I’m a little late to this party but I haven’t seen many efforts to set the record straight. The right has made much of the following youtube video posted by Michelle Malkin underling Ed Morrissey at Hot Air, showing Barney Frank and I believe 4 other House Democrats at a hearing before the Committee on Financial Services on 9/25/03 on the proposed H.R. 2575 (108th): The Secondary Mortgage Market Enterprises Regulatory Improvement Act:
For anyone unfamiliar with Captain Ed Morrisey, there used to be a day when he ran his own highly respectable conservative blog Captain’s Quarters. I often listed Captain’s Quarters among my favorite conservative blogs and respected Captain Ed’s opinions as thoughtful, researched and even handed. Sadly, since joining Malkin’s team of subordinates at Hot Air, Ed has given up command of not just his personal forum, but his integrity. I don’t believe the sense of diligence possessed by the Ed Morrissey I used to respect and read regularly would ever have allowed him to post this video and claim:
In 2004, a year after the Bush administration tried to tighten regulation and oversight on Fannie and Freddie, Congress was told yet again that disaster loomed. The Democratic response is instructive to seeing who really sat back and allowed this collapse to occur
…much less throw around such sloppy hyperbole as:
Democrats distorted the market through the CRA and through Fannie and Freddie’s massive securitizing of bad debt, and then blocked regulators from doing their jobs. That’s the real story of this collapse.
Suffice it to say, that Youtube video does not tell the viewer the real story of what happened to H.R. 2575. So what really happened? For starters, here’s the Government Printing Office’s transcript of the entire 6 hour hearing. And recall that in the 108th Congress, the GOP had a majority in both houses. Of the 70 Representatives listed in the transcript as present at the hearing, Republicans outnumbered Democrats 37-33. So with broad Republican support, it should have been pretty easy for the GOP sponsors of the bill to get it through committee and onto the House floor for a vote. But this bill never made it out of committee. You have there in black and white Ed Morrissey’s assertion for why not. But the truth is actually quite different – Reps Waters, Frank, Clay and Meeks weren’t the only ones who didn’t like the bill as proposed. The GSE Report (PDF) sheds some light on what happened:
While legislative proposals have been introduced in the past to address GSE regulatory reform, Congress did not take action on them. With the announcement of Freddie Macs restatement of income due to incorrect accounting for derivatives, the adequacy of GSE regulation has become a prominent legislative issue. To date, four bills have been introduced in the 108th Congress that aim to strengthen the current regulatory framework and improve the effectiveness of GSE supervision, including H.R. 2575 (Representative Baker), H.R. 2803 (Representative Royce), S. 1508 (Senators Hagel\Sununu\Dole), and S. 1656 (Senator Corzine). The House Financial Services Committee released a manager’s amendment in preparation for a mark-up originally scheduled for October 8, 2003. Objections were raised about the manager’s amendment by the Department of Treasury, claiming that the bill falls short of real reform. Subsequently, the mark-up was postponed until further notice and the status of the manager’s amendment is uncertain.
The National Association of Home Builders, as one would imagine, was very interested and kept close tabs on the bill’s progress, as they very much were in favor of it passing. Check their Washington Update from 10/9/2003:
Mark Up of GSE Reform Proposal Postponed
An Oct. 8 mark up of a regulatory reform proposal for the housing government-sponsored enterprises (GSEs) Fannie Mae and Freddie was abruptly postponed when the Bush Administration objected to the bill. The “Secondary Mortgage Market Enterprises Regulatory Improvement Act,” which has the support of NAHB and virtually the entire housing community, would retain mission oversight of the GSEs at the Department of Housing and Urban Development, including both goal-setting and program approval functions. The measure would also entrust an independent office within the Treasury Department to ensure the GSEs’ financial safety and soundness. The Administration is pushing for the Treasury to have approval authority over the business activities of the two giant mortgage lenders, a move that NAHB adamantly opposes.
Whoops! It wasn’t the committee Dems who stopped the bill, it was President Bush’s Treasury Department, which never even gave them the chance to vote on it. Although I wouldn’t put all of the blame on the Treasury, since the bill’s sponsors didn’t have to succumb to their objection. Rather frustrating since, as you’ll see in a moment, despite the committee hearing testimony of 5 Democrats who opposed the bill, there probably was bipartisan support and perhaps a super-majority could have been established in case the President sided with Treasury Secretary Snow. But instead of giving it a try, H.R. 2575 died before it ever went to committee vote.
However all was not yet lost, for two years later, the 109th Congress (still a GOP majority) introduced a new version of the bill in the House: H.R. 1461: The Federal Housing Finance Reform Act of 2005. And this time it not only made it out of committee, but it passed with strong bipartisan support, including a solid majority of Democrats voting in favor, 122-74. And to the credit of House Republicans, this time they didn’t allow the Bush Administration to push them around, significant because President Bush made it clear that he was not a fan of this version, either.
So now we’re cooking with gas, right? Well, not exactly. You see after a bill gets through the House, there is the matter of getting through the Senate (which was also controlled by a Republican majority) in the 109th. And the Senate version of the bill, S. 190: The Federal Housing Enterprise Regulatory Reform Act of 2005, although nearly identical to H.R. 1461, did not go over as well and died in the Banking committee. Exactly what happened in the Republican controlled Banking committee is unclear. Unfortunately there is no transcript I can find of the hearing at the Government Printing Office and I can dig up only one report:
Senate Banking Committee Reports Fannie Mae/Freddie Mac Reform Bill
On July 28, 2005, the Senate Banking Committee considered and reported S. 190, the “Federal Housing Enterprise Regulatory Reform Act of 2005.” This bill would create a new independent regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (GSEs).
The Committee accepted a substitute bill authored by Banking Chairman Richard Shelby (R-AL). They disagreed to a Democratic substitute by Ranking Member Paul Sarbanes (D-MD). The Sarbanes substitute would have created an affordable housing fund based on the GSEs’ profits, eased portfolio limits, streamlined program approval and increased the conforming loan limits for high cost areas. It failed 9 yeas to 11 nays, and the Shelby bill passed on a straight party line vote of 11 yeas to 9 nays.
Chairman Shelby assured Democratic Senators that he would continue to work with them before the bill is considered on the Senate floor to try to come to some compromise language. NAR will continue to work with the Committee to address REALTOR® priorities. The bill is not expected to gain full Senate consideration unless an accommodation can be made to attract support from Democrats.
So a bill received bipartisan support in the House and managed pass in committee in the Senate, but failed to get marked up the bill to a vote on the Republican-controlled Senate floor.
Adding to the disingenuousness of these claims was none other than Senator McCain, who has recently taken to crediting himself with being among those who supported these bills. Actually, McCain didn’t sign on to S. 190 until a year later, after the housing market had already peaked, when any new oversight enacted would have simply been too late to prevent the mortgage giants’ failures. McCain made no effort to support these measures when they had a chance to do some good. But that doesn’t stop him for touting his record on the issue:
The point of this exercise is to display the abject dishonesty of the far right wing’s propaganda machine, and the lengths it will go to defame fellow Americans. If you listen to Hannity, Coulter and Malkin (and now, John McCain) they’d have you believe that the whole economic crisis can be blamed on Barney frank and 4 other Democrat Representatives whom they claim stopped H.R. 2575 way back in 2003 (and somehow, Barack Obama) and that John McCain rode in on a white horse to provide us with our last unheeded chance to avert the impending economic doom. As usual with the claims of that group (including, increasingly, John McCain) the truth is another matter, entirely.
You are missing the point of this “economic crisis,” it was Bill Clinton and the Democrats that forced lenders to grant loans to people who could not repay them. That left people with limited income in the position to buy homes for the first time, those who were short sighted did just that, using ARM’s, the only way to make the new government program work. While they should have known that the interest rates would adjust at some point and been prepared, they either didn’t know or were just unprepared (the reason most poor people are poor is that they don’t understand how to earn money or to manage it when they do get it). That makes the problem two-fold; first, the government never should have interfered with the with the free market system, second, nobody ever forced the people who now have mortgages they never should have had to accept those mortgages. It is very easy to pass blame to Republicans, however, it was the Democrats more than Republicans, combined with the ignorance of people who by their own actions are dsestined to poverty that caused this problem. The best cure now is for the government to stay out, but once again, Republicans are capitulating to Democrats with the bailout. This will only post-pone the inevitable, and make it worse when the inevitable happens. This melt-down in our economy needs to run its course. We will, as a nation, recover. The “big business” the Democrats all hate so much will in many cases fail, but they will once again be replaced by small businesses. Some of those small businesses will succeed better than others and become the big business of tomorrow. It has happened before, 1929, and no doubt will happen again. However, if we interfere in the natural order of the free market now, we doom ourselves to government control of our lives and economy for a long time to come. The bail-out in the works now leaves government owning 70% of the financial corporations that got into trouble to begin with, with that control, how long will it be before the government owns 70% of all businesses? The Democrats, i.e. Maxine Waters, have already suggested nationalizing “big oil.”
dcbarton
Thank you for your comment. If my post is “missing the point” then so is much of the rabid right, such as Sean Hannity and Powerline and Ed Morrissey at Hot Air, since this post is nothing more than a direct response to a specific set of false claims which are supported by the above distortion of facts. So I’m glad to see that you apparently also dismiss the disingenuous claims that Morrissey posted in the very widely read forum with which he is employed. I do wonder whether you are a person of strong enough character and integrity to tell him as much by commenting at his post on Hot Air. I guess we’ll see. You can find it the very first link above.
Regarding your other assertions, it is true that Clinton pushed for less stringent credit and down payment requirements for lower and middle income earners to obtain mortgages. And even Clinton has admitted that this is one of the early contributing factors to the current crisis. But that is only one of many factors. For example, it was during the Bush Administration’s 1st term and the Republican controlled 108th Congress when the SEC decided to allow qualifying broker-dealer firms (those with $5 billion or more in capital) to expand their debt-to-net capital ratio from 12 to 1 (the ratio that had been in place since 1975) to 40 to 1. What firms qualified for the new standard? Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley. Consider that timeline; it coincides with EXACTLY when sub prime market exploded.
Link: http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/
According to McClatchy, the GOP-controlled congressional banking committees did not hold a single hearing regarding the SEC rule change. Also from that McClatchy article:
“Sen. Richard Shelby, the Alabama Republican who was the banking committee chairman when the SEC rule was adopted, received more than $152,000 in donations [from troubled broker-dealer firms and FM/FM -joe]. Jonathan Graffeo, a spokesman for Shelby, said that campaign donations “are not a factor in Sen. Shelby’s decision-making.”
Shelby said that Democrats blocked his attempts to rein in the roles of mortgage giants Fannie Mae and Freddie Mac and his push for a closer review of the SEC’s regulation of investment banks [that lie was dealt with in the primary portion of this post -joe]. He said the SEC rule left a staff of fewer than 20 overseeing trillions of dollars in assets.”
Link: http://www.mcclatchydc.com/244/v-print/story/53398.html
Moreover, the sub prime fallout was also not the sole fault of poor people getting into mortgages they couldn’t afford. Many, perhaps a majority of mortgages gone bad were the result of middle and higher income people participating in “property flipping” (where is the executive producer of “Flip this House” today, I wonder). Lots and lots of people were making money hand over fist in a game of real estate hot potato, and very few people were raising the alarm bells of stretching mortgage liquidity too thin and suffering a sub prime collapse at the time. Not House and Senate Republicans, not John McCain, not Democrats, not President Bush and certainly not the SEC.
Primarily blaming elected Democrats for the crisis is like primarily blaming the NY Yankees for the baseball steroid scandal. Half of the players on every team were taking steroids and everyone from the players union to the team managers and trainers to the franchise owners to the new generation fans who were captivated by all the home runs were all complacent.
There is plenty of blame to go around, from the current and previous Presidential Administrations to both parties in Congress to the SEC to predatory mortgage brokers to the Federal Reserve which kept interest rates low and credit too accessible (just wait until Visa and MasterCard have their day of reckoning) to Alan Greenspan who haphazardly encouraged Americans to take out ARMs to the broker-dealer firms that weren’t watching their own books to the buyers who failed to conduct their own debt management.
Joe – good post, you make some solid points. But I like this part the best:
Primarily blaming elected Democrats for the crisis is like primarily blaming the NY Yankees for the baseball steroid scandal.
Yes, it. Much like the New Yorsk Yankees were the highest paid team and benefitted the most from the steroid era, tha Democrats in that vid were the highest paid by Fannie and Freddie and benefitted the most from it, including, as you know, Barack Obama. It’s actually a pretty good analogy, although not in the way you meant it to be.
You are 100% right that Republicans could have done this on their own at any time. It is a travesty that they didn’t. So yes, there is plenty of blame to go around. Many of the Republicans were voted out in 2004 and 2006. As nearly every Republican should have been in each of those elections, for forgetting their conservative values.
I’m still waiting for the Dems to accept their medicine though. I’m still waiting for Todd and Frank and Clay and Meeks to get voted out. And don’t get me started with the least intelligent congressperson ever, Maxine Waters.
And as for Barack Obama, the #2 recipient of Fannie and Freddie funds, we made him President. How’s that for holding him accountable for his actions?
Yes, flipping hurt. So did the sale of an estimated 5 million homes to illegal immigrants who somehow managed to secure mortgages. Roughly 50,000 of those homes sit abandoned today in my city of Phoenix. But at least the business leaders of our booming meth industry have plenty of choices for where to locate their labs.
Good post, except for those points. And I thought you were harsh on Morrissey.
Scott
Thanks for the reply.
It’s impossible to argue who benefitted most from the steroid scandal since there will never be comprehensive data on who was using and even if there was such a thing there will never be a way to know just how much PEDs impacted each individual’s game.
Back on the actual topic, your measure of who benefited most is incomplete. Yes, FM/FM contributed more to Dem campaigns than they did to Republican ones. But if we’re considering who in Congress benefitted most from the crisis, we have to look at the personal investments of our representatives for an accurate measure
But much more to the point, the issue of who benefitted is pretty irrelevant and in any case entirely seperate from who is to blame for the issue. You seem to be confusing the two.
Even more to the point than that, I suggest you read my earlier reply in the comments section of this thread. The fact of the matter is that FM/FM were not even the most important factors leading to the financial crisis. This entire narrative put forth by the political right is a sham and a dishonest attempt to pin the crisis on Congressional Dems when the single greatest factor leading to our economic woes can actually be traced to the SEC.
And that’s why I’m so hard on Captain Ed. I’ve been an avid reader of Morrissey for years. The change in his approach since joining Hot Air is blatant and frankly insulting. He went from running easily the most thoughtful conservative blog I’d ever known to your standard partisan hack. He would never have advanced such easily debunked nonsense like this back in his Captain’s Quarters days. When he went to work for Malkin, the blogosphere lost one of it’s most valuable voices.
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