Diary

Bagdad Bob Gibbs Claims No Moral Hazard in Housing Plan

“It is not going to help a lender who knowingly made a bad loan.”

Bagdad Bob Gibbs

Of course it’s not going to help a shady mortgage originator that sold off the cash flows to the aiding and abetting Fannie Mae & Freddie Mac.  That mortgage originator took his or her cut long ago and passed the risk off to Fannie & Freddie, who used us, the taxpayers, as the ultimate financial backstop.  Since the risk lies with the guarantor, it is the guarantor (i.e. Fannie/Freddie) that is in essense approving the loan.  And yet Obama’s Housing Plan covers $200 Billion of these Fannie/Freddie errors.

Quoting Katherine Jean Lopez of the National Review regarding the infamous biased December 21 New York Times article (link omitted intentionally),

the (New York Times) reporters gave glancing attention to the fact that it was this Administration that pushed for strengthened regulation and oversight, greater transparency, and housing reform.

The story also gives kid glove treatment to Congress. While the Administration was pushing for more transparent lending rules and strengthening oversight and supervision of Fannie and Freddie, Congress for years blocked attempts at stronger regulation and blocked reform of the Federal Housing Administration. Democratic leaders brazenly encouraged Fannie and Freddie to loosen lending standards and instead encouraged the housing GSEs to play a larger and larger role in the housing market — even while explicitly acknowledging the rising risks. And while the story notes the political contributions of some banks to Republicans, it neglects that political contributions from Fannie Mae and Freddie Mac overwhelmingly supported Democratic officials — in particular the chairmen of the banking committees. In fact, even in the midst of what by then was a housing crisis, it took Congress nearly a full year to pass specific legislation called for by the President in the summer of 2007, especially legislation to reform oversight of Fannie Mae and Freddie Mac.

There are many more reporting failures in this story — failure to consider the impact of monetary policy; ignoring the regional nature of housing markets; and ignoring the Bush Administration’s historic proposal to overhaul the nation’s regulatory system, for example. But then a review of these issues would wave complicated the reporters’ myopic point of view that only Bush Administration policies could possibly be responsible for the housing and finance crises.