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What Was Really Responsible for the Housing Collapse?
You know, I'm getting tired of hearing, "It was all Bush's fault." There's plenty of blame to go around, but these direct quotes, from the congressional records (date or committee noted), and directly from interviews with these parties, should help explain part of the financial meltdown.
In 1999, Congress repealed the Glass-Steagal act which, in essence, deregulated certain banks and banking practices. A Republican congress passed it, and Pres. William J. Clinton (D) signed it into law.
In April, 2001, the Bush admin.'s budget request contained the following: The size of Fannie Mae (FM) and Freddie Mac (FMc) is "a potential problem." because financial trouble in either could cause "strong repercussions in financial markets." This was the first warning, but few even heard it.
In 2003, this warning was upgraded to a "systemic risk", that could spread beyond the housing market. In the fall of 2003, the administration was pushing hard to get congress to act.
on September 10th, 2003, Treasury secretary John Snow, in testimony to congress, said, "We need a strong, world class regulatory agency to oversee the prudential operations of Government Supported Enterprises (GSE's- i.e. FM and FMc), and the safety and soundness of their financial activities."
Dem. Representative Barney Frank, then ranking member of the house Financial Services Committee, replied with, "FM and FMc are not in a crises. The more people who, in my judgment, exaggerate a threat of safety or soundness, the more people conjure up the possibility of serious financial losses to the treasury, which I do not see,".... "and even if there were a problem, the federal government doesn't bail them out."
No legislation was brought forward. (Congressional record, Sept. 10, 2003)
Now, on Sept. 24th, 2008, Rep. Frank, in a Fox interview, said this, "Years of failure to regulate have led to irresponsible actions by the private sector to get us into this trouble."... "If we don't do something, things will get worse. I do think years of irresponsible failure to regulate have led to this situation."
Oh, really? Does anyone see the irony here?
In another House Financial Services Committee meeting on Feb. 17, 2005, Fed Chairman Alan Greenspan, (Bush Admin.) testified, after FM had admitted major accounting errors. He said, "Enabling these institutions to increase in size.... we are placing the total financial system of the future at a substantial risk." (Cmte. records)
On April 6, 2005, he added, "If we fail to strengthen GSE regulation, we increase the possibility of insolvency and crises."
Again Democrats defended these institutions. Dem Senator Charles Schumer said, " I think FM and FMc, over the years, have done an incredibly good job, and are an intrinsic part of making America the best housed people in the world."
By looking backward, ignoring the flashing red lights, he failed to recognize the oncoming train wreck.
On the Senate floor, on May 26, 2006, Sen. John McCain said, " For years I have been concerned about the regulatory structure that governs FM and FMc, and the shear magnitude of the companies... the GSE's need to be reformed without delay." (Cong. Record)
He had co-sponsored the 'Federal Housing Enterprise Act (S-190) which made it out of committee, with all of the Democrats voting against it, but died on the floor due to lack of support. (Then) Senator Obama did not weigh in on the bill, but later took credit for warning congress of the problems.
Okay, so now they all agree there is a problem and all of them warned us about it. (So sad.) Instead of working together to find a truly reasonable solution, however, they got involved in nasty partisan name-calling.
According to word from the House, Speaker Nancy Pelosi fired the first shot by telling the Republicans she wanted them to deliver 100 votes for the TARP bill. They obviously balked since they had no say in what the bill contained. She then had the audacity to call them "unpatriotic" for not giving her what she wanted.
As I said, there's enough blame for all. Someone should have shouted FIRE, but would any of us have listened? Our congress didn't, and it really tics me off to see the very ones who caused this mess try to claim they were blind-sided, and now attempt to convince me they can be our saviors.
Methinks it's time to boot some of the hypocrites.
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