IN 2005, THE SENATE IGNORED ITS CHANCE TO HEAD OFF THE FREDDIE AND FANNIE MORTGAGE CRISIS

Posted on by

The Senate missed their chance three years ago to head off the sub-prime mortgage crisis at Freddie Mac and Fannie Mae. Had the Senate done their job, we would be in better shape now. Shame on the U.S. Senators who did nothing.

While we anticipate the skyrocketing price we will all pay (via Uncle Sam) to get out of this crisis, and simultaneously watch the plummeting value of our investments, let’s point a collective finger at many of the people in the U.S. Senate that could have passed legislation to head off the Freddie and Fannie mess three years ago.

In 2005, Senator Chuck Hagel (R-Neb) sponsored legislation that would that would have regulated Freddie Mac and Fannie Mae. Good for Chuck Hagel. The “Senate Banking, Housing and Urban Affairs Committee sent Hagel’s bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.” (AP)  Good for the Republicans on the committee and shame on the Democrats.

But “there was not enough GOP support for Hagel’s bill to warrant bringing it up for a vote. The measure died at the end of the 109th Congress, in January 2007.”  (AP) Shame on the Republican leadership in the Senate for not bringing the measure up for a vote.

Hagel and 25 other Republican Senators (including John McCain) signed a letter urging Senate Majority Leader Bill Frist (R-Tenn) to bring the matter up for a vote. The letter said:

“If effective regulatory reform legislation … is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”  (AP)

The letter was right, but the 25 senators were unsuccessful in getting Bill Frist to bring the matter up for a vote. Shame on Bill Frist.

Behind the scenes, Freddie Mac had secretly paid DCI (a Republican consulting firm) to target 17 key Republican senators in an effort to kill the legislation.  You can read the whole sordid story in the AP article here (or after the next page break). Shame on the leaders at Freddie Mac.

There is blame enough to go around.  It is disappointing to me that all the Republican members of the Senate Banking, Housing and Urban Affairs Committee voted for Hagel’s legislation and all of the Democratic members voted against it. A vote with a pure 100% split along party lines tells me that the committee members votes had everything to do with partisan politics and little to do with the value of the legislation. If they were voting for what was best for the country, you would expect that at least a few Republicans would have voted against the measure and a few Democrats would have voted for it. Shame on partisan politics that ignores the needs of the country.

The committee vote is more evidence of a problem we have in Congress in recent years, both parties are too busy trying to prove the other side wrong and not busy enough doing what’s best for the country. My heroes in both the Senate and the House are the people who break with party lines to do what they believe is best for the country.

And so far as the Republican leaders in the Senate who prevented the measure from coming up for a vote, apparently we have the best senators that money can buy. Shame on them.

Where were the Democrats in all of this mess? Why didn’t they sign a letter urging that the matter come up for a vote. Oh right, the legislation was sponsored by a Republican.

Despite the heavy lobbying efforts aimed at 17 Republican senators, 8 of those senators were among the 25 that signed the letter urging the Senate leadership to bring Chuck Hagel’s legislation up for a vote. Good for them. One of them who singed the letter was George Voinovich of Ohio. Good for George Voinovich. And good for Chuck Hagel who sponsored the legislation in the first place. It is nice to know we have some senators that are on the ball, and obviously, way ahead of the game.  Chuck Hagel gets a gold star.

The AP article (AP):

Freddie Mac secretly paid a GOP consultant to kill regulatory legislation
Firm got enough GOP votes in ’05 to kill Senate bill

Monday,  October 20, 2008 2:55 AM

By Pete Yost
ASSOCIATED PRESS

WASHINGTON — Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse.In the cross-hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory-overhaul bill sponsored by Sen. Chuck Hagel, R-Neb. DCI’s chief executive is Doug Goodyear, whom John McCain’s campaign hired to manage the GOP convention in September.Freddie Mac’s payments to DCI began shortly after the Senate Banking, Housing and Urban Affairs Committee sent Hagel’s bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.In the midst of DCI’s yearlong effort, Hagel and 25 other Republican senators pleaded unsuccessfully with then-Senate Majority Leader Bill Frist, R-Tenn., to allow a vote.”If effective regulatory reform legislation … is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole,” the senators wrote in a letter that proved prescient.Unknown to the senators, DCI was undermining support for the bill in a campaign targeting 17 Republican senators in 13 states, according to documents obtained by the Associated Press.In the end, there was not enough GOP support for Hagel’s bill to warrant bringing it up for a vote. The measure died at the end of the 109th Congress, in January 2007.McCain, R-Ariz., was not a target of the DCI campaign. He signed Hagel’s letter and three weeks later signed on as a co-sponsor of the bill.By then, though, DCI’s effort had gone on for nine months.In recent days, McCain has said Freddie Mac and Fannie Mae were “really the match that lit this fire” of the global credit crisis. McCain has accused Democratic presidential nominee Barack Obama of taking advice from former executives of Fannie Mae and Freddie Mac and failing to see that the companies were heading for a meltdown.McCain’s campaign manager, Rick Davis, or his lobbying firm has taken more than $2 million from Fannie Mae and Freddie Mac dating to 2000. In December, Freddie Mac contributed $250,000 to last month’s GOP convention.Obama has received $120,349 in political donations from employees of Freddie Mac and Fannie Mae, compared with McCain’s $21,550.The Republican senators targeted by DCI began hearing from prominent constituents and financial contributors, all urging the defeat of Hagel’s bill because it might harm the housing boom.Inside Freddie Mac in 2005, the few dozen people who knew what DCI was doing referred to the initiative as “the stealth lobbying campaign,” according to three people familiar with it. They spoke on condition of anonymity out of fear of retaliation.

Freddie Mac executive Hollis McLoughlin oversaw DCI’s drive, the three people said.

“Hollis’ goal was not to have any Freddie Mac fingerprints on this project, and DCI became the hidden hand behind the effort,” one of the three people said.

Before 2004, Fannie Mae and Freddie Mac were Democratic strongholds. After 2004, Republicans ran their political operations. McLoughlin, who joined Freddie Mac in 2004 as chief of staff, has given $32,250 to Republican candidates over the years, including $2,800 to McCain, and has given none to Democrats, according to the Center for Responsive Politics, a nonpartisan group that tracks money in politics.

On Friday night, Hagel’s chief of staff, Mike Buttry, said Hagel’s bill “was the last best chance to bring greater oversight and tighter regulation to Freddie and Fannie.”

“It is outrageous that a congressionally chartered, government-sponsored enterprise would lobby against a member of Congress’ bill that would strengthen the regulation and oversight of that institution,” Buttry said in a statement. “America has paid an extremely high price for the reckless, and possibly criminal, actions of the leadership at Freddie and Fannie.”

Nine of the 17 targeted Republican senators did not sign Hagel’s letter: Mike DeWine of Ohio, Mitch McConnell of Kentucky, Kit Bond and Jim Talent of Missouri, Conrad Burns of Montana, Lamar Alexander of Tennessee, Olympia J. Snowe of Maine, Lincoln Chafee of Rhode Island and George Allen of Virginia. Aside from the nine, 20 other Republican senators did not sign Hagel’s letter.

McConnell’s office said members of leadership do not sign letters to the leader. McConnell was majority whip at the time.

The eight targeted senators who did sign it included George V. Voinovich of Ohio.

On Thursday, Freddie Mac acknowledged that the company “did retain DCI to provide public affairs support at the state and local level.” On Friday, DCI said in a statement that it complied with all applicable federal and state laws and regulations in representing Freddie Mac. Neither Freddie Mac nor DCI would say how much Goodyear’s consulting firm was paid.

Comments are closed.