Contact your Senator and Representative and tell them you have had enough!
Chris Dodd and Barney Frank along with all the Democratic cronnies are responsible for the mess we are in. Jim Johnson is now a top economic advisor to Obama and “earned” $90 million during six years of misbehavior as CEO with Fannie Mae. The problems in the financial market have nothing to do with capitalism and “deregulation”, it has to do with the Democrats abuse of power during and after Clinton’s administration. Bush and McCain attempted to bring about reform, oversight and sound financial management but were defeated by the Democrats which you will learn by reading below.
Obama (and Jim Johnson) know this is true and he is blatantly lying to the American public. Obama’s integrity must be seriously question after hearing his flagrant misstatements about what actually happened.
How can Obama and Barney Frank lie and keep a straight face when they blame Bush and McCain about the financial crises? Bush and McCain warned about this years ago and tried to do something about it…the Democrats blatently ignored the warnings. This is a coverup by the Democrats.
We must ask, Who’s Fault is the Housing and Banking Crises? Ironically, the root cause is the housing market and the Democrats, and some Republicans, prevented the use of sound financial practices to manage risk of their promise to broaden housing ownership.
1977: During the Carter Presidency, the CRA (Community Reinvestment Act) was passed into law by the U.S. Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community1995: The Clinton Administration’s regulatory revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans.
2003: the Bush Administration recommended what the NY Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank(D-MA) claimed of the thrifts “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, the less we will see in terms of affordable housing.” Representative Mel Watt (D-NC) added “I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing.”
Summary:
1. September 11, 2003, Bush proposed legislation to create a new agency in the Treasury Department to oversee Freddie Mac and Fannie Mae (which Democrats defeated.) (see below) The Democrats denied the problem ”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.
2. McCain in 2005 introduced a bill in to rein in Fannie Mae which the Democrats also defeated. He said, “If Congress does not act, 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
Chris Dodd and Barney Frank along with all the Democratic cronnies are responsible for the mess we are in. Jim Johnson is now a top economic advisor to Obama and “earned” $90 million during six years of misbehavior as CEO with Fannie Mae. The problems in the financial market have nothing to do with capitalism and “deregulation”, it has to do with the Democrats abuse of power during and after Clinton’s administration. Bush and McCain attempted to bring about reform, oversight and sound financial management but were defeated by the Democrats which you will learn by reading below.
Obama (and Jim Johnson) know this is true and he is blatantly lying to the American public. Obama’s integrity must be seriously question after hearing his flagrant misstatements about what actually happened.
How can Obama and Barney Frank lie and keep a straight face when they blame Bush and McCain about the financial crises? Bush and McCain warned about this years ago and tried to do something about it…the Democrats blatently ignored the warnings. This is a coverup by the Democrats.
Legislation submitted by John McCain in 2005
FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 The United States Senate May 25, 2006. Sen. John McCain [R-AZ]: Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.
The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.
The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.
McCain said, “For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.
I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, 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.
I urge my colleagues to support swift action on this GSE reform legislation.
Democrats created the financial mess we are in today.
The top three U.S. Senators getting big Fannie and Freddie political bucks were democrats and number two is Senator Barack Obama. Now, remember, he has only been in the Senate four years but still managed to grab the number two spot ahead of John Kerry, decades in the senate, and Chris Dodd who is chairman of the senate banking committee. Fannie and Freddie have been creations of the congressional democrats and the Clinton White House, designed to make mortgages available to more people, and as it turned out, some people who couldn’t afford them. Fannie and Freddie have also been places for big Washington democrats to go to work in the semi-private sector and pocket millions. The Clinton administration’s white house budget director Franklin Raines ran Fannie and collected 50 million dollars. Jamie Gurilli, Clinton Justice Apartment Official, worked for Fannie and took home 26 million dollars. Big Democrat Jim Johnson, recently on Obama’s VP search committee has hauled in millions from his Fannie Mae C.E.O. job. Now remember, Obama’s ads and stump speeches attack McCain and republican policies for the current financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain, Senator Obama, was at the head of the line when the piggy’s lined up at the Fannie and Freddie trough for campaign bucks. Source
http://wizbangblog.com/content/2008/09/16/obama-one-of-leading-recipients-of-fanniefreddie-political-contributions.php John Gibson
The leadership of Freddie and Fannie have been pawns of the Democrats
Freddie Mac Chairman and CEO
1987-2003
Leland Brendsel
2003-2008
Richard F. Syron
Member of Demcratic National Committee
http://www.nndb.com/org/674/000171161/
Democratic Congressional Campaign Committee
Official Website: http://www.dccc.org/
Barbra Streisand Singer 24-Apr-1942 You Don’t Bring Me Flowers
Richard F. Syron Business 25-Oct-1943 CEO of Freddie Mac
Fannie Mae’s Chairmen and CEO
1991-1998
James A. Johnson. The $10 billion “Opening Doors to Affordable Housing” initiative was launched. “Opening Doors” expands campaign. The Trillion Dollar Commitment is launched, pledging $1 trillion in targeted housing finance that will serve 10 million low- to moderate-income families. James Johnson, got bonuses OFHEO criticized, was shortlisted as a possible Kerry treasury secretary.
1998-2004
Franklin Raines worked for Carter and was Clinton’s budget director. In April, 1998, Fannie Mae announced the national availability of Flexible 97, a new mortgage product designed to expand home ownership through a low three percent down-payment requirement. 2001 Fannie Mae changes its Mission Statement to: tear down barriers, lower costs, and increase the opportunities for home ownership. American Dream Commitment® (ADC) is launched. It is a ten-year, $2 trillion pledge to increase home ownership rates and serve 18 million American families Under heavy pressure from regulators forced out its chairman and chief executive, Franklin D. Raines after the company was found to have violated accounting rules. http://www.nytimes.com/2004/12/21/business/21wire-fannie.html?pagewanted=print&position=
2004-2008
Daniel H. Mudd, formerly vice chairman and chief operating officer, was named acting chief executive, after the regulators had insisted on splitting the chairman’s and chief executive’s posts….
George Bush’s Proposed Legislation to Attempt to Rein in the Democrats
September 11, 2003 New Agency Proposed to Oversee Freddie Mac and Fannie Mae (Congress defeated Bush’s proposal)
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.
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.”
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.
Chris Dodd and Barney Frank along with all the Democratic cronnies are responsible for the mess we are in. Jim Johnson is now a top economic advisor to Obama and “earned” $90 million during six years of misbehavior as CEO with Fannie Mae. The problems in the financial market have nothing to do with capitalism and “deregulation”, it has to do with the Democrats abuse of power during and after Clinton’s administration. Bush and McCain attempted to bring about reform, oversight and sound financial management but were defeated by the Democrats which you will learn by reading below.
Obama (and Jim Johnson) know this is true and he is blatantly lying to the American public. Obama’s integrity must be seriously question after hearing his flagrant misstatements about what actually happened.
How can Obama and Barney Frank lie and keep a straight face when they blame Bush and McCain about the financial crises? Bush and McCain warned about this years ago and tried to do something about it…the Democrats blatently ignored the warnings. This is a coverup by the Democrats.
We must ask, Who’s Fault is the Housing and Banking Crises? Ironically, the root cause is the housing market and the Democrats, and some Republicans, prevented the use of sound financial practices to manage risk of their promise to broaden housing ownership.
1977: During the Carter Presidency, the CRA (Community Reinvestment Act) was passed into law by the U.S. Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community1995: The Clinton Administration’s regulatory revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans.
2003: the Bush Administration recommended what the NY Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank(D-MA) claimed of the thrifts “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, the less we will see in terms of affordable housing.” Representative Mel Watt (D-NC) added “I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing.”
Summary:
1. September 11, 2003, Bush proposed legislation to create a new agency in the Treasury Department to oversee Freddie Mac and Fannie Mae (which Democrats defeated.) (see below) The Democrats denied the problem ”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.
2. McCain in 2005 introduced a bill in to rein in Fannie Mae which the Democrats also defeated. He said, “If Congress does not act, 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
Chris Dodd and Barney Frank along with all the Democratic cronnies are responsible for the mess we are in. Jim Johnson is now a top economic advisor to Obama and “earned” $90 million during six years of misbehavior as CEO with Fannie Mae. The problems in the financial market have nothing to do with capitalism and “deregulation”, it has to do with the Democrats abuse of power during and after Clinton’s administration. Bush and McCain attempted to bring about reform, oversight and sound financial management but were defeated by the Democrats which you will learn by reading below.
Obama (and Jim Johnson) know this is true and he is blatantly lying to the American public. Obama’s integrity must be seriously question after hearing his flagrant misstatements about what actually happened.
How can Obama and Barney Frank lie and keep a straight face when they blame Bush and McCain about the financial crises? Bush and McCain warned about this years ago and tried to do something about it…the Democrats blatently ignored the warnings. This is a coverup by the Democrats.
Legislation submitted by John McCain in 2005
FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 The United States Senate May 25, 2006. Sen. John McCain [R-AZ]: Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.
The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.
The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.
McCain said, “For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.
I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, 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.
I urge my colleagues to support swift action on this GSE reform legislation.
Democrats created the financial mess we are in today.
The top three U.S. Senators getting big Fannie and Freddie political bucks were democrats and number two is Senator Barack Obama. Now, remember, he has only been in the Senate four years but still managed to grab the number two spot ahead of John Kerry, decades in the senate, and Chris Dodd who is chairman of the senate banking committee. Fannie and Freddie have been creations of the congressional democrats and the Clinton White House, designed to make mortgages available to more people, and as it turned out, some people who couldn’t afford them. Fannie and Freddie have also been places for big Washington democrats to go to work in the semi-private sector and pocket millions. The Clinton administration’s white house budget director Franklin Raines ran Fannie and collected 50 million dollars. Jamie Gurilli, Clinton Justice Apartment Official, worked for Fannie and took home 26 million dollars. Big Democrat Jim Johnson, recently on Obama’s VP search committee has hauled in millions from his Fannie Mae C.E.O. job. Now remember, Obama’s ads and stump speeches attack McCain and republican policies for the current financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain, Senator Obama, was at the head of the line when the piggy’s lined up at the Fannie and Freddie trough for campaign bucks. Source
http://wizbangblog.com/content/2008/09/16/obama-one-of-leading-recipients-of-fanniefreddie-political-contributions.php John Gibson
The leadership of Freddie and Fannie have been pawns of the Democrats
Freddie Mac Chairman and CEO
1987-2003
Leland Brendsel
2003-2008
Richard F. Syron
Member of Demcratic National Committee
http://www.nndb.com/org/674/000171161/
Democratic Congressional Campaign Committee
Official Website: http://www.dccc.org/
Barbra Streisand Singer 24-Apr-1942 You Don’t Bring Me Flowers
Richard F. Syron Business 25-Oct-1943 CEO of Freddie Mac
Fannie Mae’s Chairmen and CEO
1991-1998
James A. Johnson. The $10 billion “Opening Doors to Affordable Housing” initiative was launched. “Opening Doors” expands campaign. The Trillion Dollar Commitment is launched, pledging $1 trillion in targeted housing finance that will serve 10 million low- to moderate-income families. James Johnson, got bonuses OFHEO criticized, was shortlisted as a possible Kerry treasury secretary.
1998-2004
Franklin Raines worked for Carter and was Clinton’s budget director. In April, 1998, Fannie Mae announced the national availability of Flexible 97, a new mortgage product designed to expand home ownership through a low three percent down-payment requirement. 2001 Fannie Mae changes its Mission Statement to: tear down barriers, lower costs, and increase the opportunities for home ownership. American Dream Commitment® (ADC) is launched. It is a ten-year, $2 trillion pledge to increase home ownership rates and serve 18 million American families Under heavy pressure from regulators forced out its chairman and chief executive, Franklin D. Raines after the company was found to have violated accounting rules. http://www.nytimes.com/2004/12/21/business/21wire-fannie.html?pagewanted=print&position=
2004-2008
Daniel H. Mudd, formerly vice chairman and chief operating officer, was named acting chief executive, after the regulators had insisted on splitting the chairman’s and chief executive’s posts….
George Bush’s Proposed Legislation to Attempt to Rein in the Democrats
September 11, 2003 New Agency Proposed to Oversee Freddie Mac and Fannie Mae (Congress defeated Bush’s proposal)
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.
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.”
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.
