Fannie Mae and Freddie Mac were the main cause of the nation's current financial turmoil. With encouragement from Congressional Democrats, Fannie and Freddie were major purchasers of subprime securities, which allowed the GSEs to receive credit toward their federally-mandated affordable housing goals. Fannie and Freddie also guaranteed Alt-A loans, which did not require the verification of income or assets for potential borrowers. In return for Democrat support, the GSEs received protection from any meaningful reforms. The primary protectors of Fannie and Freddie, Rep. Barney Frank (D-MA) and Senator Chris Dodd (D-CT), are now offering irresponsible financial services reform plans that place the financial services system in the control of the federal government, while again ignoring any reform of Fannie and Freddie. Yet, the Obama administration has committed to providing the GSEs unlimited taxpayer funded bailouts as their losses continue to mount. In fact, after posting its tenth consecutive quarterly loss, Fannie, on February 25, requested an additional $15.3 billion of taxpayer funds. As AEI's Peter Wallison noted, "By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages and mortgage-backed securities...These are now defaulting at unprecedented rates...Since 2008, under government control, the two agencies have continued to buy dicey mortgages..." To date, the taxpayers have lost $126.9 billion bailing out the two firms and the Democrats continue to pretend not to notice.
Democrats Choose Bailouts, snub Taxpayers
At a GSE reform hearing in 2003, Rep. Barney Frank (D-MA) stated, ''These two entities-Fannie Mae and Freddie Mac-are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
At a GSE reform hearing in 2004, Rep. William Lacy Clay (D-MO) stated, "This hearing is about a political lynching of Franklin Raines."
At the same 2004 hearing, Rep. Gregory Meeks (D-NY) stated, "I am just pissed off...[N]ow the problem that we have and that we are faced with is maybe some individuals who wanted to do away with GSEs in the first place, you [the safety and soundness regulator] have given them an excuse to try to have this forum so that we can talk about it and maybe change the direction and the mission of what the GSEs had, which they have done a tremendous job..."
Rep. Maxine Waters (D-CA) stated, "Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Franklin Raines."
At a Senate Banking Committee hearing in 2004, Sen. Christopher Dodd (D-CT) stated, "[T]his [Fannie and Freddie] is one of the great success stories of all time...[O]bviously, the 70 percent of Americans who own their own homes today, in no small measure, due because of the work that's been done here."
At the same 2004 Senate hearing, Senator Chuck Schumer (D-NY), stated, "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."
In a 2008 press release, Rep. Artur Davis (D-AL) stated, "Frankly, I wish my Democratic colleagues would admit that when it comes to Fannie and Freddie, we were wrong."
For more information or questions please contact Daris Meeks at 6-0979.