Now I've watched that video, Roger. It is clear that we watched very poor judgement on the parts of many Democrats.
An interesting thing that emerges from the video is that most of the Senators that oppose stricter regulation of Fannie Mae most strenuously are black. It seems to me that to these black Senators, defending Fannie Mae was probably a symbolic and an emotional issue, not necessarily a logical and rational one. Fannie Mae, if I have understood things correctly, had become symbolic of the Community Reinvestment Act, which required banks to give loans to minorities, such as black people, and help them buy their own homes. A call for stricter regulation of Fannie Mae might have seemed like an attempt to force this huge mortgage institution to become less generous to minorities. The black Democratic Senators who opposed the attempts to regulate Fannie may have done so because they though that this was the best way to ensure that black people would be able to get mortgages in the future, too. In a society like the United States, where some people are fabulously rich and some people have a hard time getting by, sometimes because of their skin color, some people are going to fight extra hard to oppose anything that smacks the least bit of racism. That was probably what killed the bill that would have regulated Fannie Mae.
Well, the Democratic Senators were clearly wrong here, and the Republicans were right. However, Alcyone quoted Congressman Michael Oxley (R) who said:
I applaud the Journal's point about the current administration potentially exercising authority to limit Fannie and Freddie's debt issuance. I concur that the administration possesses the full authority necessary to move forward. There is no need for congressional approval.
So according to Oxley, George W. Bush himself could have made sure that Fannie and Freddie were regulated. Ultimately it wasn't necessary to 'sell' the bill of regulation to recalcitrant Democratic Senators. If the Republican Administration didn't move forward here and didn't try to get Fannie and Freddie regulated even if they had the means to so so, shouldn't some of the blame fall on them?
Another point I've tried to make here is that this crisis is certainly not all about Fannie and Freddie. Alcyone gave us a link to a highly interesting
Newsweek opinion-piece . Let me quote a few things from that article:
The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA.
Not all subprime loans were made by Fannie and Freddie. A significant number of them were issued by unregulated banks, which had nothing to do with the CRA or the Federal Reserve.
These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn't apply.
But many of these institutions were indeed highly associated with banks like Bear Stearns and Lehman Brothers. And Bear Stearns and Lehman Brothers were not regulated by the CRA.
CRA didn't force mortgage companies to offer loans for no-money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on subprime debt.
The Newsweek opinion-piece claims that the bad and reckless behaviour of many mortgage companies was nothing that the CRA had forced upon them. Rather, the mortgage institutions chose to behave like that because they could make more money that way. (And as far as I can understand, the mortgage companies that the article talks about here are not only Fannie and Freddie, but certainly also institutions like Argent and American Home Mortgage.)
Second, many of the biggest flameouts in real estate have had nothing to do with subprime lending. WCI Communities, builder of highly amenitized condos in Florida (no subprime purchasers welcome there), filed for bankruptcy in August.
The Newsweek article says that many of the biggest crashes in real estate have come from other sources than subprime loans and Fannie and Freddie.
The Newsweek article also says that Bear Stearns ran with a leverage ratio of 33:1.
How about the hundreds of billions of dollars of leveraged loans—loans banks committed to private equity firms that wanted to conduct leveraged buyouts of retailers, restaurant companies, and industrial firms? Many of those are going bad now, too. Is that Bill Clinton's fault?
Again, the article says that so many actors did their part to make the crisis happen, actors that weren't Fannie, Freddie, the CRA or Bill Clinton.
According to the Newsweek article, a Republican Congressman tried to make Richard Fuld of Lehman Brothers say that Lehman's demise was caused by the bank's dealing with Fannie Mae. But Richard Fuld answered that Lehman had had very little to do with Fannie Mae.
You try to put all the blame on the Democrats, Roger. You say that it is all about Fannie and Freddie. Yes, Fannie and Freddie certainly played a part. And the Republicans tried to regulate them, but the Democrats said no. That was a very serious mistake. But the Republicans could have tried harder, and the Administration could have forced the issue. And in any case, there were so many other actors involved, actors who had little or nothing to do with Fannie and Freddie or with the CRA or the Democrats.
And that is why I said that there is plenty of blame to go around. And I stick by that assessment.
You, on the other hand, appear to have made up your mind that the Democrats caused this crisis all on their own.
Ann
