It was the perfect storm and the names Dodd, Frank, Raines, and Waters should have been plastered on front pages of newspapers across the country. Because the media gleefully used the fall of the American economy to blame Bush and Republicans in 2008, we need to scrutinize how it happened. Federal financial institutions Fannie Mae and Freddie Mac were authorized to approve risky loans that recipients were not likely to be able to repay. Some still question whether the collapse was a manufactured economic “crisis” because it was the wild card that stalled the momentum created by Sarah Palin and helped catapult Barack Obama into the White House. You may not remember how it all came crashing down, but you probably do recall who the media collectively implied was responsible for the financial crisis.
Their scapegoat, President George W. Bush, tried to intervene from 2001 onward. The Bush administration warned that Fannie Mae and Freddie Mac were growing out of control, even cautioning Congress that they were overleveraged. According to the Wall Street Journal, the failure of Fannie and Freddie “could cause strong repercussions in financial markets, affecting federally insured entities and economic activity” well beyond housing. The chairman of the Senate Banking Committee at the time, Richard Shelby (R-AL) tried pushing for “comprehensive GSE reform in 2005,” Senator Chris Dodd (D-CT) criticized the Bush reforms and threatened a filibuster.
He changed his tune in 2008 after Fannie and Freddie collapsed and Dodd asked, “Why weren’t we doing more?” He then voted for the very Bush reforms that he once criticized! Naturally, Barney Frank (D-MA) defended Fannie and Freddie as “fundamentally sound”. Unknown to most Americans, Frank also ended up voting or the Bush reforms.
In the Wall Street Journal, Senior Advisor to President Bush, Karl Rove explained:
Sen. Charles Schumer of New York dismissed Mr. Bush’s “safety and soundness concerns” as “a straw man.” “If it ain’t broke, don’t fix it,” was the helpful advice of both Sen. Thomas Carper of Delaware and Rep. Maxine Waters of California. Rep. Gregory Meeks of New York berated a Bush official at a hearing, saying, “I am just pissed off” at the administration for raising the issue…
The more the president [Bush] pushed for reform, the more [mortgages] they bought. Peter Wallison of the American Enterprise Institute and Charles Calomiris of the Columbia Business School suggest $1 trillion of this debt was subprime and “liar loans,” almost all bought between 2005 and 2007. This bulk-up in risky paper made it possible for banks to lend imprudently on a massive scale.[i]
Remember that the Democrats controlled Congress at the time and Speaker of the House, Nancy Pelosi, still did her best to blame the Bush administration. She tried to imply that Republican deregulation helped cause the crisis and the media let her get away with her lying accusations! In 2008 alone, records show that President Bush warned Congress 17 times[ii].
Back in 2004, Alan Greenspan tried warning the Democrats as well. That same year, a year after the Bush administration tried to tighten regulation and oversight on Fannie and Freddie, Congress was told yet again that disaster loomed. The following partial transcript from a Congressional hearing shows the response of four Democrats:
Maxine Waters:Through nearly a dozen hearings, we were frankly trying to fix something that wasn’t broke. Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Franklin Raines. [Raines would barely avoid prosecution for fraud.]
Gregory Meeks: … I’m just pissed off at OFHEO [the regulators trying to warn Congress of insolvency at the GSEs], because if it wasn’t for you, I don’t think we’d be here in the first place. … There’s been nothing indicated that’s wrong with Fannie Mae, Freddie Mac has come up on its own… The question that then comes up is the competence that your agency has with reference to deciding and regulating these GSEs.
Lacy Clay: This hearing is about the political lynching of Franklin Raines.
Barney Frank: I don’t see anything in this report that raises safety and soundness problems.[iii](Emphasis mine)
Apparently, political contributions were made through Freddie Mac and Fannie Mae to the very members of Congress who were allowing irresponsible loans. Isn’t political corruption a story that should be covered or at least investigated? Journalism used to require that news producers tell the truth, but not anymore. In a 2008 article, “Will the Last Fair Reporter Please Turn On the Lights?” author and columnist Orson Scott Card wrote:
“Aren’t you supposed to follow the money and see which politicians were benefitting personally from the deregulation of mortgage lending? I have no doubt that if these facts had pointed to the Republican Party or to John McCain as the guilty parties, you would have treated it as a vast scandal. “Housing-gate,” no doubt. Senator Christopher Dodd & Congressman Barney Frank, both Democrats, denied that there were any problems – even two months before the crash…”
Franklin Raines, the CEO of Fannie Mae who made $90 million while running it into the ground, was fired for his incompetence, and Barrack Obama’s campaign actually consulted him for advice on housing… So I ask you [in the media] now: Do you have any standards at all? …Is getting people to vote for Barack Obama so important that you will throw away everything that journalism is supposed to stand for?[iv]
What a travesty that media puts party over the people it serves. I know there are some good people out there in the media who try to do an honest job in their reporting. Unfortunately, the distrust of the media and the lack of balance as a whole have gotten so out of whack that it may be irreparable. What have we learned since the economic meltdown?
In 2011, six former executives at Fannie Mae and Freddie Mac were charged by the Securities and Exchange Commission with lying about the two housing entities’ exposure to high-risk subprime mortgage loans just ahead of the 2008 financial crisis. They deceived investors to prop up Fannie and Freddie’s stock price. But if you ask the average person today who was mainly responsible for the financial meltdown they would say ‘Bush’. Many surmised that the only solution to the 2008 crisis had to be to give the White House to the Democrats so they could fix the economy. How has that worked out for America?
