The direct involvement was primarily through the Federal National Mortgage Company (Fannie Mae), a program started during the New Deal, but operated in a fiscally reckless way more in recent years.
The indirect involvement was by federal bank examiners putting pressure on banks, through the Community Reinvestment Act, to make loans to people who could not afford them in areas in which they really did not want to lend.
There was also pressure from lawmakers. Rep. Barney Frank (D-MA) said at a hearing in 2003: “These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies and the less we will see in terms of affordable housing.”
On October 26, 2005, I voted for an amendment to allow stronger regulatory action against Fannie Mae and Freddie Mac. Unfortunately, only 73 House members voted to rein them in.
James Lockhart, Director of the Federal Housing Finance Agency, said at a hearing the bailout could have been avoided if his agency had been given stronger authority over actions by Fannie and Freddie.
Professor Charles Calomiris of Columbia, and Peter Wallison, former General Counsel of the Treasury Department, wrote in the Wall Street Journal: “If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime…portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk-taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.”
More on Housing
WASHINGTON – Congressman John J. Duncan, Jr. (R-Tenn.) this week joined with Congressman Mike Pence (R-Ind.), Congresswoman Cathy McMorris Rodgers (R-Wash.) and other Republican colleagues to call on Treasury Secretary Timothy Geithner to block any American taxpayer-funded bailouts of Greece.
In the letter to Geithner, Rep. Duncan and his like-minded colleagues urge Secretary Geithner and the Administration to put Americans first.
Washington, DC -- Congressman John J. Duncan, Jr. (R-Tenn) today sent a letter to the Director of the Federal Housing Finance Agency James B. Lockhart asking that the recently fired CEO’s of Fannie Mae and Freddie Mac receive zero severance pay for overseeing the collapse of the companies.
The Federal Housing Finance Agency seized control of the two companies over the weekend after they teetered toward collapse. Reports say fired Fannie Mae and Freddie Mac CEOs Daniel H. Mudd and Richard F. Syron could receive severance packages upwards of $15 million.
Washington, DC -- Mr. Speaker, I rise in opposition to the rule that brings this bill to the floor and to this $15 billion bailout bill, and I thank the gentleman from Washington for yielding me this time.
Mr. Speaker, I think up here we lose sight of how much $15 billion really is. Fifteen billion dollars would operate the entire State government of Tennessee for almost 1 year, our education, our medical care, our prisons, our roads, our parks. And Tennessee is almost dead on average, statistics-wise, in regard to all the States.