JOHN BOEHNER

President Obama’s job-killing legislation providing permanent bailouts for his Wall Street allies fails to address the need to reform Fannie Mae and Freddie Mac, the government mortgage companies that sparked the financial meltdown after evading even the most modest reforms thanks to Washington Democrats.  Will President Obama even mention Fannie and Freddie when he gives his speech tomorrow urging passage of his Wall Street bailout bill? 

Since being taken over by the government, Fannie and Freddie have received $127 billion in taxpayer dollars and the non-partisan Congressional Budget Office (CBO) predicts they will ultimately cost taxpayers $380 billion – the biggest bailout of all. 

For years, Republicans consistently raised red flags about Fannie and Freddie’s financial condition and proposed responsible reforms only to be thwarted by Democrats with deep political ties to the worst offenders.  Now these same lawmakers who abdicated their responsibility to protect taxpayers want the power to provide their Wall Street cronies with permanent bailouts using resources that far surpass those that were available to bail out Fannie Mae and Freddie Mac.

Harvard economist Kenneth Rogoff has described this “coddling of Fannie and Freddie” – which dates back to the early 1990s – as a pattern of “criminal neglect”:

“’There was tremendous coddling of Fannie and Freddie in the face of a lot of evidence that they really weren't helping homeowners all that much,’ Rogoff says. ‘I think it was very, very clear what was coming, and that they were a huge, huge risk to the American financial system. … It really was criminal neglect.’ …

“Until they were taken over, Fannie had 13 lobbying firms on its payroll this year; Freddie had 33.  Both packed their boards with politically connected people such as Democrat Rahm Emanuel, a former Clinton aide who joined Freddie's board in 2000 before he became a congressman. …

“Sen. Chris Dodd, D-Conn., a senior member of the banking committee, is the largest recipient of political contributions from Fannie and Freddie employees and PACs, having received $165,400 since 1989, according to the center.” (USA Today, 10/12/08)

1992

• SEC Chairman Richard C. Breeden “wants … to repeal the exemption that Congress has given the GSEs and to require the GSEs to register their equities and unsecured debt securities with the SEC.” (The Washington Post, 1/27/92)

• “A proposal sought by the SEC to repeal securities law exemptions of government-sponsored enterprises such as Fannie Mae is going nowhere this year, said Sen. Christopher Dodd.  The Connecticut Democrat, chairman of the Senate securities subcommittee, said Sunday at the Public Securities Association annual conference that he sees ‘no problem’ resulting from the current exemption and ‘no reason’ to repeal it, as recommended in a recent study by the Securities and Exchanges Commission, Treasury Department, and Fed.” (American Banker, 3/3/92)

2000

• “In 2000, then-Rep. Richard Baker [R-LA] proposed a bill to reform Fannie and Freddie's oversight. … [House Financial Services Committee Chairman Barney Frank] dismissed the idea, saying concerns about the two were ‘overblown’ and that there was ‘no federal liability there whatsoever.’” (Wall Street Journal Editorial, 9/10/08)

2003

• “The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. … Among the groups denouncing the [GOP] proposal today were…Congressional Democrats.” (The New York Times, 9/11/03)

• Rep. Frank: “These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis. … The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see.  I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios.” (Financial Services Committee Hearing, 9/10/03)

• Rep. Maxine Waters (D-CA): “Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines,” Fannie’s CEO and former Director  (Financial Services Committee hearing, 9/25/03)

• Sen. Charles Schumer (D-NY): “And my worry is that we’re using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie’s mission.” (Senate Banking Committee hearing, 10/16/03)

2005

House Republicans passed the Federal Housing Finance Reform Act, establishing a truly independent regulator for Fannie and Freddie and “increased regulations on maintaining capital levels, enforcement penalties, and golden parachutes...” (Forbes, 10/8/08)  74 House Democrats voted against the bill, including current Speaker Nancy Pelosi and Chairman Frank. (Vote 547, 10/26/05)

• “…Democrats have largely been blamed for letting the bill die … the bill died in the Senate Committee on Banking, Housing, and Urban Affairs.” (Forbes, 10/8/08)

• Senate Democrats “actively opposed” the bill. In 2005, “Sen. Richard Shelby led a small group of legislators favoring reform, including fellow Republican Sens. John Sununu, Chuck Hagel and Elizabeth Dole. Meanwhile, Dodd – who along with Democratic Sens. John Kerry, Barack Obama and Hillary Clinton were the top four recipients of Fannie and Freddie campaign contributions from 1988 to 2008 – actively opposed such measures and further weakened existing regulation." (Washington Post op-ed, 9/12/08)

• “In 2005, Sen. Chuck Hagel, R-Neb., sponsored legislation to shrink the agencies’ portfolios. … The bill passed the Senate Banking Committee, but every panel Democrat voted against it. That signaled that the bill wouldn't get the 60 votes needed to pass in the Senate.  Obama was not on the banking panel; there is no record of him doing anything on the bill.” (USA Today, 10/14/08)

2006

• Sen. Schumer: “I think a lot of people are being opportunistic … throwing out the baby with the bathwater, saying, ‘Let’s dramatically restructure Fannie and Freddie,’ when that is not what’s called for as a result of what's happened here.” (Senate Banking Committee hearing, 6/15/06)

2007

• “But even as lawmakers expressed outrage at the problems being encountered by low-income homeowners, they signaled that they would not rush to impose new legislation on the industry.  Senator Christopher J. Dodd, Democrat of Connecticut and the chairman of the banking committee, said he did not know if new legislation was necessary, saying regulators could addresses most excesses under existing laws.” (The New York Times, 3/22/07)

2008

• “In a conference call with reporters this afternoon, Senate Banking Committee chairman Christopher Dodd (D-Conn.) said both GSEs are ‘very sound and strong’…” (Financial Week, 7/14/08)

• “Republicans sought to reduce the size of the companies' portfolios, arguing they were too risky. … Then the housing bubble burst.  … [Chairman Barney] Frank had no apologies.  Rep. Artur Davis, D-Ala., by contrast, offered a rare Washington mea culpa: ‘Like a lot of my Democratic colleagues, I was too slow to appreciate the recklessness of Fannie and Freddie,’ he said in a statement. ‘Frankly, I wish my Democratic colleagues would admit, when it comes to Fannie and Freddie, we were wrong.’” (USA Today, 10/12/08)

Republicans are standing with the American people by putting forward a plan that would phase out taxpayer subsidies of Fannie Mae and Freddie Mac over a number of years and end the current model of privatized profits and taxpayer losses.  View the Republican plan by clicking here.