House Republicans Ought to be Embarrassed about their Record on Fannie and Freddie

Washington, DC–(ENEWSPF)–April 28, 2010.  Rep. Spencer Bachus should know better.  In a long op-ed in Politico, the Alabama Republican talks at length about the supposed Democratic failure to reform the GSEs, but apparently President Bush’s “ownership society” doesn’t apply to Republicans taking responsibility for their own failures.  The Republican record on Fannie and Freddie is clear and embarrassing:

  • From 1995 to 2006 when the Republicans were in charge of Congress no bill to reform the GSEs passed Congress.
  • Republicans only held one vote in the House to regulate the GSEs—and the bill was opposed by President Bush.
  • Republicans in Congress did nothing when President Bush pushed Fannie and Freddie’s affordable housing goals to unsustainable levels.
  • While in the majority, Republicans never passed legislation to restrict subprime lending.  Rep. Bachus actually once believed in restricting subprime lending, even negotiating and compromising with Democrats in 2007, but he did not support the 2009 effort.

By contrast, House Democrats quickly spearheaded efforts to reform Fannie and Freddie after taking over the majority in 2007:

  • After only three months in the majority, Democrats on the House Financial Services Committee produced a tough GSE reform bill that the Bush administration supported. The bill passed the House within five months of Democrats taking control. Rep. Bachus voted against the bill.
  • House Democrats also pushed to include Fannie and Freddie reform in the 2008 stimulus bill, but their efforts were rejected by the Bush Administration.  The GSE reform bill stalled in the Senate due to the narrow partisan divide but ultimately passed in July 2008.

Even prior to taking the majority, Democrats pushed for reform of Fannie and Freddie:

  • In 2004, Democrats, while in the minority, objected to President Bush pushing Fannie and Freddie’s affordable housing goals. [“Fannie, Freddie to Suffer under New Rule, Frank Says,” Bloomberg, June 17, 2004]
  • In 2005, House Democrats worked with then-Financial Services Committee Chairman Mike Oxley to pass the only Fannie and Freddie reform bill to pass the House. In fact, every Democrat voted for the bill in committee.  Although some Democrats objected to unilateral changes when the bill reached the floor, the bill passed the House with overwhelming bipartisan support.
  • Senate Democrats then offered the Oxley bill in the Senate. However, the bill died because the Bush administration and Senate Republicans were opposed.

Democrats initiated and led the fight on mortgage reform and anti-predatory lending:

  • With Mel Watt and Brad Miller taking the lead starting in 2004, House Democrats pressed Republicans to adopt subprime lending rules in light of Federal Reserve Chairman Alan Greenspan’s refusal to use the HOEPA authority he had been given in 1994.
  • The House of Representatives in 2007, and again in 2009, passed tough measures designed to protect consumers from predatory lenders and prohibit the type of “liar loans” that were so prevalent in the years leading up to President Bush’s homeownership failures.
  • After House Democrats began working on anti-predatory lending legislation, the Federal Reserve in 2007 finally issued rules to regulate subprime lending pursuant to the 1994 Home Owners Equity Protection Act.

Democrats led the Fight for More Affordable Rental Housing:

  • Fought for a greater balance between affordable rental housing and homeownership, so people are not pushed into homeownership because Republican federal policy says this is the only way to have a decent place to live.

But Rep. Bachus apparently longs for the good old days when Republicans unabashedly pushed homeownership whether people could afford it or not.  Their record is clear.

President Bush on pressuring Fannie and Freddie:

  • “And so, therefore, I’ve called — yesterday, I called upon the private sector to help us and help the home buyers. We need more capital in the private markets for first-time, low-income buyers. And I’m proud to report that Fannie Mae has heard the call and, as I understand, it’s about $440 billion over a period of time. They’ve used their influence to create that much capital available for the type of home buyer we’re talking about here. It’s in their charter; it now needs to be implemented. Freddie Mac is interested in helping. I appreciate both of those agencies providing the underpinnings of good capital.” [President Bush, June 18, 2002]

Can’t afford the down payment? President Bush: “We can deal with that.”

  • “People take a look at the down payment, they say that’s too high, I’m not buying. They may have the desire to buy, but they don’t have the wherewithal to handle the down payment. We can deal with that. And so I’ve asked Congress to fully fund an American Dream down payment fund which will help a low-income family to qualify to buy, to buy.” [President Bush, June 18, 2002]

Even Bush appointees were concerned about the President’s agenda:

  • In December 2005, [FHA Commissioner] Mr. Montgomery drafted a memo and brought it to the White House. “I don’t think this is what the president had in mind here,” he recalled telling Ryan Streeter, then the president’s chief housing policy analyst.  It was an opportunity to address the risky subprime lending practices head on. But that was never seriously discussed. More senior aides, like Karl Rove, Mr. Bush’s chief political strategist, were wary of overly regulating an industry that, Mr. Rove said in an interview, provided “a valuable service to people who could not otherwise get credit.” While he had some concerns about the industry’s practices, he said, “it did provide an opportunity for people, a lot of whom are still in their houses today.” [NY Times, December 20, 2008]