You don’t have to be a mod to be irritated by things which side-track. Hold up a minute and re-read this:
I read that as a specific question about Fannie/Freddie problems in 2004. It seems more about “what are the mechanics of this” than it is about “fixing blame”.
At this point, I don’t care about blame. I am curious about what happened, what was tried which wasn’t accomplished (and why), and what was not tried (and why). Does that make sense?
General Questions. You’ll get a factual answer. This is Great Debates. Make sense?
Only if “Great Debates” means “Random Partisan Willy-Waving”.
I think you want the Pit, son.
Son??
The reason being that the vote in committee went on strictly partisan lines - 11 Republicans for, 9 Democrats against. This sent a signal that the Democrats would fight hard against this bill, perhaps staging a filibuster. This was the Congress that had to deal with Katrina, among other things. Rick Santorum was the guy who was responsible for putting it to a floor vote, and he made the decision that A) the Demcrats were likely to filibuster, and B) other things were more urgent given the fact that the bill was unlikely to pass and threatened to seriously disrupt the Congress should the Republicans move to put it to a vote.
You could plausibly argue that the Republicans didn’t do everything possible in their power to attempt to pass this. But in fact, the only reason they might have had to go to extraordinary lengths was because the Democrats were staunchly opposed to it.
It seems a little bizarre to blame Republicans for the problem because they didn’t fight hard enough to overcome the party-line stand against it by the Democrats.
Doesn’t that strike you as reaching a bit?
The Republicans had the control. They decided not to do it. Your thread is wrong, your unfounded partisan attack has failed and all is right with the world. 
I am a Mod.
I’m not happy to watch what might be consiudered junior modding, here, but you are pretty clearly posting a hijack. While Sam Stone’s response (for example) might be perceived as expressing a bit of schadenfreude, it did specifically address the exact situation of the OP.
Replying (in general) with claims that we should ignore the actual situation because “those other guys” are evil–regardless of actual events–does nothing to further this discussion.
Here is what you said: “and in the Senate, the House Banking Committee couldn’t get it through. It was controlled by Republicans, but they still needed 60% of the vote to get it out of the committee, and it failed with the vote along straight party lines…”
Here is what the article said: “The bill made it out of committee in the Senate but was never brought up for consideration.”
Now, you appear to be saying that it DID, in fact, make it out of committee in the Senate, whereas before you said it didn’t because of the Dems. Were you “mistaken”?
So the Republicans, with the majority, didn’t pass it. Got it.
I didn’t blame the Republicans. I’m merely trying to determine what the facts are. And they aren’t as you said they were.
And getting back to that, let’s look at what was going on here in general, without pointing fingers at one party or the other.
The government was attempting to use Fannie and Freddie as a mechanism to provide access to housing for the poor, minorities, and other disadvantaged groups. It did so by using the implicit backing of the treasury to make loan guarantees.
Normally, a loan has a certain amount of risk pricing built into it. That’s why payday loans cost so much, and why you can get a better interest rate if you secure your loan with your home.
So normally, high risk people either can’t get a mortgage at all, or they have to pay higher interest rates.
In the 1990’s, rules were changed to allow for sub-prime mortgages. The CRA forced lenders to lend money to minorities and to not discriminate. The banks would offload their risk by selling the mortgages to Fannie and Freddie, which in turn created Mortgage-Backed Securities and sold them back out into the market. But becaue Fannie and Freddie were implicitly backed by the government, these securities were given more value than they deserved. Everyone knew that Fannie and Freddie wouldn’t be allowed to fail, so they treated these securities as low-risk investments. This was the hidden subsidy in the housing market which in part caused it to boom. Had Fannie and Freddie not been in the picture, these securities would have been worth a lot less, and so the banks would not have had a way to sell their mortgages off, and would have had to charge more for high risk mortgages to make up the difference.
In short, a very simplified version is that the government told mortgage lenders, “Hey, don’t worry about the risk. We’ll cover that. Just get those people into a home.”
The other factor here is that by turning mortgages into financial intruments that could be bought and sold on the market, banks could write far more mortgages. A mortgage itself is not very liquid. It’s hard to sell off a mortgage from one lender to another because of all the unknowns regarding the risk of the mortgage and the value of the property. So if I bank loans money for the home, that’s money it can’t lend out elsewhere. But if the mortgage can be sold off, the bank gets its money back to lend again. Then Fannie Mae and Freddie Mac in turn package them into securities, implicitly backed by the government, and sell them off at a profit. They could make a profit because they could borrow money at treasury rates due to the assumption that they were government backed.
The result was more mortgages for higher risk people. But the risk was real, and the structure that was set up basically allowed everyone to ignore it - until the real estate market cratered. The dice were rolled, and came up snake eyes.
What you did not say here is who attached the amendment and why.
You also suggested that “When the Democrats took power in the House and Senate, all legislative activity with regards to Fannie and Freddie came to a standstill.”
Again, I’ll bring in…
All it took was a search on what the Dems have done since they took office.
You’re not really suggesting that the directive was to loan money to UNQUALIFIED borrowers, are you?
Cite: Speaking Frank-ly—Barney Frank Fires Back on Fannie Mae and Freddie Mac
I think you are probably right, except that I would probably change your last sentence to read as follows:
“The dice were rolled again and again, until they came up snake eyes.”
I call BS.
Here’s what Barney Frank said 5 years ago:
When exactly did he change his mind and start supporting the idea of tightening restrictions on Fannie and Freddie? I have a feeling it was not until AFTER the crisis started breaking.
Thanks for that link, Clu-Me-In
I’m not sure why you think Barney Frank’s opinion matters here. This is a Senate Bill I’m talking about. Frank is not a member of the Senate. He had nothing to do with this bill.
Frank was talking about a House bill. Frank has a history of opposing pretty much all Fannie Mae regulation. He knew the risks - he’s been quoted as saying, “When it comes to getting poor people into homes, I don’t mind rolling the dice a little.” So he gambled with the U.S. treasury, and lost.
As I understand it, the house reform bill was so watered down in Frank’s committee that it was considered to be pretty much useless.
By the way, we’re all perfectly capable of reading fonts in normal point sizes.
Hamlet: Actually, I was wrong. Some of the earlier reporting on the bill said that it didn’t come out of committee because it required 60%. But it’s more accurate to say that the bill didn’t come to a floor vote because the vote in committee indicated that it wouldn’t get the 60% support needed to override a filibuster.
Sam, did you even see the video? I wouldn’t have jumped into this post if you hadn’t started out with your partisan ramblings about whose fault it was. The video had Representatives and maybe Senators in it. So what?
You were trying to place all of the blame for the crisis on dems. Many economists have stood up and said that pretty much everyone is to blame, so quit with your partisan ramblings already. It doesn’t help any.
I’ll write in any font I want to make my point. Admin made it possible for members to choose a font and size. I’m not complaining about you choice of fonts, am I.
I too saw on CNN that the vote went “straight along party lines” Dems versus Pubs. Apparently this is a signal that a filibuster will occur, thus effectively killing the bill.
Though Democrats have a majority currently, still the Republicans are able to stop Congress on a variety of issues the Democrats would like to pass, so I guess there’s some credibility.
As for lack of reform of Freddie and Fannie precipitating the crisis: Well, I’ve tried not to be political in threads on the current economic crisis, but IMO it’s the single largest contributing factor. They’re the biggest players and they effectively set the market.
Do I blame the Democrats? No. They clearly viewed attempts to reign in Fannie and Freddie as an attack on lower income housing, an attack on the poor.
Sorry, but this forum is chock full of attacks on the Bush administration and Republicans for all kinds of things, and here we have a problem that has the Democrat’s fingerprints all over it. Yes, the Republicans share some blame, but the majority of it goes to the Democrats. You don’t get to call it ‘bipartisan’ - especially since every other thing that goes wrong in government seems to get dumped in the lap of Republicans even when many Democrats supported it.
Face it - Fannie and Freddie were strongly supported by Democrats. Barney Frank in the House and Chris Dodd in the Senate have a long history of opposing reforms and of stating that there was no problem wtih Fannie and Freddie and that they were both sound. Democrats in the Senate Banking committee unanimously opposed the last reform bill. The Bush administration had been sounding the alarm about the need for reform since 2002. It was primarily the Democrats who resisted. These are simply the facts. The various votes and rhetoric are available for all to see.
However, considering that the value of U.S. subprime mortgages was estimated at $1.3 trillion as of March 2007, this $60 billion is a rather small percentage of the total market.
I guess what I see is that, while Fannie Mae and Freddie Mac played some role in the crisis, it does not seem to be the primary role that Sam Stone and others seem to assign to them.
A Great Debate would be along the lines of “Republicans did X, but they should have done Y” or “Democrats, instead of doing Z, stonewalled until the situation imploded”. It’s not necessarily all about blame.