Wednesday, July 23, 2008

The Rackets and Thugs: Fannie and Freddie

Paul Gigot hits a grand-slam. illustrates the perverse nature of Fannie and Freddie that has made them such a relentless and untouchable political force. Their unique clout derives from a combination of liberal ideology and private profit. Fannie has been able to purchase political immunity for decades by disguising its vast profit-making machine in the cloak of "affordable housing." To be more precise, Fan and Fred have been protected by an alliance of Capitol Hill and Wall Street, of Barney Frank and Angelo Mozilo.

In fact, Fan/Fred have purchased the loyalty of all the players who count. There is no better prototype for G K Chesterton's "Hudge/Gudge" duo than these crooks.

And there's more. Gigot's editorialists were on to the Fan/Fred scams back in 2003--and paid the price, as did others who asked questions.

...Freddie's accounting fiasco became public in 2003, while Fannie's accounting blew up in 2004. Mr. Raines was forced to resign, and a report by regulator James Lockhart discovered that Fannie had rigged its earnings in a way that allowed it to pay huge bonuses to Mr. Raines and other executives.

Such a debacle after so much denial would have sunk any normal financial company, but once again Fan and Fred could fall back on their political protection. In the wake of Freddie's implosion, Republican Rep. Cliff Stearns of Florida held one hearing on its accounting practices and scheduled more in early 2004.

He was soon told that not only could he hold no more hearings, but House Speaker Dennis Hastert was stripping his subcommittee of jurisdiction over Fan and Fred's accounting and giving it to Mike Oxley's Financial Services Committee. "It was because of all their lobbying work," explains Mr. Stearns today, in epic understatement. Mr. Oxley proceeded to let Barney Frank (D., Mass.), then in the minority, roll all over him and protect the companies from stronger regulatory oversight. Mr. Oxley, who has since retired, was the featured guest at no fewer than 19 Fannie-sponsored fund-raisers.

Hastert, the Land-Deal King of South BumF&^%, Ill. Imagine that!! Not only was he a witless twerp; he was complicit.

And it gets close to home, too:

Or consider the experience of Wisconsin Rep. Paul Ryan, one of the GOP's bright young lights who decided in the 1990s that Fan and Fred needed more supervision. As he held town hall meetings in his district, he soon noticed a man in a well-tailored suit hanging out amid the John Deere caps and street clothes. Mr. Ryan was being stalked by a Fannie lobbyist monitoring his every word.

On another occasion, he was invited to a meeting with the Democratic mayor of Racine, which is in his district, though he wasn't sure why. When he arrived, Mr. Ryan discovered that both he and the mayor had been invited separately -- not by each other, but by a Fannie lobbyist who proceeded to tell them about the great things Fannie did for home ownership in Racine.

When none of that deterred Mr. Ryan, Fannie played rougher. It called every mortgage holder in his district, claiming (falsely) that Mr. Ryan wanted to raise the cost of their mortgage and asking if Fannie could tell the congressman to stop on their behalf. He received some 6,000 telegrams. When Mr. Ryan finally left Financial Services for a seat on Ways and Means, which doesn't oversee Fannie, he received a personal note from Mr. Raines congratulating him. "He meant good riddance," says Mr. Ryan

Now Gigot makes it plain, joining Tim Carney (author of The Big Ripoff) in his indictment.

...about half of the implicit taxpayer subsidy for Fan and Fred is pocketed by shareholders and management. According to the Federal Reserve, the half that goes to homeowners adds up to a mere seven basis points on mortgages. In return for this, Fannie was able to pay no fewer than 21 of its executives more than $1 million in 2002, and in 2003 Mr. Raines pocketed more than $20 million. Fannie's left-wing defenders are underwriters of crony capitalism, not affordable housing

It bears repeating, but I will edit Gigot's remark slightly to include such cretins as Hastert:

Fannie's left-wing defenders are underwriters of crony capitalism, not affordable housing.

The abiding lesson here is what happens when you combine private profit with government power. You create political monsters that are protected both by journalists on the left and pseudo-capitalists on Wall Street, by liberal Democrats and country-club Republicans

If you think that this story is significant, it is. And the reason has nothing whatsoever to do with mortages, gross overcompensation, fraudulent accounting, foreclosures, or taxpayer-financing of all of the above.

The reason the story is significant is this:

Fannie Mae and Freddie Mac are prototypes for what Gummint Health Care will be.

Put THAT in your pipe and smoke it.

HT: FoxPolitics

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