Another Fine Mess

Randall Hoven
Among the messes President Clinton made for President Bush to clean up, we can now add Fannie Mae, Freddie Mac and the housing loan crisis.

The government announced Sunday that it would take over the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.

"The Bush administration's seizure of troubled mortgage giants Fannie Mae and Freddie Mac is potentially a $200 billion bet that it will help reverse a prolonged housing and credit crisis.  The historic move announced Sunday won support from both presidential campaigns, but private analysts worried that it may not be enough.

"The companies, which together own or guarantee about $5 trillion in home loans, about half the nation's total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover."

Two hundred billion dollars might not be enough.

How did President Clinton bring this on?  First, he appointed Andrew Cuomo as HUD Secretary in 1993.  He served until the end of Clinton's second term in 2001.  Not to put too fine a point on it, Andrew Cuomo "gave birth to the mortgage crisis."  That's not me talking.  That's not Rush Limbaugh or some other conservative talking.  That's what Wayne Barrett at the very liberal Village Voice wrote:

"Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis. He took actions that-in combination with many other factors-helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded "kickbacks" to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.

"Steven Holmes, a reporter from the [New York] Times's Washington bureau, wrote at the time: ‘In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But, he added, ‘the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s.'"

Congratulations to Steven Holmes for calling this one exactly right.

President Clinton also appointed Franklin Raines as CEO of Fannie Mae in 1999.  Raines retired in 2004 while the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight investigated him for "accounting errors", errors that had the effect of generating large bonuses for him and fellow senior executives.  In 2006, the OFHEO brought suit against him and other Fannie Mae executives.  These suits were settled in April 2008, with the executives paying multi-million dollar fines.

Also, Fannie Mae has been consistently supported in recent years by liberals like US Representative Barney Frank (D-MA) and New York Times columnist Paul Krugman, and consistently criticized by the moderate Wall Street Journal .

It's possible President Bush could have avoided some of this by his HUD secretary, Mel Martinez, undoing Andrew Cuomo's rules.  But can you imagine the grief he would have gotten for making houses harder to buy, especially for those on the lower rungs of the economic ladder, with the likes of Barney Frank and Paul Krugman on the opposing side?

This was the perfect liberal operation:  The righteous cause of home ownership for those on the lower rungs of the economic ladder.  Pockets padded for fellow cronies.  And the blame for the inevitable crisis going to Republicans.  Perfect.  Bill Clinton is a genius.

We can rest assured that this will go down politically as another disaster given to us by President Bush.  After a recession started formally just six weeks after being sworn in, the 911 attacks within eight months, Hurricane Katrina and now this, poor President Bush must recall the saying "better lucky than good" every day, with little amusement.

Randall Hoven can be contacted at randall.hoven@gmail.com or  via his web site, kulak.worldbreak.com/.
Among the messes President Clinton made for President Bush to clean up, we can now add Fannie Mae, Freddie Mac and the housing loan crisis.

The government announced Sunday that it would take over the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.

"The Bush administration's seizure of troubled mortgage giants Fannie Mae and Freddie Mac is potentially a $200 billion bet that it will help reverse a prolonged housing and credit crisis.  The historic move announced Sunday won support from both presidential campaigns, but private analysts worried that it may not be enough.

"The companies, which together own or guarantee about $5 trillion in home loans, about half the nation's total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover."

Two hundred billion dollars might not be enough.

How did President Clinton bring this on?  First, he appointed Andrew Cuomo as HUD Secretary in 1993.  He served until the end of Clinton's second term in 2001.  Not to put too fine a point on it, Andrew Cuomo "gave birth to the mortgage crisis."  That's not me talking.  That's not Rush Limbaugh or some other conservative talking.  That's what Wayne Barrett at the very liberal Village Voice wrote:

"Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis. He took actions that-in combination with many other factors-helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded "kickbacks" to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.

"Steven Holmes, a reporter from the [New York] Times's Washington bureau, wrote at the time: ‘In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But, he added, ‘the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s.'"

Congratulations to Steven Holmes for calling this one exactly right.

President Clinton also appointed Franklin Raines as CEO of Fannie Mae in 1999.  Raines retired in 2004 while the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight investigated him for "accounting errors", errors that had the effect of generating large bonuses for him and fellow senior executives.  In 2006, the OFHEO brought suit against him and other Fannie Mae executives.  These suits were settled in April 2008, with the executives paying multi-million dollar fines.

Also, Fannie Mae has been consistently supported in recent years by liberals like US Representative Barney Frank (D-MA) and New York Times columnist Paul Krugman, and consistently criticized by the moderate Wall Street Journal .

It's possible President Bush could have avoided some of this by his HUD secretary, Mel Martinez, undoing Andrew Cuomo's rules.  But can you imagine the grief he would have gotten for making houses harder to buy, especially for those on the lower rungs of the economic ladder, with the likes of Barney Frank and Paul Krugman on the opposing side?

This was the perfect liberal operation:  The righteous cause of home ownership for those on the lower rungs of the economic ladder.  Pockets padded for fellow cronies.  And the blame for the inevitable crisis going to Republicans.  Perfect.  Bill Clinton is a genius.

We can rest assured that this will go down politically as another disaster given to us by President Bush.  After a recession started formally just six weeks after being sworn in, the 911 attacks within eight months, Hurricane Katrina and now this, poor President Bush must recall the saying "better lucky than good" every day, with little amusement.

Randall Hoven can be contacted at randall.hoven@gmail.com or  via his web site, kulak.worldbreak.com/.