Fannie and Freddie

Why are Republicans in a tizzy about Fannie and Freddie?

Because they feel this is the strongest tie of some Democrats to the current financial crisis. Take McCain's latest barb at the debates.

McCain said that government-sponsored mortgage lenders Fannie Mae and Freddie Mac "were the catalyst, the match that started this forest fire" in the economy and that he had "stood up" to them.

Of course, he overstates the case because a lot of Dems got money from these groups. McCain doesn't mention Countrywide or any other mortgage giants who were into the subprime game WAY before Fannie and Freddie. Fannie and Freddie were losing market share to other firms who plunged ahead more recklessly.

And McCain playing up his role in warning about Fannie and Freddie are overplayed. For one, it was Chuck Hagel who sponsored the bill and McCain came to the game a year later.

In a May 26, 2006, news release, McCain 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 as a whole." But PolitiFact.org said those problems had nothing to do with the subprime mortgage loans that triggered the current crisis.

More evidence that Fannie and Freddie were not the catalysts in this crisis and were actually a relatively small part of the problem.

Fannie and Freddie did not guarantee and securitize substantial quantities of subprime loans. They had more Alt-A loans but these were still a relatively small portion of their overall business. In fact, as the subprime market was building, Fannie and Freddie lost market share because they weren't participating. Their involvement in the secondary market was far from the driving force in the creation of the subprime market.

It’s true, however, that Fannie and Freddie were damaged by the subprime crisis because everyone in the housing sector was damaged by falling home prices and, more significantly, the two companies branched out into a broader investment portfolio. In that portfolio were included mortgage-backed securities that hurt all of those who purchased them. Fannie and Freddie weren’t the biggest players in this and, most importantly, started this practice very late in the game. In fact, the subprime market had already started to go bad when they started their purchases (which speaks poorly for Fannie and Freddie’s decision making, but precludes them from responsibility for the crisis).

Fannie and Freddie were supposed to be more closely supervised than other lenders—with their own regulator, which was supposed to keep a special eye on them because they are important institutions. Those regulators, who were part of the Bush administration, failed along with the rest of the Bush regulatory apparatus to stop the problem.

I'm not excusing Democrats who resisted regulation of these companies given their financial ties. But to ignore Republican responsibility and their basic ideology of DEREGULATION would make one as ignorant as a Fox News "journalist". No David Assman, this is not Barney Frank's fault because he fucked a Fannie exec in 1988. Ha! I even made myself laugh at that one...fucked a Fannie...laugh out loud.