How Congress Looked The Other Way

I am asking you to please tell your friends to read this post because it will be their money Congress will use to pay for their own mismanagement.  It is an outstanding piece on how we got into this financial crisis. Money, greed, and power drove the engine … and behind the wheel … Congress. This article takes it back to 1992 when a Democratic Congress blocked a Republican effort to reign in Fannie and Freddie.

From this morning’s Washington Post, it’s a story of political expediency, cronyism and out and out threats! As Fannie began to implode, Democrats doubled down, Greenspan played along and the Republicans, not wanting to look like the grinch that kept people out of homes, buckled under pressure 

Gary Gensler, an undersecretary of the Treasury, went to Capitol Hill in March 2000 to testify in favor of a bill everyone knew would fail.

Fannie Mae and Freddie Mac were ascendant, giants of the mortgage finance business and key players in the Clinton administration’s drive to expand homeownership. But Gensler and other Treasury officials feared the companies had grown so large that, if they stumbled, the damage to the U.S. economy could be staggering. Few officials had ever publicly criticized Fannie Mae and Freddie Mac, but Gensler concluded it was time to urge Congress to rein them in.

Here’s my favorite part … and a good indication of how Fannie spanked any Republican who dared blow the whistle.

And when they couldn’t massage, they intimidated. In 2003, Richard H. Baker (R-La.), chairman of the House Financial Services subcommittee with oversight over Fannie Mae and Freddie Mac, got information from OFHEO on the salaries paid to executives at both companies. Fannie Mae threatened to sue Baker if he released it, he recalled. Fearing the expense of a court battle, he kept the data secret for a year.

Baker, who left office in February, said he had never received a comparable threat from another company in 21 years in Congress. “The political arrogance exhibited in their heyday, there has never been before or since a private entity that exerted that kind of political power,” he said.

I’ll have more later.