Question: I've heard several times that Dodd and Frank were somehow

[wiggs]

responsible, in part, for staving off regulation of Fannie and Freddie. Yet when I google I get mostly RW sites repeating that meme, plus a quote from Frank in 2003 that FM and FM aren't in financial trouble. I don't find anything definitive that shows that Frank or Dodd did anything since 2007 when in power...nor do I see anything that describes their role prior to 2007 in squashing GOP efforts to regulate financials.

Hard for me to believe that dems are any more responsible for deregulation than republicans but would like to know the facts.

Can someone fill me in or provide a link that connects Frank or Dodd to deregulation? Or does it not exist because the meme is a deception?

Thanks

[Ashy Larry]

1. I have heard that too but I think its nonsense.

Barney Frank explained his role to Bill O'Reilly here:
http://www.youtube.com/watch?v=yrfPMa3lONU

You'll notice that Bill concedes on the regulation issue and just yells at Barney for supposedly giving bad investment advice (which isn't true either).

Its kind of like when Bush failed during Katrina and every republican instantly started blaming the mayor and the governor (democrats) for the entire mess.

[immoderate]

2. I'm wondering too...

Especially since both houses and the administration were all Republican controlled in 2003.

--IMM

[JHB]

3. Not much as a primary source, but to help you in digging...

On "The Mortgage Professor" site, here's part of a March 10, 2003 post on:

"What are Fannie Mae and Freddie Mac, and what do they do?"

http://www.mtgprofessor.com/A%20-%20Secondary%20Markets/what_do_fannie_and_freddie_do.htm

Do I have anything at stake in this issue?

If you are a potential borrower eligible for a conforming loan, your interest rate will probably be about 1/4% lower than it would be absent the GSEs. This reflects their relatively low funding costs, part of which is passed through to borrowers.

In addition, if you are a low or low-to-moderate income borrower, and/or reside in an underserved area, you might find a loan through a GSE. As part of their public responsibility, the GSEs commit to purchase specified numbers of such loans. How many would not be made without the GSEs, however, is not clear.

As a taxpayer, on the other hand, you have a cause for concern. The low borrowing costs of the GSEs is based on implicit Government backing for their $3+ trillion of debt and guarantees. If the GSEs ever have a financial disaster, the Government will have to bail them out and you and I will be on the hook for the cost.

"Is anybody regulating the GSEs to prevent such a disaster?"

A few years ago Congress gave that responsibility to the Department of Housing and Urban Development (HUD). Very few informed observers believe that HUD is up to the task.

"Is there a way to eliminate the risk of a financial disaster by removing Government support without hurting investors who rely on that support?"

It could be done by 1) revoking the credit line the GSEs now have with the Treasury, and b) providing an explicit Federal guarantee of all debt and GSE guarantees outstanding on the date the credit line is revoked. An explicit guarantee on the old claims would prevent any repercussions in the financial markets, yet put the markets on notice that news ones are not guaranteed. Over time, the volume of guaranteed claims would gradually decline.

Copyright Jack Guttentag 2003
-------------------------------------
So you might want to look at HUD's role in overseeing the FM's, especially since we know what fanatics Bush appointees are about business regulation (of course, it's the wrong way....).

[jkshaw]

4. Could be the "You did it too!" syndrome

Bunch of schoolyard kids. Every mother and/or teacher has heard it.

[JHB]

5. Meet James B. Lockhart, III, regulator of Fannie & Freddie

http://www.ofheo.gov/about.aspx?Nav=78

Meet Director James B. Lockhart III

James B. Lockhart, III, is the Director (CEO) and Chairman of the Oversight Board of the Federal Housing Finance Agency, regulator of Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. He assumed that position with the signing of the Housing and Economic Recovery Act on July 30, 2008. He remains the Director of OFHEO, which is now part of FHFA. He was nominated by President Bush to that position and confirmed by the Senate in June 2006.

From 2002 to 2006, Mr. Lockhart served as Deputy Commissioner and Chief Operating Officer of the Social Security Administration and as Secretary to the Social Security Board of Trustees. He was a member of President Bush’s Management Council and its Executive Committee. Lockhart served in the previous Bush Administration as Executive Director (CEO) of the Pension Benefit Guaranty Corporation from 1989 until 1993.

Mr. Lockhart co-founded and served as managing director of NetRisk, a risk management software and consulting firm serving major financial institutions, banks, insurance companies and investment management firms worldwide. He has an extensive background in financial services management including insurance, investment banking and pensions.

He has served as Senior Vice President, Finance, at National Reinsurance, Managing Director at Smith Barney, Treasurer of Alexander & Alexander, and as Assistant Treasurer of Gulf Oil in Europe and the U.S. He has served as a member of the American Benefits Council’s Board of Directors and on the Advisory Board to the Task Force for the Critical Review of the US Actuarial Profession.
A native of Connecticut, Lockhart is married and has two children. He graduated from Yale University with a bachelor’s degree and received a master’s degree from Harvard Graduate School of Business Administration. He also served as a Lieutenant (j.g.) in the U.S. Navy aboard a nuclear submarine.

--------------------------------------------------------
Who ran OFHEO before him?

[JHB]

7. 2004 WAPO column on Armando Falcon Jr., Lockhart's predecessor

http://www.washingtonpost.com/wp-dyn/articles/A30436-2004Dec27.html

A Gutsy David Takes On a Goliath

By Cindy Skrzycki
Tuesday, December 28, 2004; Page E01

There are no awards for moxie in regulating, but if such a program is ever established, supporters of Armando Falcon Jr., director of the Office of Federal Housing Enterprise Oversight, would probably nominate him. The tiny agency was created in 1992 to oversee Fannie Mae and Freddie Mac, two government-backed housing financiers with assets and mortgage guarantees adding up to more than $3 trillion.

"Courage is something any good regulator needs," said Cary Coglianese, chairman of Harvard University's Kennedy School of Government Regulatory Policy Program. "Because they get delegated the tasks that Congress can't muster the courage to do itself."

-----------------

[stillcool]

6. I don't know..

but here's some stuff that might be helpful.
http://www.whereisthemoney.org/hotseat/stanleysporkin.htm



Greenspan: Limit Fannie Mae, Freddie Mac

Washington (April 7, 2005)
By WebCPA staff
|

In remarks before the Senate Banking Committee, Federal Reserve Chairman Alan Greenspan urged lawmakers to curtail the portfolios of mortgage concerns Fannie Mae and Freddie Mac, stating that stronger regulation may not be sufficient.

"Without restrictions on the size of balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for home ownership,'' Greenspan said.

Fannie Mae and Freddie Mac are the first and second largest buyers and guarantors of home mortgages, respectively.

However, both became embroiled in billion-dollar accounting scandals over the past year, prompting many to call for tighter regulation of the concerns. Fannie Mae, for example, said that it would need to restate earnings by at least $8.4 billion.

And earlier this week, Armando Falcon -- director of the Office of Federal Housing Enterprise Oversight, the agency that oversees both Fannie Mae and Freddie Mac -- said that he would step down May 20.

Falcon's resignation letter to President Bush comes as lawmakers have introduced legislation that would shutter OFHEO and create a stronger overseer for both.
http://www.webcpa.com/article.cfm?articleid=12085



CQ TODAY MIDDAY UPDATE
March 9, 2007 – 1:53 p.m.
Frank Offers Revised Fannie Mae, Freddie Mac Bill

House Financial Services Chairman Barney Frank plans to introduce a revamped proposal to overhaul regulation of Fannie Mae and Freddie Mac today in hopes of boosting the chances to move legislation this year.

The Massachusetts Democrat’s new version would alter the specifics of a controversial affordable housing fund and give the individual states the authority to distribute a percentage of the companies’ huge investment portfolios, according to a Frank spokesman.

The changes could help eliminate some of the politically contentious issues that have scuttled previous attempts to tighten regulation of the mortgage finance giants.

Lawmakers have tried to move legislation during the last three congressional sessions. The efforts were derailed each time by partisan bickering, intense lobbying and an inability to agree on how best to oversee Fannie Mae and Freddie Mac. Both companies had faced significant accounting problems.

Last year’s effort was stymied in part by disagreements over the risk posed by the companies’ investment portfolios — which last year were estimated to be worth as much as $1.5 trillion — and whether to include affordable housing fund language
http://www.cqpolitics.com/wmspage.cfm?docID=cqmidday-000002467032
http://www.washingtonpost.com/wp-dyn/articles/A12665-2004Oct6.html


WASHINGTON (Reuters) - Fannie Mae on Tuesday reported a $2.51 billion loss in the first quarter as the U.S. housing crisis drove the mortgage finance company to a third straight quarterly loss.

The company has spent years recovering from an accounting scandal and fending off the threat of a tough, new regulator. Yet, the government-chartered company has also been called upon to help stabilize the national housing market in recent months.

Below is a timeline of some significant events for Fannie Mae.

On Tuesday, Fannie Mae's regulator eased some rules put in place after an accounting scandal and promised to ease capital requirements later this year. Separately, the company pledged to build a $6 billion cushion against possible losses.

April 18 - The Office of Federal Housing Enterprise Oversight, Fannie's regulator, settles case against former Fannie Mae executives who will pay over $30 million in combined fines, though company and insurance will cover most costs.

March 19 - Fannie Mae and Freddie Mac, its mortgage-finance cousin, pledge to pump $200 billion into the troubled housing market after the regulator eases some capital constraints put in place after accounting scandals.

February - Fannie Mae reports a $3.6 billion loss for the fourth quarter and regulator OFHEO lifts the cap on the company's investment holdings put in place after accounting woes.

December 2007 - Fannie Mae priced a record $7 billion preferred stock issue in a bid to shore up its capital base under pressure from regulators and in the face of housing declines.

Late Summer 2007 - Political allies of Fannie Mae call for the company to be permitted to make larger mortgage investments to help stabilize the housing sector.

December 2006 - Fannie Mae restates earnings for 2002, 2003 and the first half of 2004 by $6.3 billion.

December 2004 - Fannie Mae states that it must correct years of improper accounting, forcing an ouster of top executives. Regulator OFHEO demands company hold more capital and creates tough oversight regime in wake of the announcement
http://www.reuters.com/article/ousivMolt/idUSN0648043420080506?pageNumber=2&virtualBrandChannel=0&sp=true

[wiggs]

8. kick for daylight. still no real link, which is an answer in itself. nt