Fannie Mae-No Politics (FNMA)

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Rip it apart but don't shoot the messenger (me).
David Brat Gets It Right About Subprime Crisis


Economics: The Beltway hates it when Tea Party pols speak the truth. So when David Brat blamed the recession on Washington, it of course set up an intellectual firing squad to stop him. But it's shooting the same old blanks.

In upsetting House Majority Leader Eric Cantor in Virginia's GOP primary, Brat never wavered from his position that government caused the financial crisis and has stunted the recovery with more of the same bad policies. And he's not backing away from it, despite media bashing.

Here's how the economics professor turned politician explained it in a post-victory interview:

"The American people want to take the country back, and what motivated the race for me was after the financial circumstance, we had Fannie (Mae) and Freddie (Mac) collapse. I thought surely our political leaders, we're on our knees economically, we'll learn some lessons and get it right, and they didn't. We're still roughly in the same mess."

Brat added, "I don't think a lot of folks in D.C. understand what free markets are, so that's the most important piece. Fannie and Freddie made two-thirds of all subprime mortgages. That is not a free-market institution. That entity ... caused the housing collapse. So we need to take free markets seriously."

Bravo. Finally, someone with eyes wide open may be joining a legislative body that for too long has had its eyes closed shut over one of the most important issues of our time.

With little resistance from Republicans, Democrats and their media toadies have been able to hijack the crisis narrative and demonize private banks. The Wall Street bashing helped the Obama administration justify financial "reform" and centralize credit in the hands of the state.

Market defenders such as Brat are a serious threat to the left's final goal of turning banks into public utilities, so it unleashed its pundits, including David Corn, who hurled brickbats about Brat repeating "the conservative canard that Freddie Mac and Fannie Mae brought down the housing market."

Only the historical evidence is clear that the toxic twins — and their affordable-housing mission regulator, HUD — polluted the mortgage and securities industry with high-risk paper.

Here are the incontrovertible facts the left continues to overlook:

• By 2008, government-sponsored Fannie and Freddie held $1.84 trillion in subprime and other nonprime mortgages and securities.

• Of the 27 million bad loans outstanding, Fannie and Freddie held almost 12 million, while the Federal Housing Administration and other federal agencies held more than 5 million, with another 2.2 million originated by lenders under federal anti-redlining mandates.
Washington housing policies and regulations were responsible for more than 72% of the risky lending, while private institutions on their own accounted for 28%.

While Brat would be more technically accurate arguing that more than two-thirds of the toxic loans were generated by not just Fannie and Freddie but also FHA, HUD and the Community Reinvestment Act, he is correct to lay the subprime mess chiefly at the feet of Fannie and Freddie.

The mortgage giants, under pressure from HUD and its escalating affordable-housing quotas, loosened the underwriting standards and down-payment requirements followed by the entire mortgage industry. Their government-created hunger for subprime purchases spurred a frenzy of subprime originations in the private market. They also drove the private market for subprime securities on Wall Street.

Sorting out blame isn't an academic debate. Because the evidence was never publicly litigated, the crisis was misdiagnosed — and the economy is taking the wrong prescriptions for preventing another.

Brat understands that more government is not the answer. It's just more poison.

http://news.investors.com/ibd-editorials/061614-704894-left-miffed-as-david-brat-fingers-correct-subprime-culprits.htm