Replies to post #67332 on Tornado Alley (PROG)

[F6]

and a couple more re Phil Gramm and his role in all this:

McCain guru linked to subprime crisis
3/28/08
http://www.politico.com/news/stories/0308/9246.html

Foreclosure Phil
July/August 2008 Issue
http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

Shattering the Glass-Steagall
Sept. 15, 2008
http://www.slate.com/id/2200148

[F6]

AP IMPACT: How Freddie Mac halted regulatory drive


In this July 13, 2008 file photo, the Freddie Mac's corporate offices are seen in McLean, Va.
(AP Photo/Pablo Martinez Monsivais, File)


In this Oct. 11, 2008 file photo, Hollis McLoughlin, an executive of Freddie Mac, watches a Washington Capitals hockey game from Freddie Mac's suite at the Verizon Center.
(AP Photo/Luis M. Alvarez, File)

By PETE YOST
December 7, 2008

WASHINGTON (AP) — When the Washington Nationals played their first-ever baseball game in the nation's capital in April 2005, two congressmen who oversaw mortgage giant Freddie Mac had choice seats — courtesy of the very company they were supposed to be keeping an eye on.

Efforts to tighten government regulation were gaining support on Capitol Hill, and Freddie Mac was fighting back. The baseball tickets for home opener were means of influence.

According to confidential company documents obtained by The Associated Press, Reps. Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa., spent the evening in hard-to-obtain seats near the Nationals dugout with Freddie Mac executive Hollis McLoughlin and four of Freddie Mac's in-house lobbyists.

Kanjorski declined comment through a spokeswoman. Ney ultimately served a federal prison term after pleading guilty to trading political favors for a golf trip to Scotland, other gifts and campaign donations in the Jack Abramoff lobbying scandal.

The Nationals tickets were bargains for Freddie Mac, part of a well-orchestrated, multimillion-dollar campaign to preserve its largely regulatory-free environment, with particular pressure exerted on Republicans who controlled Congress at the time.

Internal Freddie Mac budget records show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich were recruited with six-figure contracts. Freddie Mac paid the following amounts to the firms of former Republican lawmakers or ex-GOP staffers in 2006:

-- Sen. Alfonse D'Amato of New York, at Park Strategies, $240,000.

-- Rep. Vin Weber of Minnesota, at Clark & Weinstock, $360,297.

-- Rep. Susan Molinari of New York, at Washington Group, $300,062.

-- Susan Hirschmann at Williams & Jensen, former chief of staff to House Majority Leader Tom DeLay, R-Texas, $240,790.

Freddie Mac's chairman and chief executive, Dick Syron, and McLoughlin, senior vice president for external relations, used Clark and Weinstock extensively, Weber said in an e-mail Friday.

"I personally met with the CEO several times and with Hollis and his team regularly," Weber said in the e-mail. "Clark and Weinstock worked effectively and intensely for Freddie Mac under Dick Syron and Hollis McLoughlin."

The tactics worked — for a time. Freddie Mac was able to operate with a relatively free hand until the housing bubble ultimately burst in 2007.

Now Freddie Mac and its sister company, Fannie Mae, are in financial collapse and under government control. Congress is investigating how it all happened. Lawmakers have planned a hearing Tuesday.

The records obtained by the AP reflect growing concern within Freddie Mac over a chorus of criticism from Republicans worried that Freddie Mac and Fannie Mae had grown too big. The two companies owned or guaranteed over $5 trillion in mortgages.

The Bush administration and Federal Reserve Chairman Alan Greenspan were sounding the alarm about the potential threat to the nation's financial health if the fortunes of the two mammoth companies turned sour. They did eventually, when they took on $1 trillion worth of subprime mortgages and when their traditional guarantee business deteriorated. Commercial banks regarded Freddie Mac and Fannie Mae as competitors and were anxious to pick up business that would result from scaling back the two companies.

Pushing back, Freddie Mac enlisted prominent conservatives, including Gingrich and former Justice Department official Viet Dinh, paying each $300,000 in 2006, according to internal records.

Gingrich talked and wrote about what he saw as the benefits of the Freddie Mac business model.

Dinh wrote a legal analysis of private property rights that viewed a hypothetical government-enforced sale of Freddie Mac assets as constitutionally suspect.

In 2005, Freddie Mac hired political consultant Frank Luntz, a Washington fixture whose specialty is choosing the right buzz words to achieve a particular goal. The records AP obtained do not cover 2005 and Freddie Mac refuses to confirm that it brought Luntz on board. But four people familiar with events at Freddie Mac at the time confirmed the Luntz hire. All four spoke on condition of anonymity, saying they fear reprisals if their names were revealed. Luntz did not respond to efforts to contact him through his office.

The AP previously described, in October, how Freddie Mac thwarted efforts to bring a tough regulatory bill sponsored by Republican Sens. Chuck Hagel of Nebraska, John Sununu of New Hampshire, Elizabeth Dole of North Carolina and John McCain of Arizona to a full Senate vote.

At a meeting days after Hagel's bill went to the full Senate, Syron and McLoughlin berated the company's in-house lobbyists for failing to keep Hagel's bill corralled in committee, said the four people familiar with events at Freddie Mac at the time.

Freddie Mac shifted into high gear, secretly paying a Republican consulting firm, Washington-based DCI Group, $2 million to kill Hagel's legislation. The covert lobbying campaign targeted Republican senators in 2005-06.

According to the newly obtained records, DCI's deployment was part of a broader campaign that targeted mainly Republicans on Capitol Hill.

The internal Freddie Mac documents show that 17 of the lobbying firms and consultants paid in 2006 were specifically directed to focus on Republicans and four on Democrats, with varying targets for the rest.

McLoughlin hired his own personal political strategist, Republican consultant Harry Clark, paying Clark's firm $440,494 in 2006 out of McLoughlin's executive office budget, according to the records obtained by AP.

Even the office that served as the sole source of federal regulation over Freddie Mac was targeted.

Lobbyist Geoffrey P. Gray was paid $240,000 in 2006 to focus in part on the Office of Federal Housing Enterprise Oversight, according to the records.

Last week, Gray did not return calls to his office. On Friday, Freddie Mac declined to comment. A lawyer for Syron, one of the scheduled witnesses at Tuesday's congressional hearing on the collapse of Freddie Mac and Fannie Mae, did not return a phone call seeking comment.

Copyright © 2008 The Associated Press

http://www.google.com/hostednews/ap/article/ALeqM5hGXB8-7MNyCqUeGzwsRJt4eLcWgAD94U1CVO0

[F6]

Wall Street Journal Editorial Board Does It Again


Rep. Barney Frank
Posted December 11, 2008 | 04:09 PM (EST)

Recently, the editorial staff of the Wall Street Journal repeated unsupported and flat out wrong conservative talking points about me and the root causes of the subprime mortgage crisis. I sought to counter their accusations in a letter to the editor, but the Journal, true to their conservative ideology, is too busy stifling debate and democracy to care that not only are their statements incorrect, they run counter to the own editorials. Here is my response:

Letter to the editor

Rep. Barney Frank

Friday, December 05, 2008

Editor:

I am used to having my views severely distorted by the Wall Street Journal Editorial Board - in contrast to the accurate representation that its reporters present. But the opening of the editorial on December 3rd [ http://online.wsj.com/article/SB122826619188174465.html ] doesn't distort - it gets the truth absolutely backwards. In short, the Journal's assertion that I have "spent [my] career encouraging mortgage loans to people who can't repay them," is not only entirely inaccurate; it blames me for policies that the Journal has itself defended.

I have consistently argued that the push for homeownership that existed in the Clinton administration, but was significantly upgraded in the Bush administration, made the mistake of assuming that virtually all people could be homeowners. In contrast, I argued that the majority of low-income people should be aided by policies that promoted affordable rental housing.

For example, on February 18, 2002, at a hearing on the budget I said "I am in favor of trying to help lower-income people get the advantages of homeownership...but almost by definition, the large majority of poor people are going to need rental housing." On March 6, 2004, the National Journal reported that "When the FHA's plan to insure subprime loans was included in a Senate-passed appropriations bill, Frank...a staunch supporter of low-income housing, wrote a highly critical letter urging that the measure not be included ... Not only had the House committee not examined ...the proposal he said then, but the measure also offered no protection against lenders inappropriately steering people towards these high-cost loans. Nor did it offer safeguards to ensure that participants 'were fully suitable for homeownership.'"

That same year, when the Bush administration insisted that Fannie Mae and Freddie Mac raise the percentage of below-median income homeowner mortgages they bought, I was correctly quoted in a Bloomberg article on June 17th as saying that this would "do some harm," and the writer noted that "Frank's comments echo concerns...that the new goals will undermine profits and put new homeowners into dwellings they can't afford."

It was a consistent series of statements like that on my part, and efforts to act on them --although these were often unsuccessful when I was in the minority -- that led frequent Republican economic appointee and Wall Street Journal contributor Larry Lindsey to write in April of this year that "Barney Frank is the only politician I know who has argued that we needed tighter rules that intentionally produce fewer homeowners and more renters. Politicians usually believe that homeownership rates should - must - go ever higher."

In fact, I was one of the supporters in 1994 of the legislation that directed the Federal Reserve to restrict inappropriate mortgages at the subprime level, and I also lamented Alan Greenspan's refusal to implement this - a refusal which he in a forthright manner acknowledged recently was a grave error. When he refused to do this, I and others in Congress, mostly but not only Democrats, pushed for legislation to restrict subprime mortgages.

As Mark Zandi notes in his recent excellent study of the financial crisis, when "the Bush administration put substantial pressure on Fannie Mae and Freddie Mac to increase their funding of mortgage loans to lower-income groups," I and other Democrats stepped up our efforts to pass legislation that banned the inappropriate loans that have led to the current crisis. In Zandi's words, "Democrats in Congress worried about increasing evidence of predatory lending...and the Democrats wanted a federal (law) that would cover all lenders nationwide. The Bush administration and most Republicans in Congress were opposed, believing legislation would overly restrict lending and thus slow the march of homeownership...the last attempt to pass any predatory lending legislation occurred in 2005 but it was also stymied."

In other words, I was consistently arguing against efforts to extend homeownership to people who could not afford it, and instead sought to increase rental housing. Indeed, as the Journal knows, one of their criticisms of my attitude towards Fannie and Freddie has been my ultimately successful effort to create an affordable housing trust fund that takes money from Fannie and Freddie and puts it into rental housing.

In fact, Zandi's comment that the last effort to pass any predatory lending legislation was 2005 is correct as it applies to those years from 1995 until 2006 when the Republicans controlled Congress. However, when the Democrats achieved a majority in 2007, and I became Chairman of the Financial Services Committee, the first major piece of legislation the committee approved was a bill adopting the regulatory upgrade for Fannie and Freddie that had been strongly advocated by the Bush administration, but which it had been unable to get the Republican Congress to pass. Next, we moved on to anti-predatory lending legislation and succeeded later in 2007 in passing a bill that, had it been law earlier - when we were in the minority and unable to enact it - would have prevented most of the bad loans.

But, while the predatory lending bill passed by a large majority in the House, there were staunchly conservative advocates of unlimited homeownership who were critical. One prominent conservative voice lamented in November 2007 that I planned "to hold a committee vote on the Mortgage Reform and Anti-predatory Lending Act that would impose new rules and financial penalties on subprime lenders while providing new lawsuit opportunities for distressed borrowers." In objecting to this legislation, this commentator defended the record of subprime lending, although conceding that there had been some "lending excesses." Decrying the attacks on subprime lending, this statement said that "For all the demonizing, about eighty percent of even subprime loans are being repaid on time and another ten percent are only thirty days behind. Most of these new homeowners are low-income families, often minorities, who would otherwise not have qualified for a mortgage. In the name of consumer protection, Mr. Frank's legislation will ensure that far fewer of these loans are issued in the future."

Exactly. That was my intention then, and it was my intention years earlier when Republicans blocked it and carried out the spirit of these comments to allow fairly unregulated subprime lending. And of course the statement I have been quoting here is the Wall Street Journal [ http://www.opinionjournal.com/editorial/?id=110010826 ] Editorial of November 6, 2007.

Copyright © 2008 HuffingtonPost.com, Inc.

http://www.huffingtonpost.com/rep-barney-frank/wall-street-journal-edito_b_150350.html [with comments]

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in addition to (items linked in) the post to which this post is a reply (and preceding), see also in particular the other replies to the post to which this post is a reply and following

[nwsun]

F6 and I welcome others to respond.. but im not looking for partisan responses.. i want facts on how the dems were successful when they were in the minority or was this beneficial to the repubs and dems??..

- from the first link, "When some Senators tried to rein in the GSEs, their Demcoratic patrons blocked the way:

In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent."

So a democrat can hold something up in committee even as a minority? I kept hearing how Dems werent even allowed into some committee meetings... can't the committee chair, a repub in this case let something go to the floor for vote and override any and all objections? How were the dems successful here, but all we heard in the 2002 - 2006 was how the repubs were strong arming the dems... Im confused?

[F6]

Rep. Barney Frank (D-MA) Sets The Record Straight On Fannie Mae/Freddie Mac and Subprime Mortgages

June 30, 2010 debate Wall Street Reform and Consumer Protection Act -- HR 4173. Rep. Barney Frank (D-MA) sets the records straight on Fannie Mae/Freddie Mac and subprime mortgages. Frank calls out opponents for rewriting the history of reform efforts and gets in a couple of comedic jabs at Tom Delay.

http://www.youtube.com/watch?v=c5nBddKn4TQ
[also embedded at http://voices.washingtonpost.com/ezra-klein/2010/07/someone_should_have_told_barne.html ]

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much more (linked) in the post to which this is a reply (and preceding) and (the many) other following