Diary

About Time

At long last, the McCain campaign has finally decided to take the gloves off concerning the failures of Fannie Mae and Freddie Mac, McCain’s efforts to warn anyone who would listen concerning the precarious positions that Fannie and Freddie had and Barack Obama’s do-nothing response to the storm clouds that had gathered over Fannie and Freddie long ago.

To get an idea of just how disastrous things were at Fannie–which, let us be reminded, was a wholly governmental creation–read this:

When the mortgage giant Fannie Mae recruited Daniel H. Mudd, he told a friend he wanted to work for an altruistic business. Already a decorated marine and a successful executive, he wanted to be a role model to his four children — just as his father, the television journalist Roger Mudd, had been to him.

Fannie, a government-sponsored company, had long helped Americans get cheaper home loans by serving as a powerful middleman, buying mortgages from lenders and banks and then holding or reselling them to Wall Street investors. This allowed banks to make even more loans — expanding the pool of homeowners and permitting Fannie to ring up handsome profits along the way.

But by the time Mr. Mudd became Fannie’s chief executive in 2004, his company was under siege. Competitors were snatching lucrative parts of its business. Congress was demanding that Mr. Mudd help steer more loans to low-income borrowers. Lenders were threatening to sell directly to Wall Street unless Fannie bought a bigger chunk of their riskiest loans.

So Mr. Mudd made a fateful choice. Disregarding warnings from his managers that lenders were making too many loans that would never be repaid, he steered Fannie into more treacherous corners of the mortgage market, according to executives.

For a time, that decision proved profitable. In the end, it nearly destroyed the company and threatened to drag down the housing market and the economy.

Dozens of interviews, most from people who requested anonymity to avoid legal repercussions, offer an inside account of the critical juncture when Fannie Mae’s new chief executive, under pressure from Wall Street firms, Congress and company shareholders, took additional risks that pushed his company, and, in turn, a large part of the nation’s financial health, to the brink.

Between 2005 and 2008, Fannie purchased or guaranteed at least $270 billion in loans to risky borrowers — more than three times as much as in all its earlier years combined, according to company filings and industry data.

“We didn’t really know what we were buying,” said Marc Gott, a former director in Fannie’s loan servicing department. “This system was designed for plain vanilla loans, and we were trying to push chocolate sundaes through the gears.”

There is a great deal of whining in the story to the effect that Fannie Mae and its executives would never have blundered so disastrously if the poor little darlings were not pressured by so many mean people bent on making money. To which, Tom Maguire, from whom I got the story, responds that “Maybe we should simplify the requirements for these jobs.  Let’s distill them down to (a) having a backbone and (b) demonstrating an ability to use the word ‘no’.”

Amazing that this actually has to be written, nyet?

Equally welcome is this:

House Republicans defended “deregulation” in advance of House Oversight and Government Reform hearings designed to assign blame for the financial market crisis that prompted Congress to pass a $700 billion rescue plan last week.

“In the midst of the most serious financial crisis in a generation, some claim that deregulation is entirely to blame,” states the report, which was written by Republican staff on the oversight committee.

“This is simply not true and more importantly serves to grossly oversimplify a problem whose roots run deep and involve myriad actors and issues.”

The report instead points a finger at a few large institutions, in particular Fannie Mae and Freddie Mac. These mortgage giants, with portfolios that skyrocketed in value between 1990 and 2005, were a “central cancer of the mortgage market, which has now metastasized into the current financial crisis,” the report states.

These points should make up the meat and bones of every single campaign speech and appearance by McCain, Sarah Palin and their campaign staffers. Every. Single. Campaign. Speech. And. Appearance. And they need to be repeated to the point that people can be awakened out of drunken slumbers and can recite the punchy phrases from those speeches and appearances automatically, no matter how tired and out of it they are upon waking up.