Mostly Democrats Talking About Fannie & Freddie

Who said what, when? The Wall Street Journal has at least a partial answer to the question.

House Financial Services Committee hearing, Sept. 10, 2003:

Rep. Barney Frank (D., Mass.): I worry, frankly, that there's a tension here. 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. . . .

Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban Development Secretary Mel Martinez:

Secretary Martinez, if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?

* * *

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .

* * *

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Gregory Meeks, (D., N.Y.): . . . I am just pissed off at Ofheo [Office of Federal Housing Enterprise Oversight] because if it wasn't for you I don't think that we would be here in the first place.

And Freddie Mac, who on its own, you know, came out front and indicated it is wrong, and now the problem that we have and that we are faced with is maybe some individuals who wanted to do away with GSEs in the first place, you have given them an excuse to try to have this forum so that we can talk about it and maybe change the direction and the mission of what the GSEs had, which they have done a tremendous job. . .

Ofheo Director Armando Falcon Jr.: Congressman, Ofheo did not improperly apply accounting rules; Freddie Mac did. Ofheo did not try to manage earnings improperly; Freddie Mac did. So this isn't about the agency's engagement in improper conduct, it is about Freddie Mac. Let me just correct the record on that. . . . I have been asking for these additional authorities for four years now. I have been asking for additional resources, the independent appropriations assessment powers.

This is not a matter of the agency engaging in any misconduct. . . .

Rep. Waters: However, I have sat through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke. Housing is the economic engine of our economy, and in no community does this engine need to work more than in mine. With last week's hurricane and the drain on the economy from the war in Iraq, we should do no harm to these GSEs. We should be enhancing regulation, not making fundamental change.

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. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. . . .

Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?

Mr. Raines?

Mr. Raines: No, sir.

Mr. Frank: Mr. Gould?

Mr. Gould: No, sir. . . .

Mr. Frank: OK. Then I am not entirely sure why we are here. . . .

Rep. Frank: I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.

* * *

Senate Banking Committee, Oct. 16, 2003:

Sen. Charles Schumer (D., N.Y.): 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. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.

Mr. Raines: But more importantly, banks are in a far more risky business than we are.

* * *

Senate Banking Committee, Feb. 24-25, 2004:

Sen. Thomas Carper (D., Del.): What is the wrong that we're trying to right here? What is the potential harm that we're trying to avert?

Federal Reserve Chairman Alan Greenspan: Well, I think that that is a very good question, senator.

What we're trying to avert is we have in our financial system right now two very large and growing financial institutions which are very effective and are essentially capable of gaining market shares in a very major market to a large extent as a consequence of what is perceived to be a subsidy that prevents the markets from adjusting appropriately, prevents competition and the normal adjustment processes that we see on a day-by-day basis from functioning in a way that creates stability. . . . And so what we have is a structure here in which a very rapidly growing organization, holding assets and financing them by subsidized debt, is growing in a manner which really does not in and of itself contribute to either home ownership or necessarily liquidity or other aspects of the financial markets. . . .

Sen. Richard Shelby (R., Ala.): [T]he federal government has [an] ambiguous relationship with the GSEs. And how do we actually get rid of that ambiguity is a complicated, tricky thing. I don't know how we do it.

I mean, you've alluded to it a little bit, but how do we define the relationship? It's important, is it not?

Mr. Greenspan: Yes. Of all the issues that have been discussed today, I think that is the most difficult one. Because you cannot have, in a rational government or a rational society, two fundamentally different views as to what will happen under a certain event. Because it invites crisis, and it invites instability. . .

Sen. Christopher Dodd (D., Conn.): I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. And we don't want to lose sight of that and [what] has been pointed out by all of our witnesses here, obviously, the 70% of Americans who own their own homes today, in no small measure, due because of the work that's been done here. And that shouldn't be lost in this debate and discussion. . . .

* * *

Senate Banking Committee, April 6, 2005:

Sen. Schumer: I'll lay my marker down right now, Mr. Chairman. I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring in terms of their mission, in terms of their role in the secondary mortgage market, et cetera. Change some of the accounting and regulatory issues, yes, but don't undo Fannie and Freddie.

* * *

Senate Banking Committee, June 15, 2006:

Sen. Robert Bennett (R., Utah): I think we do need a strong regulator. I think we do need a piece of legislation. But I think we do need also to be careful that we don't overreact.

I know the press, particularly, keeps saying this is another Enron, which it clearly is not. Fannie Mae has taken its lumps. Fannie Mae is paying a very large fine. Fannie Mae is under a very, very strong microscope, which it needs to be. . . . So let's not do nothing, and at the same time, let's not overreact. . .

Sen. Jack Reed (D., R.I.): 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. . . .

Sen. Chuck Hagel (R., Neb.): Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard.

(h/t Ryan D.)


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More Superficial Drivel

[ed. note: we originally titled this "Answers To Your Questions." That was before we wrote the post. Once finished, we decided on this, more appropriate title.]

First off (though we don't know why we even have to clarify this), we have never pretended to be a moderate/centrist/non-partisan/post-partisan/bi-partisan blog. We're conservative first. This often leads us to support Republican candidates. How is this a surprise to anyone? We try to be fair and reasonable, but we know enough about bias to understand that objectivity is a pipe dream. Plus, this is an opinion blog, not a reporting blog. We've got no reason to even make a failing attempt at 'just the facts, please ma'am' reporting a la The New York Times. So, please, quit faulting us for not being something we never claimed to be in the first place.

When we bash what seems to our readers to be a far-left opinion. Don't take it personally. We very rarely pick on those precious few of you who choose to read and respond to our posts. We get that none of you advocate the ridiculous things we pan here at OL&L. Most of our readers are conservatives. Most of you who reply are moderate to liberal. To our knowledge, none of you fall into the extreme left camp we frequently lampoon. So, when we go after whacked out leftist/environmentalist ideas or whatever, don't take it personally. We're usually responding to something we read over at the Seattle PI or maybe our bi-weekly scan of the Daily Kos or Huffington Post--not your comments.

We like the idea of drilling independent of its political ramifications. The fact that it could be used politically to help get people we like elected is simply a happy coincidence. Our support of drilling is not so myopic or narrow as some of you seem to believe. We have repeated here (every time we talk about energy issues. check our archive.) that we support drilling along with a carbon tax, nuclear power, and increased R&D funding. What more do you want? We are wary of the economic cost to Americans and American businesses if we attempt large scale transition from fossil fuels to renewable energy. It will hinder us competitively in relation to other countries and is an environmental burden we should not bear alone.

When it comes to policy recommendations, we are political realists. We like the idea of a carbon tax, but the likelihood of enacting one by itself is very slim. Coupling it with a reduction in income and corporate taxes improves its chances, but still makes it tough politically. This is why we half-heartedly endorsed McCain's $300 million initiative to award individuals or corporations who developed better battery technology. It's not the broad, market based solution we hoped for and RD mocked, but if McCain is elected President, it has a far better chance of passing Congress than his and our preferred carbon tax.

And all of these things have a better chance of passing if they are lumped together with increased drilling--a policy supported by a significant majority of Americans.

Part of the reason we disagree with some of you about drilling is that we do not entirely agree with the assumptions on which you base your conclusions.

We get the idea of "peak oil." We understand the price distorting effect of a cartel like OPEC. But we think some of these things are overblown. OPEC's influence has been overstated since the trade embargoes of 1979. Since then, their influence has diminished and with the increased supply coming from Canada's oil sands (our largest single supplier), they have been diminished even further. This isn't to say they have no or little effect, simply that their influence is less than you think because it's easy to demonize and hate the terrorist/oil producing countries.

Regarding peak oil and how that plays into this conversation, RD and some of the rest of you don't like the idea of drilling because it prolongs the influence and control OPEC has on the price of oil and therefore the American economy, national security, and our international interest. We don't like the idea of funding Saudi Wahabbists anymore than the rest of you. However, we believe that between the outer continental shelf, ANWR, and non-traditional supplies of oil found in shale-oil and Canada's oil sands, the increased supply will both decrease the price of oil in the long run and the price influence (what is the technical term? control of marginal supply?) of the OPEC cartel. Some estimate that shale-oil and other non-traditional oil reserves are actually several times greater than the oil reserves of OPEC nations. Again, accessing these resources would significantly diminish OPEC's cartel influence.

We are optimistic about oil because we believe that higher prices will drive the market to find more sources of oil like thermal depolymerization which could potentially manufacture oil indefinitely from things like garbage, sewage, and agricultural waste. We also believe that improvements in technology will make more oil more accessible. Higher prices and technology led to large oil field finds in the Gulf of Mexico, off the coast of Brazil and of course drove the development of Canada's oil sands. We do not foresee a peak oil collapse in the near or even mid-term because of these factors. Heck, our faith in the markets is such that we think prices will eventually drive a near-seamless transition from fossil fuel to some other, perhaps yet-to-be discovered energy source. This is what our study of history has shown us.

Within the general framework we outlined the other day, we are of course open to new and different ideas. Hopefully our drilling fetish makes sense to you when considered in light of our assumptions about supply, demand, OPEC, peak oil and the other things we've written about in this post. Or, you could do as Krauthammer suggested Congress was doing (h/t: S. Lybbert) with some of their recent legislative posturing--repealing first the law of supply and then the law of demand because, of course, they're laws so they must have been put in place by some other idiot Congress--probably a Republican one.

The truth is, we blame most of the rising cost of gasoline on the weak dollar. Greenspan, the guy who seems like he wishes we was still in the game, is largely responsible for cutting rates to far and leaving them their too long. If Bernanke follows through on his commitment to raise interest rates and strengthen the dollar, we expect gas prices to fall accordingly.
/superficialdrivel

[cue Raisin's predictable mocking impersonation]

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