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     Spatten1 |
This is from WSJ this morning. I think it's interesting that congress wants to pretend that they didn't force Fannie Mae and Freddie Mac to lend to people that had no business owning a home. Not that the leaders of the GSEs are totally innocent, but give me a break: Waxman: GSEs Ignored Warnings By JESSICA HOLZER and MICHAEL R. CRITTENDEN WASHINGTON -- A key House Democrat said documents obtained by congressional staffers show the chief executives of Fannie Mae and Freddie Mac knowingly took on the risks that led to the demise of the mortgage giants and could ultimately cost taxpayers billions. House Oversight and Government Reform Committee Chairman Henry Waxman (D., Calif.) said Tuesday that a review of nearly 400,000 documents show the firms' ill-fated foray into the subprime mortgage market was driven by greed. But Mr. Waxman rejected the argument that the firms caused the financial crisis. "The CEOs of Fannie and Freddie made reckless bets that led to the downfall of their companies," the congressman said at a hearing on the firms' role in the crisis before his committee. "Their actions could cost taxpayers hundreds of billions of dollars. "But it is a myth to say they were the originators of the subprime crisis. Fundamentally, they were following the market, not leading it," he continued. Former Fannie and Freddie executives defended their roles in the firms' downfall, suggesting the U.S. government shouldn't have seized the companies in September. "I made the argument at the time and proposed that more modest government support could be used to encourage private investment capital -- basically something more like the program many banks are now eligible for," former Fannie CEO Daniel Mudd said in his prepared remarks before a House committee. Mr. Mudd, who was forced out at the company after the U.S. government put the two government-sponsored enterprises into conservatorship in September, was joined by former Freddie CEO Richard Syron and other former executives from the two firms in an appearance before the House Oversight and Government Reform Committee. Both Messrs. Syron and Mudd defended the companies' roles in the current housing crisis, arguing that the two firms were forced by legal and regulatory mandates to support the housing market, even when that market started to falter. "We had obligations to Congress and to the public to promote our chartered purposes of increasing affordability, liquidity and stability in housing finance, which included some very specific low-income housing goals," Mr. Syron said in his prepared remarks. Mr. Mudd struck a similar tone. He noted that Fannie's market share dropped precipitously in the midst of the housing bubble as banks and other private mortgage originators sought to originate millions of mortgages. Unfortunately, he continued, the GSEs' business model was not "immune to the shocks of 2008." "As this market...went through unprecedented depression, the company bore commensurate and unprecedented losses; hence we are here today to examine the causes and prescriptions," Mr. Mudd said. Mr. Syron said the pressures on the two firms to maintain liquidity in a troubled market were "enormous" and that both companies' financial position deteriorated as a result. "Every institution with significant exposure to residential mortgages has been negatively impacted by the generally unforeseen magnitude and rapidity in the collapse of housing prices," Mr. Syron said. |
