

"But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd have received mind-boggling levels of financial support from them over the years.


"Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.


"Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.


You Tube Video Explains Obama's Involvement in Creating Crisis

You Tube  Footnote 8


Obama was one of the lawyers in a firm that sued banks for not giving enough subprime [risky] loans to low income people.   He received 49 times as much money from Frannie & Freddie  as John McCain received.  Obama  received 4 times more money per year than any other senator; and in three years  collected more money from Fannie & Freddie than John Kerry did in over 20 years. See this link for this video:


My Comments


Did More Regulation (Government Control) or Less Regulation Cause the Crisis


It is clear there was regulation mainly by the liberal Democrats – the type of regulation that forced risky loans and caused the crisis. Now Democrats are blasting the Republicans saying Republicans are to blame for the crisis because Republicans  wanted less regulation, implying that the free market and capitalism is the culprit in this situation.

The truth is the Republicans wanted less regulation in the areas that were causing the problems (forcing banks to give risky loans)  and more regulation to correct the problem.  But as usual, the liberals have so clouded the issue that the citizens can't discern whether too much regulation or too little regulation caused the problem.


 It took me several hours to get to the bottom of this, so I understand the dilemma citizens face in deciding who to believe.  Most people don't have the hours it takes to get to the truth, so the liberals, backed by the media, continue to spread their propaganda to support  their government control and socialistic practices.


I see nothing in the bailout bill that will rectify the problems that caused the crisis.  With liberal Democrat Barney Franks, Chairman of the Banking Committee, pushing this bailout through the house, it is obvious whose philosophy has shaped the bill and who will enforce the bill.  The liberals had slipped a measure into the bailout bill to send some of the profits from the sale of distressed assets the government buys into  to ACORN (Association Community Organizations for Reform).  ACORN  is known to many as a liberal/socialist organization involved in voter fraud and advocating the risky loans. (Recently, Milwaukee's top election official announced plans to seek criminal investigations of 37 ACORN employees.)


Obama, a Central Figure in Left-Wing ACORN Organization


Obama is a central figure in the left-wing ACORN exploitation of financial institutions and pressuring them to make high risk loans. In the 90's those years, he also conducted leadership-training seminars for ACORN's up-and-coming organizers. "Obama's campaign apologized for failing to report $800,000 in campaign payments to ACORN.  They were 'accidentally' filed with the Federal Election Committee as money sent to 'get-out-the-vote' and 'advance work.'" 

After several days of rage from conservative activists regarding this provision, the ACORN provision was removed.   See footnote 9 for link to article on matters in this section.

Liberals Try To Slip in another $56 Billion For Give-A-Way Programs In Midst of "Pearl Harbor" Financial Crisis


Even in the midst of the financial crisis which is costing taxpayers 700 billion, a crisis called a Pearl Harbor financial crisis by some,  the liberal Democrats tried to slip in a $56 billion plan to expand more give away programs like food stamps.  The bill was blocked by Senate Republicans. See this link for full article: See Footnote 9 for link to article


I thought when our nation became destitute the liberals would finally understand they had to cut programs, but now I see they will just push the deficit up and up until we become so bankrupt that we lose our nation to China and other foreigners who are lending us the money. 


Debbie Pelley



 Documentation Footnotes: Links to articles quoted above



President Clinton Pressures Fannie Mae To Give Risky Loans



Fannie Mae Resist Hiking Risky Loans



Bush Recommended Regulatory Overhaul of Fannie & Freddie In 2003But Barney Franks & Congressional Democrats Defeated the Proposal



McCain Co-Sponsored A Bill to Prevent the Fannie and Freddie Crisis



McCain's speech on the floor



S.190  S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005 can be read at this link:



Powerful Democrats Receive Huge Levels of Financial Support From Fannie Mae and Freddie Mac



You Tube Video Explains Obama's Involvement in Creating Crisis titled "You'll Never Guess"


9. and and   ACORN in bailout bill and Obama's role in ACORN



Liberals Try To Slip in another $56 Billion For Give-A-Way Programs In Midst of "Pearl Harbor" Financial Crisis



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