Thread: Looking for Causes, or Scapegoats?

If you're empty enough to be seeking scapegoats, just plug into Obamabots.com and get your daily upgrade.

If you're seeking causes, try this:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae
By STEPHEN LABATON

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws.

The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session.

After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall.

''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies.

''These irregularities, which have been going on for several years, should have been detected earlier by the regulator,'' he added.

The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.

At the time, the companies and their allies beat back efforts for tougher oversight by the Treasury Department, the Federal Deposit Insurance Corporation or the Federal Reserve. Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. This year, however, the chances of passing legislation to tighten the oversight are better than in the past.

Reflecting the changing political climate, both Fannie Mae and its leading rivals applauded the administration's package. The support from Fannie Mae came after a round of discussions between it and the administration and assurances from the Treasury that it would not seek to change the company's mission.

After those assurances, Franklin D. Raines, Fannie Mae's chief executive, endorsed the shift of regulatory oversight to the Treasury Department, as well as other elements of the plan.

''We welcome the administration's approach outlined today,'' Mr. Raines said. The company opposes some smaller elements of the package, like one that eliminates the authority of the president to appoint 5 of the company's 18 board members.

Company executives said that the company preferred having the president select some directors. The company is also likely to lobby against the efforts that give regulators too much authority to approve its products.

Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ''responsible proposal.''

The stocks of Freddie Mac and Fannie Mae fell while the prices of their bonds generally rose. Shares of Freddie Mac fell $2.04, or 3.7 percent, to $53.40, while Fannie Mae was down $1.62, or 2.4 percent, to $66.74. The price of a Fannie Mae bond due in March 2013 rose to 97.337 from 96.525.Its yield fell to 4.726 percent from 4.835 percent on Tuesday.

Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.''

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

So, let's get this straight.

BUSH promoted a fix to Freddie and Fannie.

DEMOCRATS opposed the fix successfully.

The source is impeccable, if you're a flaming socialist. They consider the New York Times their bible.

Who was in charge of the Senate in 2003?

Democrats.

That's who to blame if you want to prosecute the guilty.

Christopher Cox is apparently being made the scapegoat.

But ah... lookie here....

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws.

Well, Jeez... no WONDER they didn't pass it!

That bolded piece right there, is a show-stopper.

No fuckin' WAY am I giving a government agency a blank check to go into business!

Come on, you're gonna have to do a LOT better than that....

(This reminds me of that idiotic proposition that was on the ballot here in California about 20 years ago - the one that had a LINE ITEM in it that no one noticed, giving the governor emergency powers to move money around as he sees fit, simply by "declaring" an emergency - and hence, for the last seven years, we've been siphoning off lottery money that's SUPPOSED to be paying for our childrens' education, to pay police and sheriffs' salaries).

Originally Posted by nonsqtr

Christopher Cox is apparently being made the scapegoat.

But ah... lookie here....



Well, Jeez... no WONDER they didn't pass it!

That bolded piece right there, is a show-stopper.

No fuckin' WAY am I giving a government agency a blank check to go into business!

Yeah, Democrats are just world famous for protecting the interests of business, any business.

I guess if you on another world that might be true.

Fact: The GOP requested more regulation of the banks, the Democrats said "no".

Ergo: Democrats can't claim, honestly, that the Republicans were against more regulation in an area that needed it, and the Democrats wanted it.

Then again, what significant banking regulation legislation did Obama introduce into the senate during he 143 day of campaigning?

None.

Originally Posted by Freedom for All

Yeah, Democrats are just world famous for protecting the interests of business, any business.

I guess if you on another world that might be true.

Fact: The GOP requested more regulation of the banks, the Democrats said "no".

Ergo: Democrats can't claim, honestly, that the Republicans were against more regulation in an area that needed it, and the Democrats wanted it.

Then again, what significant banking regulation legislation did Obama introduce into the senate during he 143 day of campaigning?

None.

Psh... like I said, you're gonna have to do better.

This is called "supporting a bill you KNOW will fail".

That way, you can point back to it later, and say, "see, I supported it".

Dude, that's the oldest trick in the book.

Biden just did it the other day, with his little bit about Hillary. This is "par for the course" in politics. Happens every day.

You look at Phil Gramm's record, and then tell me that's the man you want in charge of Treasury. Yikes!