While stumping for Barbara Boxer last night, President Obama rattled on about how the Republicans drove the economy into the ditch and were standing there watching while he, our Dear Leader, and his comrades pull it out. It’s getting old. Especially when he continues to suffer from amnesia over his own role in blocking financial reform when he was a senator.
If he reads the Wall Street Journal perhaps the op-ed by Peter Wallison this morning helped to refresh his memory.
The story is all too familiar. Politicians in positions of authority today had an opportunity to prevent this fiasco but did nothing. Now—in the name of the taxpayers—they want more power, but they have never been called to account for their earlier failings.
One chapter in this story took place in July 2005, when the Senate Banking Committee, then controlled by the Republicans, adopted tough regulatory legislation for the GSEs on a party-line vote—all Republicans in favor, all Democrats opposed. The bill would have established a new regulator for Fannie and Freddie and given it authority to ensure that they maintained adequate capital, properly managed their interest rate risk, had adequate liquidity and reserves, and controlled their asset and investment portfolio growth.
These authorities were necessary to control the GSEs’ risk-taking, but opposition by Fannie and Freddie—then the most politically powerful firms in the country—had consistently prevented reform.
The date of the Senate Banking Committee’s action is important. It was in 2005 that the GSEs—which had been acquiring increasing numbers of subprime and Alt-A loans for many years in order to meet their HUD-imposed affordable housing requirements—accelerated the purchases that led to their 2008 insolvency. If legislation along the lines of the Senate committee’s bill had been enacted in that year, many if not all the losses that Fannie and Freddie have suffered, and will suffer in the future, might have been avoided.
Why was there no action in the full Senate? As most Americans know today, it takes 60 votes to cut off debate in the Senate, and the Republicans had only 55. To close debate and proceed to the enactment of the committee-passed bill, the Republicans needed five Democrats to vote with them. But in a 45 member Democratic caucus that included Barack Obama and the current Senate Banking Chairman Christopher Dodd (D., Conn.), these votes could not be found.
Thanks, Barack. I wonder if Wallison’s piece was turned down by The New York Times and The Washington Post. Probably, because Wallison also mentioned that then Senator Obama was the third largest recipient of campaign funds from Fannie and Freddie, right behind Chris Dodd and John Kerry.
The Wall Street Journal was chock full of useful information this morning. On Friday the SEC announced it’s lawsuit against Goldman Sachs and that was the big story through the weekend and into this week. What we didn’t hear was that the Inspector General of the SEC released a report that same day damning the SEC’s handling of the R. Allen Stanford Ponzi scheme for which Mr. Stanford was indicted last year. I guess the SEC dropping the ball on a Ponzi scheme that caused untold harm to thousands of innocent investors just isn’t as attention grabbing as a drive-by lawsuit against a big name firm. President Obama didn’t mention that when he was cracking his jokes.
Obama will keep going out there, talking about how the Republicans, and the Republicans alone, caused the financial mess. But he won’t mention any of the above, and he won’t mention that his financial reform plan will only make worse the crony capitalism that’s so harmful to the economy.
Related: The Other McCain asks: Filibuster financial reform? What kind of Senator would dare to do such a thing?
The Pirate’s Cove reminds us how much Goldman Sachs gave to Obama’s campaign. I think we need to remind people of that every day. You, know, the way the left reminded us that George W. Bush received about 1/10th from Enron what Obama received from GS.
Update: The Politico reports that Darryl Issa (R-CA) and eight other House Republicans are calling for an investigation into the SEC and any communications they may have had with the White House or members of Congress leading up to the announcement of the fraud suit.
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