According to House Speaker Nancy Pelosi, the financial crisis is
all due to the Bush Administration’s “right wing ideology of
anything goes, no supervision, no oversight, no regulation.”
But at a hearing in the House in 2004, now available in video on
YouTube, the Republicans sought to expand supervision
and regulation, over Fannie Mae and Freddie Mac. Federal regulators
testified that the reckless financial practices of these two
government-sponsored enterprises threatened the entire financial
system. Republican after Republican called for a new regulatory
authority to supervise Fannie and Freddie and impose standard bank
regulation on them.
Franklin Raines, the former Clinton budget director who went on
to serve as chairman and CEO of Fannie Mae, testified that the
mortgage-related securities of these two organizations, which have
now rocked the entire financial world, were “riskless.” During his
tenure, Raines criminally led Fannie Mae to falsify its books so
that he would qualify for excessive bonuses and compensation
eventually totaling $90 million.
But the Democrats excoriated the Republicans for criticizing the
wonderful practices of Fannie and Freddie that had been so
successful in achieving their goals of affordable housing. The
Republican concerns for safety and soundness were dismissed as
trumped up efforts to frame the brilliant leadership of Mr. Raines,
and said to show once again that Republicans don’t care about the
middle class and the poor. Barney Frank, now chairman of the House
Financial Services Committee, foolishly laughed off concerns over
safety and soundness without offering any evidence to rebut these
concerns. Instead, he shamefully led the Democrats in attacking
the regulators, who had provided the evidence that Fannie and
Freddie were increasingly threatening the safety and soundness of
the entire financial system.
The following year John McCain was one of three co-sponsors of
legislation to impose such regulatory supervision and controls over
Fannie and Freddie. The Bush Administration supported this as well,
in one of its four attempts to win legislative approval for such
expanded regulatory authority. But the Democrats shouted these
proposals down as an assault on affordable housing for the middle
class and the poor.
So it was the Republicans who tried time and again to expand
proper regulatory controls to prevent this crisis. And it was the
Democrats who stopped them because such regulation threatened their
policy of turning Fannie and Freddie into welfare programs. It is
Chairman Barney Frank, not SEC Chairman Chris Cox, who should
resign for his shameful and stupid role in creating this crisis.
And if Franklin Raines is not prosecuted and sent to prison for his
naked thievery, then we must let all of the Enron convicts out of
jail and issue them a national apology.
Apart from this, there is no other instance in which
deregulation or lack of regulation played any significant role in
the current crisis. Just what “no regulation” was Nancy Pelosi
talking about? Does she want the government to stare over the
shoulders of all lenders and tell them what loans they can make and
what loans they can’t? Going all the way back to the Community
Reinvestment Act of 1977, it is the government led by the Democrats
and their “affordable housing” policies that have imposed
increasingly onerous regulations on lenders, forcing them to make
shaky loans to increasingly dubious borrowers on increasingly lax
terms, and it is the failure of precisely these loans that is at
the root of the current crisis. These are the people that are now
going to save us with wise, judicious supervision and
regulation?
On exactly what issue is Nancy Pelosi any more knowledgeable
than Sarah Palin? Pelosi can’t nearly match Palin’s expertise on
energy policy, nor Palin’s record in cutting taxes and spending. In
over 20 years in Congress, the ultra-left San Francisco Democrat
has distinguished herself only in the mindless repetition of brain
dead political propaganda, such as we saw at the beginning of this
commentary.
The Democrats have assailed former Senator Phil Gramm for
leading the repeal of the Glass-Steagall Act in 1999. But repeal of
that outdated regulatory relic from the 1930s, which sought to
separate commercial banking from investment banking, has played no
role in this financial crisis. Even Clinton’s Treasury Secretary
Robert Rubin has said as much. Indeed, exactly to the contrary,
repeal of Glass-Steagall has been a major factor helping to
counter the crisis. It is precisely that repeal that allowed
Bank of America to buy out Merrill Lynch, JP Morgan to buy out Bear
Stearns, and Barclays Bank to work on buying up the remains of
Lehman Brothers. This silly charge is just old, Soviet style
propaganda, completely divorced from reality, calculated to mislead
the gullible.
