Sunday, September 21, 2008

McCain Has No Clue

John McCain brags that a few years ago he supported reform of Fannie Mae and Freddie Mac, changes that allegedly would have averted the problems we now witnesses. That's balderdash. He did not support converting those government-sponsored enterprises into organizations without access to government favors or an implicit guarantee of bailout. Rather he merely supported new "independent" government oversight of those privileged corporations. Here's the Congressional Research Service summary of the Federal Housing Enterprise Regulatory Reform Act of 2005:
Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.
Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.
As though "independent" oversight could have avoided the problems better than HUD oversight. The issue hasn't been lack of oversight, but intervention designed to countervail the market process in order to promote home ownership among people who couldn't otherwise have afforded it. Not coincidentally, this brought great profits to the financial, homebuilding, and real-estate industries. Nothing short of blocking Fannie's and Freddie's path to the taxpayers' wallets could have turned things around.

Yeah, a real maverick.

3 comments:

Anonymous said...

Bravo to Sheldon Richman for debunking the new GOP myth. It seems to have originated with Investors Business Daily and the right wing echo chamber has picked it up, including "libertarian" sites like Q&O.
It's no coincidence that every site spreading this myth is pro-war, pro-McCain.

Bob Weber

Chris Baker said...

Is McCain still taking orders from Charles Keating?

Oddsman M. said...

Great job as usual, Sheldon, but IMO the real problems will come when people find out the credit derivatives "market" (and I use the term loosely) FAR exceeds a "mere" Trillion bucks, and could easily turn wrong on any number of those bets. When that happens, the cascading counterparty defaults this taxpayer bailout delayed will happen anyway. Then the dollar will become even more like asswipe, and people will blame us libertarian types since we've had so much power & influence over the past 2 decades.