Wednesday, February 11, 2009

Bush, Greenspan, Snow, and McCain Warned of Financial and Housing Crisis Starting in 2001



The Bush Administration, Alan Greenspan, Treasury Secretary John Snow, and Senator McCain warned repeatedly about Fannie Mae and Freddie Mac and what thus became the 2008 financial crisis -- starting in 2001. Democrats like Barney Frank resisted.

HT: Dallas Walton

21 Comments:

At 2/11/2009 1:39 PM, Anonymous Machiavelli999 said...

;(

What is conservatives' obsession with Fannie and Freddie? Yes, Fannie and Freddie were stupid. But so were Lehman, Bear, Merryl, BoA, Citi, etc, etc, etc,....

In fact, I wish that it was only Fannie and Freddie that were doing stupid things. It would make the recession much milder.

But I guess my original question is stupid. Fannie and Freddie are quasi-public companies so they can be criticized by free market ideologues, but the other companies I listed did the same thing on their own "private" accord. That we can just ignore.

 
At 2/11/2009 1:55 PM, Blogger Monkeesfan said...

Fannie and Freddie were government-sanctioning bodies, and Lehmen, Bear, etc. collapsed in part because of Freddie and Fannie. Government sanction has always proven a recipe for failure.

 
At 2/11/2009 2:31 PM, Anonymous Machiavelli999 said...

Explain how the existence of Fannie and Freddie caused Lehman and Bear invest in the very same mortgage securities.

Do the mistakes of GM cause Toyota to do dumb things as well? Did the failure of the Vista operating system cause Apple to make a bad OS as well?

I didn't think this is how markets work. In fact, its not how they work. Dumb decisions by my competitor does not force my hand into making dumb decisions as well.

 
At 2/11/2009 2:45 PM, Anonymous Anonymous said...

The plan was for Democrats to crash economy though the leadership of Barney Frank and Chris Dodd in order to elect Hillary as President and blame Bush for the economic mess.
Obama out smarted Hillary in the primary.

By this time Fannie and Freddy were already in play and Chicago Mobsters (Unions) installing Obama would be more then happy to play ball.

The kicker was when Electronic Run On Banks - $550 Billion Withdrawn in 1 Hour, Federal Reserve Halts Withdrawls before the entire system crashed. Some really big hitters wanted the National Socialists to take control of the USA and they did not hold back.

http://atlasshrugs2000.typepad.com/atlas_shrugs/

Soon the US Government will be in control of 40% of the entire GDP. Obama will have Modern Day Brown Shirts in ACORN and the rest of Grandmas Retirement will be toast.

Today’s National Socialist Party of the DNC make Madoff look like a rank Amateur who was creeping into the DNC turf.

We have many Models to get out of recession. Stimulus could be done in days though income tax cuts, Corp. and Cap Gains Tax Cuts.

The Democrats want Pork and Spend to buy future votes and hold even more people on the DNC Plantation.

This is sick and twisted stuff we are seeing and Americans had better come out of their comma quick.

Just doing the job the Media will not do.

Dave J
Sacramento CA.

 
At 2/11/2009 2:46 PM, Anonymous Anonymous said...

Bwaney Fwank...the Banking Queen.

 
At 2/11/2009 2:49 PM, Anonymous Chris said...

Hahaha...Bawney Fwank is a loser. The people in Boston that send him to the US House ought to be ashamed of themselves.

 
At 2/11/2009 3:14 PM, Anonymous Anonymous said...

Here's how I see it.

I think it really boils down to whether or not you want to accept that the CRA led to bad loans that Freddie and Fannie backed. ie Government is the problem.

Once backed by the Fed, banks used the SIV method to keep all that bad debt off their books.

Once the trend was started it was easy for banks to open up the taps and let it flow. Easy money for everyone.

Lots of guilty parties but it helps to look back at the source of the problem to know where to fix it.

For example, a government mandated factory mold is flawed. Along the production line some employees try to tweak the process to fix the flaw and get a workable product. Management lets it slide to keep people working and business as usual. It passes QC and goes out to consumers. Later the product fails.

Do you fire management, the workers, or fix the mold?

 
At 2/11/2009 6:21 PM, Blogger Monkeesfan said...

Machiavelli - when the government meddles in the housing market, it always winds up affecting mortgage securities. When the government meddles, the rest of the market gets affected.

Geez, grow up, Mach.

 
At 2/11/2009 6:22 PM, Blogger Monkeesfan said...

Chris - ain't that the truth, and I'm from MA and am embarassed that people vouch for him and the rest of our corrupt political culture.

 
At 2/11/2009 6:23 PM, Anonymous EJ said...

machiavelli,

the GSEs had the implicit government guarantee, which allowed them to borrow at below market rates and become massively over leveraged. The government in effect then subsidized risky investment which put the risk/ reward analysis of investors to significantly more towards more risk then would have otherwise.

So what did this do? It took the massive amounts of liquidity being created by the fed post 2001 recession and channeled this all into the housing market via their leverage. Likely a couple trillion more dollars were invested in housing then would have otherwise which created this bubble.

The subprime part was the last phase in the runnup, with most of these loans being originated from 2005 to 2007, well after the bubble was moving. By this time the only way to put more buyers into housing was creating sub prime loans. And this is where wall street came into effect (and the GSE's who also bough a lot of Alt-A loans). By this time the irrational expectation of continued price appreciation had set in as the Fed and the GSE policies created this inflationary expectation. Just as workers with this force will ask for high wages, home buyers, investors and wall street firms all jumped on board.

In short, had the GSE's not existed in congruence with loose monetary policy, we would have never had the bubble that created the price collapse and the subprime mortgage crisis. This episode is not primarily about subprime loans. Its a about a government induced (the FED and GSE) asset bubble. At the very least, if you are going to distort these market incentives, some restriction on these firms needed to be put in place, but nothing was done.

 
At 2/11/2009 7:28 PM, Anonymous Dr. T said...

Yes, the Bush administration knew about potential problems with Fannie Mae and Freddie Mac. But, the administration took no action. Where was the Republican-sponsored bill to eliminate (or at least rein-in) those two entities? Where was the pressure from the Treasury Dept. to make it harder for those entities to buy risky mortgage securities? An administration with leadership would have acted. This was an administration of inept, lazy, or ass-covering bureaucrats.

 
At 2/11/2009 8:03 PM, Anonymous Anonymous said...

Dr. T --

Anytime the Bush administration or any other Republican suggested action to rein in the GSEs, Democrats explicitly and implicitly accused them of racism, as if their only motivation was to keep nonwhites from owning homes.

Yes, the Bush administration was inept, but that hardly lets off the hook the leftist ideologues who like to play their social engineering games with other peoples' hard-earned money.

 
At 2/11/2009 11:38 PM, Anonymous t jefferson said...

Greenspan quote 2008

MR. GREENSPAN: I made a mistake in presuming that the self- interest of organizations, specifically banks and others, were such (as that ?) they were best capable of protecting their own shareholders and their equity in the firms. And it’s been my experience, having worked both as a regulator for 18 years and similar quantities in the private sector, especially 10 years at a major international bank, that the loan officers of those institutions knew far more about the risks involved in the people to whom they lent money than I saw even our best regulators at the Fed capable of doing.
So the problem here is, something which looked to be a very solid edifice, and indeed a critical pillar to market competition and free markets, did break down. And I think that, as I said, shocked me.
I still do not fully understand why it happened. And obviously, to the extent that I figure out where it happened and why, I will change my views. And if the facts change, I will change.

 
At 2/12/2009 12:04 AM, Anonymous Anonymous said...

t jefferson.

A freind of mine worked for Pulte selling new homes. After the Fed mandated Banks make loans insured by Fannie and Freddie to people who could not afford them. She went to the underwriters of these loans to protest. She was told to get on board or get out. 36% of these loans had to go to people who could not afford the property taxes, let alone the payments.

If the Banks did not play the game. they would find the Feds would not give them any more money to lend and they would be toast.
Wanna bet these Bankers get an earfull before they testify? Wanna bet Barney Frank and Chris Dodd will hit these guys with full force of the US Government if these guys make a peep about the involvement of Government (Congress) in this mess.

When will Barney Frank and Chris Dodd have to testify about their own involvement in crashing a world economy 35 days before an election??

Had the Bush Admin. or any other Republicans who knew about this mess protested. Just as the immigration issue, they would have been labled a rasists. That is what democrats do. Just ask Pat Buchanan. Who's sin was to request the Federal Government honor the Constitution of the United States of America and close our Borders.

Bush was running two wars and was NOT in charge of the Banking system. Democrat voters need a simple 7th grade Civics 101 refresher couse before each election.

D.Johnson
Sacramento CA.

 
At 2/12/2009 12:23 AM, Anonymous t jefferson said...

D.Johnson
We had a republican congress for the first six years during the Bush administration and the last six years during the Clinton administration. So your saying all these problems developed in the last two years? Maybe we should just re-install Bush as permanent Prez for life and everything would be better, ya thats the ticket.

 
At 2/12/2009 12:27 AM, Anonymous t jefferson said...

Come on, D. Johnson, tell us the real truth. We can handle it. Its un-supervised computer night at the assylum, right?

 
At 2/12/2009 1:19 AM, Blogger OBloodyHell said...

> What is conservatives' obsession with Fannie and Freddie? Yes, Fannie and Freddie were stupid.

No, they were criminal.

It was the supposed wonderful "returns" (false, based on criminally inaccurate income statements, promoted by Frank Raines and Jamey Gorelick in the late 1990s, in order to secure their bonuses -- acts very similar to those which got Ken Lay arrested) from the GSEs which led idiots in the financial markets to start doing the same incompetent things in wider fashion throughout the financial markets.

It was Frank Raines who touted to the effect that "these securities are sure things. we should be able to operate on as little as 1% reserves given them." -- so, hey, why shouldn't the private companies operate at 30, 35, or 40 to 1? That's more than *twice* the level Frank said we should be able to rely on!!!

Yeah, with flagrantly bogus financial reports, we should've tossed Raines and Gorelick in jail right next to Lay's cronies and Madoff. Instead, Gorelick was on the hot sheet for Obama's AG. Go figure.


===============================
The reason for the focus on the GSEs is that they represented the seed crystal around which this current financial clusterf*** was formed.
===============================

 
At 2/12/2009 1:23 AM, Blogger OBloodyHell said...

> Do you fire management, the workers, or fix the mold?

None of the above, clearly --

You sue the stockholders.


And, in an odd sort of way, that's what's happening...

 
At 2/12/2009 1:32 AM, Blogger OBloodyHell said...

> Where was the Republican-sponsored bill to eliminate (or at least rein-in) those two entities?

Uh, what PLANET are YOU on?

http://hotair.com/archives/2008/09/17/mccains-attempt-to-fix-fannie-mae-freddie-mac-in-2005/

McCain in 2005, Bush in 2003.

Every time the GOP and/or Bush attempted to do anything, the @#$@#%@$% Dems bottled it up in committees.

For some of that time, the GOP did have the power to override them, but having somewhere lost their testicles, they gave in, on this and many other issues, whenever the Dems stamped their feet, and held their breath unless the GOP gave in.

For this, I do blame the GOP. But the primal sin was the Dems, and Barney Frank, whose exquisite turn of phrase was, "I want to roll the dice on these things a little bit longer".

...And now we enjoy the results of finally rolling craps.

 
At 2/12/2009 1:38 AM, Blogger OBloodyHell said...

P.S. here's Frank uttering that very phrase in C-Span footage -- it's towards the end, as I recall.

If the link doesn't work (somehow, it's "a violation of the terms of use", I guess because it indicts the Dems with their own words, which is against official Google policy), do a search on YouTube for:
"dems raines barney frank cover up" -- that should turn it up. They constantly try and suppress it, but it doesn't "stick".

 
At 2/12/2009 2:06 PM, Blogger Monkeesfan said...

Dr.T. - they did take action and were stopped by Dodd, Frank, etc.

 

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