Sunday, October 12, 2008

Freddie, Fannie, Dodd and McCain

Sen. John McCain’s 2006 letter warning about Fannie and Freddie and GSE’s precedes Sen. Chris Dodd’s touching concern for Fannie Mae and Freddie Mac by a significant margin.

A late September story in the Hartford Courant noted that, “that although Dodd amassed a strong rhetorical record on the housing crisis, it was not until 10 months ago that he introduced legislation aimed squarely at the industry, with a bill banning practices that drove up fees for home buyers, providing millions for foreclosure counseling and strengthening the oversight of government-sponsored mortgage giants Fannie Mae and Freddie Mac>

By that time the walls of Jericho were already crumbling.

“At a hearing just seven months ago,” according to the Courant story, “Dodd deflected critics of Fannie Mae and Freddie Mac, saying the two firms remained healthy sources of credit, even as other mortgage firms collapsed.

“'The system is under siege,’ Dodd declared, ‘and it is the GSEs that are riding to the rescue,’’ an amusing notion, somewhat on a par with noting that cancer cells are riding to the rescue of the patient.

“At the same hearing,” the Courant story continues, “Dodd sent the message that he would be taking a cautious approach to reforming Fannie Mae and Freddie Mac, even as a House-passed bill to overhaul regulation of the firms had been languishing for eight months in his Senate committee.

"Let me be clear," he said. "I will not be the one to preside over a legislative process that dismantles this system. I will pursue GSE legislation, and I will do so aggressively, but I will not do anything that undermines the foundations of this highly beneficial system."

By way of contrast, here is a copy of a letter written by McCain in May of 2006 to the Majority Leader of the senate and the chairman of the Banking Housing and Urban Affairs Committee:

The letter begins, “We are concerned that if effective regulatory reform legislation for the housing-finance government sponsored enterprises (GSE’s) is not enacted this year, American taxpayers will continue to be exposed to the enormous risks that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole. Therefore we offer you our support in bringing the Federal Housing Enterprise Regulatory Reform Act (S. 190) to the floor and allowing the Senate to debate the merits of this bill, which was passed by the senate Banking Committee…

The letter stated it was "...vitally important that Congress take the necessary steps to ensure that [Fannie Mae and Freddie Mac]...operate in a safe and sound manner.[and]..More importantly, Congress must ensure that the American taxpayer is protected in the event that either...should fail."

Sen. Obama did not sign the letter, nor did any other Democrat.

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