[Congressional Record Volume 154, Number 153 (Thursday, September 25, 2008)]
[House]
[Pages H9950-H9951]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 IT IS INAPPROPRIATE TO TURN OVER OUR ECONOMIC SYSTEM TO THE GOVERNMENT

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from North Carolina (Ms. Foxx) is recognized for 5 minutes.
  Ms. FOXX. Madam Speaker, I feel certain that some of my colleagues 
have already broached the issue of the topic that has been consuming us 
around here for the last 4 days, and that has been the topic that is 
most being discussed on the news and I think by many Americans. I know 
that in speaking to my colleagues on both sides of the aisle, that we 
have all received many, many telephone calls about the issue of our 
economy. And again it is very much on our minds and it is the thing 
that is pretty much dominating everyone's thinking.
  I came tonight because last night I talked a little bit about the 
situation that we have and my concern about the blame game. Ever since 
there was the announcement that we have a problem with our economy that 
the President and Secretary of Treasury have announced that we need to 
do something drastic about our economy, there have been a lot of people 
pointing fingers. We've heard a lot, particularly from the Democrats, 
saying that this is a Republican problem, you deal with it. But as we 
see more and more in the news and more and more in documents, we learn 
that Republicans and even nonpartisan people such as Alan Greenspan 
when he was chairman of the Federal Reserve warned that something 
needed to be done about this situation or we were going to very much be 
in the situation that we find ourselves in and that the root of this 
problem was the problem with the two agencies called Fannie Mae and 
Freddie Mac. These are agencies that were set up many years ago to deal 
with helping people who were low-income people or disadvantaged people 
or minorities get low-income loans and be able to buy homes.
  We've learned again a great deal about the fact that there was 
insufficient oversight of those two agencies, and that when Republicans 
raised the issue of better oversight, more effective oversight, they 
were often blocked. There was an article in Friday's Washington Post by 
Al Hubbard and Noam Neusner entitled ``Where Was Senator Dodd?'' And 
the subheadlines, ``Playing the Blame Game on Fannie and Freddie.'' I 
would like to submit the entire article. I'm not going to read it all.
  Madam Speaker, let me just read a bit of it. ``Taxpayers face a tab 
of as much as $200 billion for a government takeover of Fannie Mae and 
Freddie Mac, the formerly semi-autonomous mortgage finance 
clearinghouses. And Senator Christopher Dodd, the Democratic chairman 
of the Senate Banking Committee, has the gall to ask in a Bloomberg 
Television interview, ``I have a lot of questions about where was the 
administration over the last 8 years.
  ``We will save the senator some trouble. Here is what we saw 
firsthand at the White House from late 2002 to 2007: Starting in 2002, 
White House and Treasury Department economic policy staffers, with 
support from then-Chief of Staff Andy Card, began to press for 
meaningful reforms of Fannie, Freddie and other government-sponsored 
enterprises.''
  And then it goes on to talk about it. And it chronicles all of the 
problems that were put up to the administration when they brought these 
issues up. There are many, many other articles that are out, as I said, 
talking about this.
  Now, I am not one who is in favor of the plan that was brought to us 
by Secretary Paulson at the beginning of this week. Many of us here 
really believe in this country, and we believe in the principles that 
undergird this country. They are the rule of law, our Judeo-Christian 
heritage and capitalism. Those are the things that have made our 
country great. And it is not appropriate to turn over our economic 
system to the government.

               [From the Washington Post, Sept. 12, 2008]

                          Where Was Sen. Dodd?

                    (By Al Hubbard and Noam Neusner)

       Taxpayers face a tab of as much as $200 billion for a 
     government takeover of Fannie Mae and Freddie Mac, the 
     formerly semi-autonomous mortgage finance clearinghouses. And 
     Sen. Christopher Dodd, the Democratic chairman of the Senate 
     Banking Committee, has the gall to ask in a Bloomberg 
     Television interview: ``I have a lot of questions about where 
     was the administration over the last eight years.''
       We will save the senator some trouble. Here is what we saw 
     firsthand at the White House from late 2002 through 2007: 
     Starting in 2002, White House and Treasury Department 
     economic policy staffers, with support from then-Chief of 
     Staff Andy Card, began to press for meaningful reforms of 
     Fannie, Freddie and other government-sponsored enterprises 
     (GSEs).
       The crux of their concern was this: Investors believed that 
     the GSEs were government-backed, so shouldn't the GSEs also 
     be subject to meaningful government supervision?
       This was not the first time a White House had tried to 
     confront this issue. During the Clinton years, Treasury 
     Secretary Larry Summers and Treasury official Gary Gensler 
     both spoke out on the issue of Fannie and Freddie's 
     investment portfolios, which had already begun to resemble 
     hedge funds with risky holdings. Nor were others silent: As 
     chairman of the Federal Reserve, Alan Greenspan regularly 
     warned about the risks posed by Fannie and Freddie's 
     holdings.
       President Bush was receptive to reform. He withheld 
     nominees for Fannie and Freddie's boards--a presidential 
     privilege. While it would have been valuable politically to 
     use such positions to reward supporters, the president put 
     good policy above good politics.
       In subsequent years, officials at Treasury and the Council 
     of Economic Advisers (especially Chairmen Greg Mankiw and 
     Harvey Rosen) pressed for the following: Requiring Fannie and 
     Freddie to submit to regulations of the Securities and 
     Exchange Commission; to adopt financial accounting standards; 
     to follow bank standards for capital requirements; to shrink 
     their portfolios of assets from risky levels; and empowering 
     regulators such as the Office of Federal Housing Oversight to 
     monitor the firms.
       The administration did not accept half measures. In 2005, 
     Republican Mike Oxley, then chairman of the House Financial 
     Services Committee, brought up a reform bill (H.R. 1461), and 
     Fannie and Freddie's lobbyists set out to weaken it. The bill 
     was rendered so toothless that Card called Oxley the night 
     before markup and promised to oppose it. Oxley pulled the 
     bill instead.
       During this period, Sen. Richard Shelby led a small group 
     of legislators favoring reform, including fellow Republican 
     Sens. John Sununu, Chuck Hagel and Elizabeth Dole. Meanwhile, 
     Dodd--who along with Democratic Sens. John Kerry, Barack 
     Obama and Hillary Clinton were the top four recipients of 
     Fannie and Freddie campaign contributions from 1988 to 2008--
     actively opposed such measures and further weakened existing 
     regulations.

[[Page H9951]]

       The president's budget proposals reflected the nature of 
     the challenge. Note the following passage from the 2005 
     budget: Fannie, Freddie and other GSEs ``are highly 
     leveraged, holding much less capital in relation to their 
     assets than similarly sized financial institutions. . . . A 
     misjudgment or unexpected economic event could quickly 
     deplete this capital, potentially making it difficult for a 
     GSE to meet its debt obligations. Given the very large size 
     of each enterprise, even a small mistake by a GSE could have 
     consequences throughout the economy.''
       That passage was published in February 2004. Dodd can find 
     it on Page 82 of the budget's Analytical Perspectives.
       The administration not only identified the problem, it also 
     recommended a solution. In June 2004, then-Deputy Treasury 
     Secretary Samuel Bodman said: ``We do not have a world-class 
     system of supervision of the housing government-sponsored 
     enterprises (GSEs), even though the importance of the housing 
     financial system that the GSEs serve demands the best in 
     supervision.''
       Bush got involved in the effort personally, speaking out 
     for the cause of reform: ``Congress needs to pass legislation 
     strengthening the independent regulator of government-
     sponsored enterprises like Freddie Mac and Fannie Mae, so we 
     can keep them focused on the mission to expand home 
     ownership,'' he said in December. He even mentioned GSE 
     reform in this year's State of the Union address.
       How did Fannie and Freddie counter such efforts? They 
     flooded Washington with lobbying dollars, doled out tens of 
     thousands in political contributions and put offices in key 
     congressional districts. Not surprisingly, these efforts 
     worked. Leaders in Congress did not just balk at proposals to 
     rein in Fannie and Freddie. They mocked the proposals as 
     unserious and unnecessary.
       Rep. Barney Frank (D-Mass.) said the following on Sept. 11, 
     2003: ``We see entities that are fundamentally sound 
     financially. . . . And even if there were a problem, the 
     federal government doesn't bail them out.''
       Sen. Thomas Carper (D-Del.), later that year: ``If it ain't 
     broke, don't fix it.''
       As recently as last summer, when housing prices had clearly 
     peaked and the mortgage market had started to seize up, Dodd 
     call on Bush to ``immediately reconsider his ill-advised'' 
     reform proposals. Frank, now chairman of the House Financial 
     Services Committee, said that the president's suggestion for 
     a strong, independent regulator of Fannie and Freddie was 
     ``inane.''
       Sen. Dodd wonders what the Bush administration did to 
     address the risks of Fannie and Freddie. Now, he knows. The 
     real question is: Where was he?

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