I just won an argument with a conservative co-worker regarding whether the democrats were responsible for killing the 2005 regulatory reform effort, which "would have prevented the housing crisis". This diary focuses on the context of the rewriting of history with respect to the "republicans saw it coming" meme. There is a pervasive "blame the democrats"meme working its way into common thinking claiming that it was democrats who killed an attempt by
congressional republicans to fix a badly broken regulatory system over
fannie and freddy.
Conservative 'conventional wisdom' has already worked itself into the mental history of conservatives. It took only minutes to find news articles claiming all sorts of things... and a while to find facts. When he finally said "wow... I like Bush even less now..." I was quite pleased.
It took some work to assemble the facts, but here they are, in quick reference form, for you to use on your misguided conservative friends as well:
The whole argument started when my co-worker announced, loudly, an article from a McCain staffer claiming that McCain saw the foreclosure crisis coming, introduced a reform bill to head it off, and it was blocked by democrats. Then his usual tirade followed.
The CRA wasn't at fault. Carter wasn't at fault. Senate democrats
weren't at fault. Republicans are trying to rewrite history again.
First, a little bit of background. The regulatory reform effort was
comprised of two different bills: S190 in the senate, and H1461.
First, the house bill passed by a massive 331 to 90. There was no
democratic filibuster. The senate bill was referred back to committee from the floor, and was never voted on by the floor. Democrats never had the chance to block it, even had they wished to. Not only that, but the democrats wouldn't have needed to. Multiple folks said the bill was no good:
First, not only does the conservative AEI pan the bill:
HR 1461--a bill that was supposed to create a "world class regulator"--is in fact a world class failure. Not only does it fail to improve significantly upon the regulatory authority of the Office of Federal Housing Enterprise Oversight (OFHEO), but it actually increases the opportunities for Fannie and Freddie to exploit their subsidies in order to expand into other areas of residential finance.
So does president Bush himself!
"the Administration opposes the bill.."
...
"The regulatory regime envisioned by H.R. 1461 is considerably weaker
than that which governs other large, complex financial institutions. "
Now granted, later AEI goes back to
the more conservative talking points, and suggests that the senate bill is stronger, but when AEI goes on record as opposing the regulatory reform bill, you know there is enough opposition among republicans that the bill is going to die. And when the 'conservatives' support the Let's dig a little deeper and talk about the administration's position, some of the other conservative myths, and what the bills were really intended to do:
Myth 1) Democrats had the dream of home ownership for everyone, and
republicans were more pragmatic:
Not according to Bush's Secretary John Snow testimony:
Our national system of housing finance plays an important role in
promoting home ownership – a key priority of this Administration. We have seen tremendous progress in increasing home ownership in America, which now stands at 69 percent. Secretary Jackson and I share the commitment made by the President to expand home ownership to 5.5 million more minority homeowners by the end of the decade.
Banks were making too much money for them to want to stop lending to poor people! Of course conservatives are going to support massively expanded home ownership (not that helping the poor buy homes is a bad thing). And even more:
With the aid of these financial institutions, Americans have ready
access to a wide array of mortgage finance options. Our national system of housing finance plays an important role in promoting home ownership – a key priority of this Administration. We have seen tremendous progress in increasing home ownership in America, which now stands at 69 percent. Secretary Jackson and I share the commitment made by the President to expand home ownership to 5.5 million more minority homeowners by the end of the decade.
That figure, however, points to a significant homeownership gap between non-Hispanic whites and minorities. In June 2002, the President challenged the nation to create 5.5 million new minority homeowners by 2010. Since the President's challenge, 2.2 million minority families have joined the ranks of homeowners, and we are on track to meet the 5.5 million goal.
And Bush's HUD secretary goes into even more detail:
"These government sponsored enterprises can and must further use their
power in the marketplace to ensure that more low-income and minority families get on the path to homeownership."
By statute, HUD sets the annual affordable housing goals that require
a percentage of Fannie Mae and Freddie Mac's lending go to underserved borrowers and communities. The proposal is currently under a 15-day congressional review after which there will be a 60-day public comment period.
Looks like the Bush white house grabbed the flavor-aid and chugged it.
Myth 2) It was Barney Frank, a democrat, who was the key element of pushing a policy forcing fannie and freddie to buy up mortgages from subprime lenders and ruined the twin's legitimacy:
Well, Bush's HUD secretary doesn't agree:
Government-sponsored enterprises were chartered to help low- and moderate-income families secure mortgages. HUD recently published a rule that requires Fannie Mae and Freddie Mac to increase their purchases of mortgages for low- and moderate-income households and underserved communities. These new goals will push the GSEs to genuinely lead the market in creating homeownership opportunities for those traditionally underserved by the mortgage markets, particularly first-time homebuyers.
Nor does Bush's treasury secretary concur:
Another key power for the new regulator is the ability to review the
activities of a regulated entity, whether they be new activities or those in which the regulated entity already participates. We need to strengthen the activity review process, including greater public participation through notice and comment rulemaking. Meaningful reform will also give greater clarity to the types of activities that fall within the GSEs' mission, thus ensuring that new and existing activities focus the GSEs on promoting housing opportunities . These tools should be a meaningful part of the oversight of the housing GSEs.
Read that carefully. The treasury secretary is asserting that the regulator needs the power to force the GSE's to stay more in line with their mission. As we'll see, combined with HUD's new regulations, forcing GSE's to purge their portfolios and focus exclusively on home loans, combined with the regulations causing them to issue subprime paper, was that they were pushing the very same risky business that brought down the housing market!
And take a look at the de-facto controller for Fanne and Freddie, HUD
Wait a minute! Look down there on the list! HUD required Fannie and Freddie to issue subprimes?
"The FHA Payment Incentives Program, a new sub-prime loan product to
offer FHA insurance to families with credit problems who would otherwise be charged higher rates in the private sector or not get a loan at all"
!
Here's more!
http://www.aei.org/...
http://www.allbusiness.com/...
Myth 3) Democrats under Clinton exacerbated the problem by pushing the
federal home loan banks to buy up subprime (predatory) loans.
Well actually no... the Clinton era HUD secretary campaigned aggressively against that.
http://archives.hud.gov/...
http://archives.hud.gov/...
http://archives.hud.gov/...
http://archives.hud.gov/...
http://archives.hud.gov/...
http://archives.hud.gov/...
Myth 4) Democrats held Bush hostage on home loans, and he couldn't do
anything about it.
Bull. The HUD secretary is directly answerable to the president. A single executive order directing HUD to use its authority over the federal home loan banks would have been all that was necessary to stop the anti-predatory lending activity. Bush chose not to.
Feel free to use any of these silly little facts to deal with other conservatives. Can we please kill off the "blame democrats for the housing crisis" meme now?
Also, Hat tip to Heartland Eric, whose diary made it easy to find some of the information for this one.
***Update Thought***
Use these links to make republicans put their money where their mouth is: I bet most of them won't know that it was BUSH's HUD secretary Jackson who proudly announced that he was having Fannie Mae issue subprime loans. Take your winnings and make them even sweeter by donating them to progressives.