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Tag Archives: Fannie Mae

Obama Nominates Fox to Guard Chicken Coop

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President Obama last week nominated Rep. Mel Watt (D-N.C.) to run the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, the two agencies that caused the Great Recession Obama keeps blaming on George W. Bush.

They did this by promoting policies that allowed them to own billions of dollars in home loans made to people who couldn’t afford to buy homes. And then, a FINANCIAL CRISIS ensued when these people couldn’t make their payments, as might have been expected.

Except, it wasn’t expected by Mel Watt.

In a nice piece of investigative journalism, Charles C. Johnson over at The Daily Caller did some research and found out that Mr. Watt supported the very polices that got us into trouble in the first place, even after these policies got us into trouble.

From the article:

In 2002, Watt  teamed up with Freddie Mac and Fannie Mae, Bank of America, BB&T, and UJAMMA Inc., to announce Pathways to Homeownership, a pilot initiative designed to give home loans to welfare recipients . . .

Watt, alongside then-Democratic Massachusetts Rep. Barney Frank, blocked Bush Administration efforts to reduce Fannie and Freddie’s overexposure to subprime loans . . .

In 2007, a full year after the real estate market peaked and began to plummet under the weight of millions of mortgage defaults, Watt and Frank co-sponsored a bill forcing Fannie and Freddie to meet even higher quotas for affordable lending.

Don’t be shocked. Remember that in Obama World, only greedy bankers and George W. Bush cause financial crises. They can never be the result of market-distorting liberal policies, which opened the door for lending abuses – and even in some cases required them – in order to realize the dream of home ownership for all.

Because even people who can’t afford homes need to own them. And, please, each according to their needs.

And so, in Obama World, Mel Watt is perfect for the job. And on the Obama Farm, foxes guard chicken coops.

POLITICO Details Donilon’s Fannie Mae Years

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POLITICO has a good rundown on newly installed National Security Adviser Tom Donilon’s career, with a detailed examination of his time as a lobbyist for Fannie Mae.

From the story:

One part of Donilon’s résumé that went unmentioned in the Rose Garden Friday — the six years he spent as a top executive of Fannie Mae at the height of the housing boom — made him a problematic choice for any Obama administration job that requires Senate confirmation.

Donilon left the firm as it was mired in an accounting scandal in 2005, three years before Fannie Mae’s spectacular collapse when the mortgage market imploded in 2008. Investigators never accused Donilon of wrongdoing in the accounting scandal, but Fannie ultimately paid $400 million to the federal government to settle charges that the company misstated its earnings from 1998 to 2004. The government sued three top Fannie Mae executives to recover millions in bonuses based on the allegedly falsified reports, but Donilon was not among them.

A former official who led one of the main investigations into Fannie Mae said Friday that Donilon didn’t play a role in the misstatements but tried to pressure lawmakers to derail the probe.

“He was in charge of the lobbyists. … That process involved using the Hill to rein in the regulators,” said Stephen Blumenthal, former acting director of the Office of Federal Housing Enterprise Oversight. “That was always Fannie Mae’s approach. And there’s no question that Congress played a major role in enabling Fannie Mae to escape regulation and avoid increasing their capital, which is what eventually killed the company.”

“I don’t think he was part of the problem, but he wasn’t part of the solution,” Blumenthal said. “Mr. Donilon was not a target of the investigation. … Was he an enabler? Absolutely.”

A 2006 report on the federal “special examination of Fannie Mae” is replete with references to Donilon, who worked at the firm from 1999 to April 2005, first as senior vice president and general counsel, and later as executive vice president for law and policy. The report quotes from a 2004 Donilon e-mail plotting efforts to resist federal regulators’ attempts to force changes in Fannie Mae’s executive structure.

“Do you have any sense of the basis on which the agency believes that it has the authority to mandate practices in this area, hard to believe they have a safety and soundness rationale. … We should speed up our work on the interaction between bank regulators and the SEC … Should we start working with the BRT [the Business Roundtable], Chamber [of Commerce], ABA [American Bankers Association] etc now?” Donilon wrote to a colleague.

The report also describes Donilon as part of a group of Fannie Mae execs who exchanged “scripts” in advance of meetings of Fannie Mae’s nominally independent compensation committee.

Of course, even absent the accounting scandal, any involvement with Fannie Mae is politically precarious for a simpler reason: The firm became insolvent in September 2008 and was taken over by federal regulators. Since that time, the federal government has pumped at least $145 billion into Fannie Mae and cohort Freddie Mac. According to independent estimates, long-term costs of bailing out the two firms could range from $389 billion to $1 trillion, depending on how the real estate market fares.