I've been told hither and yon that this market meltdown is, like all things, the fault of Republicans. Smarter people have blown holes in that idea on more than one occasion. Since they somehow to be ignored, let's go to the Liberal's Paper of Record, the New York Times:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

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 new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

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.

''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws.

The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session.

After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall.

''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies.

''These irregularities, which have been going on for several years, should have been detected earlier by the regulator,'' he added.

The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.

At the time, the companies and their allies beat back efforts for tougher oversight by the Treasury Department, the Federal Deposit Insurance Corporation or the Federal Reserve. Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. This year, however, the chances of passing legislation to tighten the oversight are better than in the past.

Reflecting the changing political climate, both Fannie Mae and its leading rivals applauded the administration's package. The support from Fannie Mae came after a round of discussions between it and the administration and assurances from the Treasury that it would not seek to change the company's mission.

After those assurances, Franklin D. Raines, Fannie Mae's chief executive, endorsed the shift of regulatory oversight to the Treasury Department, as well as other elements of the plan.

''We welcome the administration's approach outlined today,'' Mr. Raines said. The company opposes some smaller elements of the package, like one that eliminates the authority of the president to appoint 5 of the company's 18 board members.

Company executives said that the company preferred having the president select some directors. The company is also likely to lobby against the efforts that give regulators too much authority to approve its products.

Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ''responsible proposal.''

The stocks of Freddie Mac and Fannie Mae fell while the prices of their bonds generally rose. Shares of Freddie Mac fell $2.04, or 3.7 percent, to $53.40, while Fannie Mae was down $1.62, or 2.4 percent, to $66.74. The price of a Fannie Mae bond due in March 2013 rose to 97.337 from 96.525.Its yield fell to 4.726 percent from 4.835 percent on Tuesday.

Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.''

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.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

That is the final word. The Bush administration supported it, even Fannie Mae and Freddie Mac supported it but the DEMOCRATS stepped in and stopped it.

There is no wiggle room here. There is no deregulation to blame or Phil Gramm or anyone other than Democrats. Clinton started the ball rolling and Barney Frank and his ilk were holding the ball when the market collapsed.


kavips said…
Ok, now I'm beginning to see where you are coming from.. You are looking for anything that democrats had, so you can say...see they were part of it too..

In this case, I will agree that Barney Frank was concerned that the mission of Fannie and Freddie would be changed under the Bush regime. He had reason to fear... everything else was...

Remember this was back in 2003....

This is not really a point of argument.. When it came to Fannie and Freddie Mack, many liberal Democrats accepted their insolvent nature and did not stop its practices... We all agree....But Fannie and Freddie Mack are not the entire cause of the $8oo billion we are discussing...

Let me put this in perspective.... Even had this gone under the administration's control, there is no guarantee that things would turn out better; look how they handled the Federal Budget?

But whether or not Fannie or Freddie Mack were kept insolvent by Democrats, matters little. Even more, it is irrelevant. Our financial system is large enough where it could absorb the dissolving of one large institution.

It is the impossibility of dealing with all of them at once, which creates not only a problem, but a huge crises.

We woke up and realized our entire financial system is unsound...It's based on.....confidence... There is nothing there to back it up....just like there was nothing in 1929 to protect anyone then....

Bear Sterns failed not because of Fannie and Freddie Mack..Lehman Brothers failed not because of Fannie and Freddie Mack...Goldman and Sacs failed not because of Fannie and Freddie Mack...Morgan Stanley failed not because of Fannie and Freddie Mack....AIG failed not because of Fannie and Freddie Mack...All the others still standing who will fail,...will not fail because of Fannie and Freddie Mack...

They will fail because of Phil Gramm's changing of the Securities Act of 1933 and 1934 which was supposed to prevent that from ever happening again. A rider which was slipped in sight unseen in a conference session by Phil Gramm, and was never debated, and never voted on by either body...

That should be illegal. But it's not... It happened. It is certainly unethical..and it brought this country to its knees.

That is why we say Phil Gramm and the Republicans are to blame for this financial crises... Because the crises ..was him.

Were it debated and passed? We could say all were to blame and I would be right there with you in saying it.. It was deliberately sneaked in.

BTW how is the Republican prosperity holding up for you and your family? I haven't caught any of your inspiring posts lately.....If things go bad as it looks they will, I think we will all be needing some of your stoic inspiration, that you do so well...

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