Monday, August 03, 2009

Why are Democrats blocking release of Countrywide's records that document the origin of the mortgage crisis?

To its credit, CBS News reported this weekend that a variety of D.C. power players received sweetheart mortgage deals during the heyday of the real estate bubble. The main corporate player was Angelo Mozilo, CEO of Countrywide Financial, who curried favor with politicians, agency bureaucrats and regulators with 'special' loans.

True to form, however, CBS waits until the last paragraph of the story to unleash this bombshell:

"Democrats are blocking a Republican effort to subpoena Countrywide documents."

Why would Democrats obstruct discovery of these records?

Consider what we know so far. Among the recipients of sweetheart loans were then-Fannie Mae CEO Franklin Raines, former Fannie CEO James Johnson (an advisor to President Obama, according to CBS) and Minyon Moore, a former COO of the Democrat National Committee. All served in the Clinton administration.

How did Fannie Mae relate to Countrywide? CBS explains that Fannie "bought billions in toxic Countrywide loans that defaulted at taxpayer expense."

Raines was finally forced out of Fannie in 2004 over allegations of a $10 billion accounting fraud. Although he claimed innocence, he finally agreed to settle the suit with the government in 2008 and said he would pay back a "few million of the [approximately] $50 million... he [allegedly] obtained illegally."

All told, Franklin Raines pulled down $90 million in Fannie Mae compensation before the implosion. Clinton Deputy Attorney General and FNMA Vice Chair Jamie Gorelick made $26 million. Obama adviser and FNMA vice-chair James Johnson pulled in $21 million -- in one year. A few years later, the entire house of cards collapsed, leaving American taxpayers on the hook for trillions.

Moreover, a secretive "Countrywide program" gave special loans to connected individuals including the Democratic Chairman of the Senate Banking Committee, Sen. Christopher Dodd, and the chairman of the Senate Budget Committee, Democrat Kent Conrad.

Put simply, Democrats used Fannie Mae like their own personal piggy bank, leveraging holdovers from the Clinton administration and other sympathetic officials. And what were Republicans and indpendent officials doing at the time? Trying to sound the alarm.

For example: in 2003, the Bush administration tried to rein in Fannie's top managers, all of whom were ex-Clinton staffers.

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago... Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry...

...The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

And why did the Bush administration fail at reforming Fannie Mae ?

Among the groups denouncing the proposal today were the ...Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” ...Representative Melvin L. Watt, Democrat of North Carolina, agreed.

On a straight party-line votes in committee after committee, Democrats procedurally stonewalled any increased oversight of the GSEs.

And Republicans weren't the only ones anxious to address the problems. Officials at the Federal Reserve publicly expressed their concerns as well.

In February 2004, Alan Greenspan warned that, unless reined in, Fannie and Fredde could cost taxpayers dearly. At the time, Greenspan stated that Fannie and Freddie "have grown so rapidly and accumulated so much debt that they cannot adequately hedge against the risks of financial crises." The Fed chairman said both entities, which then held about $2 trillion worth of obligations tied to home mortgages, had grown much faster than their competitors because investors believed the federal government would simply bail them out in a crisis.

Why are Democrats blocking the release of Countrywide's records?

The answer is obvious. The close ties between Countrywide and the Clinton-controlled GSEs, the Fannie Mae accounting scandals, the failure to properly oversee and regulate the GSEs, all of the major blunders and criminality that led to the financial crisis have Democrat cronies laced throughout.

The blood of the economy is on Democrat hands.

It's time for the truth: call a Democrat representative near you and demand a full release of the Countrywide records. The American people demand it.

Linked by: The Anchoress, Ed Morrissey, Memeorandum, PrairiePundit and Provocateur. Thanks!

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