Video Reports: Statements and Positions of the Candidates
John McCain warned about problems with Fannie Mae and Freddie Mac several years ago
McCain Warned About Economic Collapse Over Two Years Ago
Mortgage crisis created by Carter and Clinton Administrations
October 2, 2008 – In 2003, President Bush warned Congress about the risky activities of Freddie Mac and Fannie Mae and proposed putting both entities under the Treasury Department for oversight. Bush cited a July 2003 report by outside investigators that Freddie Mac had manipulated its account procedures to fool investors.
However, Rep. Barney Frank (D-MA), who was the ranking Democrat on the House Financial Services Committee shot back at Bush: “These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
“Clearly, President Bush was right and Frank was wrong,” said TVC Executive Director, Andrea Lafferty. “President Bush saw the danger five years ago, and his warnings were ignored. Now, Frank is blaming Reagan economics and President Bush for this current crisis. But, it was his advocacy five years ago that helped create this disastrous situation.
Sen. John McCain (R-AZ), like Bush, was also warning about the coming mortgage crisis years ago, but his warnings were also ignored. In May 2006, for example, Sen. McCain co-sponsored the Federal Housing Enterprise Regulatory Reform Act, which would have reigned in Freddie Mac and Fannie Mae from posing a risk to the housing market. The legislation went into the Senate Committee on Banking, Housing, and Urban affairs – where it died. Sen. McCain warned about the activities of Freddie and Fannie and criticized Franklin Raines, the former CEO of Fannie Mae for his dismal leadership of this financial institution.
Carter/Clinton Administrations Created A Monster
The current mortgage crisis is rooted in the Community Reinvestment Act, (CRA), legislation signed into law by President Jimmy Carter in 1977. The legislation was pushed by groups like ACORN and it forced banks to make low-income loans to minorities. ACORN and other groups were claiming that banks were engaged in discriminatory behavior and “redlining” by refusing loans to individuals with questionable credit.
The CRA empowered the FDIC to punish banks that did not lend to low-income, risky individuals so they could own homes. Bank and mortgage lending policies were influenced by the rules demanded by CRA.
Thus, in order to avoid punishment by federal regulators, banks and mortgage companies began offering loans to risky individuals.
In 1995, President Clinton engineered a revision to the CRA – which committed nearly $1 trillion by banks for inner-city and low-income mortgages. Most of this money was funneled through a network of leftist groups like ACORN.
Clinton’s Secretary of Housing and Urban Development, Andrew Cuomo, made a series of decisions between 1997 and 2001 that helped create the current housing crisis. One of those decisions was to propel Fannie Mae and Freddie Mac into the subprime loan market. One rule permitted these groups to hold just 2.5% of capital to back their investments. Banks were required to hold 10%.
Howard Husock, director of the Manhattan Institute’s Social Entrepreneurship Initiative wrote a prophetic column for City Journal in 2000 on this $1 trillion dollar shakedown of the banking industry. In it, Husock noted: “The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.”
