NYC Letter: BLAME THEM!

Countdown 31 days to go

UPDATE: Events have overtaken this post.

SENATE PASSES BAILOUT, 74-25
October 1, 2008 (BusinessWeek)

BAILOUT BILL PASSES HOUSE, 263-171
WASHINGTON October 3, 2008 (IndyStar)

BILLIONS IN EARMARKS IN SENATE'S BAILOUT BILL

WASHINGTON October 3, 2008 (SFC) - While crafting a bill intended to rescue the U.S. economy this week, lawmakers couldn't stop themselves from adding billions of dollars in tax breaks that have little to do with restoring confidence in financial markets.

Senators quietly tucked a number of earmarks into the tax package of the 451-page bill that was passed Wednesday night and is expected to be put to a vote in the House today: a $2 million tax benefit for makers of wooden arrows for children; a $100 million tax break to benefit auto racetrack owners; $192 million in rebates on excise taxes for the Puerto Rican and Virgin Islands rum industry; $148 million in tax relief for U.S. wool fabric producers; and a $49 million tax benefit for fishermen and other plaintiffs who sued over the 1989 tanker Exxon Valdez spill.

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There will be a time to fix the blame for all that has happened -- especially in the case of Fannie Mae and Freddie Mac, and the abuses and political deal-making that corrupted those institutions. But our duty right now is to fix the problem, and that is the business that will shortly take me back to Washington.

John McCain (D-AZ),
giving a pass to the opposition
on its regulatory oversight
and its banjaxing capitalism
ARLINGTON, Virginia October 1, 2008 (McCain/Palin)

We would argue that the time to affix blame is now or never. Now is the time to identify those who engineered this mess -- if only to make sure they are shut out of engineering a solution. [Too late, see above update.] If Mr. McCain hopes to be elected president, he best recognize that assigning blame IS part of any solution.

THERE ARE PARTIES RESPONSIBLE -- BUT NO RESPONSIBLE PARTIES
Look! Look! The Guilty Are Right In Front Of Our Noses

Now is the time to fingerpoint.

And here they are in their own words:

House Financial Services Committee hearing, September 10, 2003

Barney Frank (D-MA, 4th): I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios...

Maxine Waters (D-CA, 35th): [Housing and Urban Development Secretary Mel Martinez], if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?

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House Financial Services Committee hearing, September 25, 2003

Barney Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing...

Gregory Meeks (D-NY, 6th): ...I am just pissed off at OFHEO [Office of Federal Housing Enterprise Oversight, the under-funded regulator of Fannie Mae and Freddie Mac] because if it wasn't for you I don't think that we would be here in the first place. ...

Armando Falcon Jr., OFHEO Director: Congressman, OFHEO did not improperly apply accounting rules; Freddie Mac did. OFHEO did not try to manage earnings improperly; Freddie Mac did. So this isn't about the agency's engagement in improper conduct, it is about Freddie Mac. Let me just correct the record on that. ... I have been asking for these additional authorities for four years now. I have been asking for additional resources, the independent appropriations assessment powers.

This is not a matter of the agency engaging in any misconduct.

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House Financial Services Committee hearing, September 25, 2003

Maxine Waters: However, I have sat through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke. Housing is the economic engine of our economy, and in no community does this engine need to work more than in mine. With last week's hurricane and the drain on the economy from the war in Iraq, we should do no harm to these GSEs. We should be enhancing regulation, not making fundamental change.

Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. ...

Barney Frank: Let me ask [George Gould, then-Freddie Mac lead director] and [Franklin Raines, then-Fannie Mae Chairman and CEO] on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated? Mr. Raines?

Franklin Raines: No, sir.

Barney Frank: Mr. Gould?

George Gould: No, sir. ...

Barney Frank: OK. Then I am not entirely sure why we are here. ... I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.

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Senate Banking Committee, October 16, 2003

Charles Schumer (D-NY): And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.

Franklin Raines: But more importantly, banks are in a far more risky business than we are.

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Senate Banking Committee, April 6, 2005

Charles Schumer: I'll lay my marker down right now, Mr. Chairman [Federal Reserve Chairman Alan Greenspan]. I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring in terms of their mission, in terms of their role in the secondary mortgage market, et cetera. Change some of the accounting and regulatory issues, yes, but don't undo Fannie and Freddie.

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Senate Banking Committee, June 15, 2006

Robert Bennett (R-UT): I think we do need a strong regulator. I think we do need a piece of legislation. But I think we do need also to be careful that we don't overreact.

I know the press, particularly, keeps saying this is another Enron, which it clearly is not. Fannie Mae has taken its lumps. Fannie Mae is paying a very large fine. Fannie Mae is under a very, very strong microscope, which it needs to be. ... So let's not do nothing, and at the same time, let's not overreact....

Jack Reed (D-RI): I think a lot of people are being opportunistic...throwing out the baby with the bathwater, saying, "Let's dramatically restructure Fannie and Freddie," when that is not what's called for as a result of what's happened here. ...

Chuck Hagel (R-NE): Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard.

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Not last and not least, Christopher Dodd (D-CT), chairman, United States Senate Committee on Banking, Housing, and Urban Affairs.

WHERE WAS SEN. DODD?
Playing The Blame Game On Fannie And Freddie

OP-ED September 12, 2008 (WaPo) - Taxpayers face a tab of as much as $200 billion for a government takeover of Fannie Mae and Freddie Mac, the formerly semi-autonomous mortgage finance clearinghouses. And Sen. Christopher Dodd, the Democratic chairman of the Senate Banking Committee, has the gall to ask in a Bloomberg Television interview: "I have a lot of questions about where was the administration over the last eight years."

We will save the senator some trouble.

What follows is a detailed history of administration efforts to reform GSEs with a number of prescriptions, such as:

...to submit to regulations of the Securities and Exchange Commission; to adopt financial accounting standards; to follow bank standards for capital requirements; to shrink their portfolios of assets from risky levels; and empowering regulators such as the Office of Federal Housing Oversight to monitor the firms.

GSEs pushed back.

They flooded Washington with lobbying dollars, doled out tens of thousands in political contributions and put offices in key congressional districts. Not surprisingly, these efforts worked. Leaders in Congress did not just balk at proposals to rein in Fannie and Freddie. They mocked the proposals as unserious and unnecessary.

... Meanwhile, Dodd -- who along with Democratic Sens. John Kerry [No.3, $111,000*], Barack Obama [No.2, $126,349*] and Hillary Clinton [No.12, $76,050 *] were the top four recipients of Fannie and Freddie campaign contributions from 1988 to 2008 [Dodd No.1, $165,400*] -- actively opposed such measures and further weakened existing regulation.

... As recently as last summer, when housing prices had clearly peaked and the mortgage market had started to seize up, Dodd called on Bush to "immediately reconsider his ill-advised" reform proposals. [Barney Frank,] now chairman of the House Financial Services Committee, said that the president's suggestion for a strong, independent regulator of Fannie and Freddie was "inane."

BLAME THEM!

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* Our numbers are for 1989-2008 and are sourced here. For the record, Mr. McCain ranks No.62 with $21,550, Mr. Biden No. 217 with $3,300, and Mrs. Palin does not rank never having taken money from Fannie Mae or Freddie Mac. The LAT rushes to pass on the assurances of the Obama campaign:

The mortgage money has not influenced Obama's stands, a campaign aide said. The candidate has "consistently supported stepped-up regulation for Fannie Mae and Freddie Mac to ensure that instead of rewarding speculators who relied on the government to reap massive profits, taxpayers and struggling homeowners are protected."

Is the LAT as stupid as the Obama campaign hopes. Does the LAT not understand the rationale behind campaign money? Well, yes it does.

McCain campaign manager Rick Davis is past president of the Homeownership Alliance, an advocacy group whose members included Freddie and Fannie. In that role, he defended the companies against increased regulation.

Let's see if we have grasped the LAT's take on GSE campaign contributions. Mr. McCain, who actually proposed reform legislation, is, by association, probably in the pocket of corrupt GSEs. While Mr. Obama, who despite his desire to protect homeowners has never proposed or voted for any reform legislation, has taken almost 6x as much money in three years as Mr. McCain has in 19 and is wholly unaffected.

The LAT is just that stupid.

BTW, Homeownership Alliance, which closed in 2005, specifically abjured Congressional lobbying: "The group says it will not lobby members of Congress, but will concentrate on public advocacy."

Posted by Damian at October 3, 2008 11:15 PM