From left, former CEOS Richard Syron of Freddie Mac, Daniel Mudd of Fannie Mae, Leland Brendsel of Freddie Mac and Franklin Raines of Fannie Mae, right on Capitol Hill. (AP Photo/Susan Walsh)
by Frank James
A lot of congressional anger, from both Republicans and Democrats, is being vented today at the former heads of the Fannie Mae and Freddie Mac for their role in the mortgage meltdown.
Not that the former chief executives, who are testifying before a House committee today, are accepting that they share much blame for the financial crisis.
The position of Franklin Raines, the former Fannie Mae head, and the other former CEOS, is essentially that the companies they once ran were more sinned against than sinning, that Fannie and Freddie, which provide much of the nation's mortgage financing, were hapless victims, slammed by the same bursting housing bubble like so many other companies and individuals.
Richard Syron, Freddie Mac's former head said:
What was the role of Fannie Mae and Freddie Mac in the credit crisis? ...
When the dramatic and widespread downturn in housing prices occurred, the pressures on Freddie Mac and Fannie Mae were enormous. The GSEs are a non-diversified business focused solely on residential housing in the United States. As the guarantor of almost half the home mortgages in the country, it is not surprising that these two firms would get hit hard by the biggest housing collapse in 75 years.
But most of the lawmakers on the House Oversight and Government Reform Committee were having none of it.
Rep. Elijah Cummings, a Maryland Democrat, said:
"I can tell you as I sit here, you know I'm just disturbed and that's putting it lightly. Because when I look at this fiasco I think both of these companies did have something to do with it. And I'm not going to sit here and act like you didn't."
The tone of the hearing was set by Rep. Henry Waxman, a California Democrat and the committee's chairman, who cited what appears to be a pretty damning fact on the surface, that Frediie fired its top credit-risk officer after he pointed out the riskiness of the subprime loans Fredie was purchasing.
In 2004, Freddie Mac's chief risk officer sent an e-mail to CEO Richard Syron urging Freddie Mac to stop purchasing loans with no income or asset requirements as soon as practicable. The risk officer warned that mortgage lenders were targeting borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed and that the, quote, "potential for the perception and the reality of predatory lending with this product is great." But Mr. Syron did not accept the chief risk officer's recommendation. Instead, the company fired him.
Rep. Virginia Foxx, a Republican from North Carolina, echoed a theme hit by many lawmakers, that the former heads of Fannie and Freddie were paid astounding sums of money for being the helpless victims of fate.
"What in the world were you getting paid millions of dollars to do? Simply ride the gravy train and always be there when things were good. For heavens sakes, did you not have any sense that anything could ever go wrong under your watch... You have exhibited no sense of accountability for your actions here, none. And that is disturbing to me and the American people."
Comments
Play "find the Democrat" on this article.
Give up?
Franklin Raines, identified in the article only as a "former Fannie Mae head", was and is a key advisor of Barack the Messiah.
When a Dem like Raines is in deep do-do, Dems can count on their media friends to cover this fact up.
Posted by: Bruce | December 9, 2008 2:38 PM
When all the bodies are carted away and all the gore mopped up, then we can take a step back and look & see whether a "quaisi public" corporation with a political talent like Frank Raines screwed up worse than an investment bank like Lehman Bros. with Dick Fuld running it, a guy who started in the mail room (or so he says).
Surprise: I don't think Fannie screwed up more the Lehman.
Actually, quite a bit less in the screw up department.
Posted by: ornery | December 9, 2008 5:50 PM
Did these guys show up on Capitol Hill wearing their T-shirts that read, No Job, No Credit, No Problem?
Posted by: Vivian | December 9, 2008 6:01 PM
Hello, these people served at the pleasure of Barney Frank, Chris Dodd and Nancy Pelosi and lets not forget Waters from California. If any of these people had any self respect they would resign immediately.
Posted by: Paul | December 9, 2008 6:02 PM
Franklin Raines is also a Harvard grad, Harvard Law grad, Oxford Rhodes Scholar and once worked for the Nixon Administration.
When a Dem like Raines is in deep do-do, republicants can count on robot Bruce to tell them what robot Bruce wants them to hear.
Posted by: Bubba | December 9, 2008 10:30 PM
Let's look at the source of the problem - the sub-prime loans. How did that come about:
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On May 6, 1999, the Senate passed the Gramm-Leach-Bliley Act by a 54-44 vote along party lines (53 Republicans and one Democrat in favor; 44 Democrats opposed).On July 20, the House passed a different version of the bill on an uncontested and uncounted voice vote. When the two chambers could not agree on a joint version of the bill, the House voted on July 30 by a vote of 241-132 (R 58-131; D 182-1) to instruct its negotiators to work for a law that ensured that consumers enjoyed medical and financial privacy and also "robust competition and equal and non-discriminatory access to financial services and economic opportunities in their communities" (i.e. protection against exclusionary redlining). Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the anti-redlining Community Reinvestment Act and address certain privacy concerns. On November 4, the final bill resolving the differences was passed by the Senate 90-8 and by the House 362-57. This legislation was signed into law by Democratic President Bill Clinton on November 12, 1999.
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Notice that the dems jumped on board as soon as "economic opportunities" were made avialable in their communities. In English, that meand making loans to those who can't pay them back.
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That folks is the root casue of this whole mess - banks having to expand "economic opportunities" to those who can't afford the loans.
Posted by: Terry | December 9, 2008 10:36 PM
Bruce, it isn't amazing that Frank James failed to note Franklin Raines being on Obama's team. Frank James is incapable of honest reporting. Of course, now that I've said that, the censors won't post this. They don't like truthful statements about the Tribune. Not only is the Tribune bankrupt financially, it's bankrupt morally.
Posted by: John D | December 10, 2008 12:01 AM
At this moment CSpan is replaying the testimony.
Anyone who actually takes the trouble to watch the testimony knows that the events in issue happened when
HASTERT was running the House and BUSH the Executive Branch.
Stop trying to rewrite history.
Frank Dodd Pelosi were in the MINORITY.
Bush is still in office, though, Paul, Viv, Bruce, don't you wish he weren't!
Then you could blame it all on Obama.
Posted by: ornery | December 10, 2008 1:18 AM
No Job
Posted by: GodIsAGirl | December 10, 2008 3:48 AM
Ornery, the Bush White House on several occasions tried to get reform and oversight of Fannie Mae and Freddie Mac because things were out of control there. Congress stopped those attempts. Some Republicans voted to prevent reform, but Democrats voted en masse to prevent reform of those two agencies. Since Democrats took control of Congress, Fannie Mae and Freddie Mac became even more reckless, especially as Barney Frank and Chris Dodd ran interference for them and prevented any kind of oversight or reform. In July of this year, one month BEFORE Fannie Mae and Freddie Mac went belly up, Barney Frank proclaimed those entities to be "fiscally sound."
Those ARE the facts, Ornery, not revisionism, but the facts -- whether you like them or not.
Posted by: John D | December 10, 2008 9:26 AM
Ornery,
.
To make John D's point, here is an article from that lib favorite:
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http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63
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Brothel Barney Frank wanted to roll the dice a little more on subsidized housing.
Posted by: Terry | December 10, 2008 8:01 PM