Did the Democrats play a significant role in the current financial crisis?

Posted by: ST on October 3, 2008 at 9:50 am

It’s been well-documented, mostly by conservative writers, about how Democrats repeatedly hindered efforts by Republicans including John McCain at trying for a regulatory overhaul of Fannie Mae and Freddie Mac. The evidence exists in print and video that while the Bush admininstration and Republican members of the House and Senate were saying “we’ve got to do something about this,” Democrats like Rep. Barney Frank, House Financial Services Committee Chair, and Senator Chris Dodd, Senate Banking Committee Chair, were saying there were “no” problems with Fannie Mae and Freddie Mac.

Unfortunately, you wouldn’t know that by reading the pages of the New York Times, the self-proclaimed “newspaper of record” that has, to date, failed to shed any light on the facts mentioned above – and of course we know why. Today they’ve published a piece that blames the SEC … and Bush, for the blow up of our economy, without noting the promiment Democrats in the House and Senate who routinely downplayed what Republicans and regulators were saying was happening with Fannie Mae and Freddie Mac until both institutions imploded a few weeks ago. Now, these same Democrats are “demanding answers” of the administration when in reality they only have themselves to blame. Again, you wouldn’t know this if your sole source for news was the NYT.

While the NYT does its part in aiding the Obama campaign by blaming Bush, UK opinion writer Dominic Lawson hits the nail squarely on the head:

Yet when I see such senior Democrats as Barney Frank, Chairman of the House Financial Services Committee, and Christopher Dodd, Chairman of the Senate’s Banking Committee, play the part of avenging angels – well, I can only stand in silent awe at the sheer tight-bottomed nerve of it. These are men with sphincters of steel.

What is the proximate cause of the collapse of confidence in the world’s banks? Millions of improvident loans to American housebuyers. Which organisations were on their own responsible for guaranteeing half of this $12 trillion market? Freddie Mac and Fannie Mae, the so-called Government Sponsored Enterprises which last month were formally nationalised to prevent their immediate and catastrophic collapse. Now, who do you think were among the leading figures blocking all the earlier attempts by President Bush – and other Republicans – to bring these lending behemoths under greater regulatory control? Step forward, Barney Frank and Chris Dodd.

[...]

It’s true that the improvident lending was not initiated by Fannie and Freddie: their role in this was to buy these loans and sell them on – but then the music stopped. Cynical students of the American political system will note that the biggest recipient of campaign contributions from the munificent duo of Fannie and Freddie over the past 20 years was one Christopher Dodd, Democrat Chairman of the Senate’s Banking Committee.

Rather surprisingly, given that he has only been in the Senate for four of those years, the second biggest beneficiary was Barack Obama. In August the Washington Post reported that Obama’s presidential campaign team had sought the advice of Franklin Raines “on mortgage and housing policy matters”. Perhaps Mr Obama’s team just wanted to know where all the bodies are buried – there are rather a lot of them.

The saddest outcome of all this within America – apart from the crippling cost to the nation’s taxpayers – is that the very people the Democrats had intended to help will be the biggest victims: for many years to come banks will demand the most stringent terms for mortgages to the least well off.

In the meantime, let us praise Senator Artur Davis of Alabama, who confessed this week: “Like a lot of my Democrat colleagues I was too slow to appreciate the recklessness of Fannie and Freddie when in retrospect I should have heeded the concerns raised. I wish my Democrat colleagues would admit that we were wrong.” I fear Senator Davis will not go far with this attitude – but at least he will be able to look at himself in the mirror.

A lot of conservatives have wanted McCain-Palin to drive this point home about how Democrats stymied Republican efforts at reform and greater oversight, and McCain released an ad earlier this week that touched on that point but without naming names. Gov. Palin touched on it last night as well, but did not name Democrat names. It’s been incredibly frustrating for a lot of us that the campaign has not hammered home this point, which many see would be a homerun in terms of getting worried and frustrated people to see exactly who it was who was trying to stop the blow up and exactly who it was who turned a blind eye to the issue. However, I was thinking about this morning and came to the conclusion that McCain-Palin are not yet naming names because they are waiting for the bailout bill to pass both houses in Congress and is signed off on by the Prez. Once that happens, perhaps they’ll unleash this attack. Blogger Ace of Spades speculates this is what will happen as well:

John McCain is waiting until the bill passes.

And then he will unleash the dogs of war.

And he will say, “I stayed away from making these partisan attacks, even though you lied ridiculously about me and your own attempts at ‘reform.’ I held back, because partisan attacks — even truthful ones — would harm our country and reduce the chances of getting a vital bill passed.

“Well, the bill is now passed. I put country first. You didn’t, and you lied on top of that. And now — only now that this crisis has been dealt with, to the extent we can — I’m going to give you a bit of straight-talk about Fannie, Freddie, my attempts to reform it, and your attempts to block reform on behalf of your big donors and friends in ACORN.”

I hope he’s right.

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  • 5 Responses to “Did the Democrats play a significant role in the current financial crisis?”

    Comments

    1. Great White Rat says:

      PARTY TIME!!! <:-p

      Our favorite blog turns five years old today…congrats, ST!! And here’s to many more to come!!

      I’ll bring the cake, but do not expect me to sing. :d

      The first post

    2. Thanks, GWR! I had forgotten to put up a post about it up until a few minutes ago :D

    3. greg says:

      I’ve also assumed that McCain is waiting for the bailout to pass to respond to the Dodds’ and Franks’ who are attempting to pass this off as a Republican problem.
      I hope once it’s passed he’ll let loose and remind everyone what got us here.
      Congratulations on 5 years. It’s great to have one of my favorite bloggers here in my home town.

    4. TomStPaul says:

      It is too simplistic to pin the financial crisis on Fannie and Freddie. There is lots to fault in the behavior of Fannie and Freddie and in government oversight of them – the decisions of management, the lobbying efforts that were funded by their ability to extract a premium from the implicit government guarantee – all of this was a big problem. However, as the Lawson opinion article itself points out, only half the loans were ultimately gauranteed by Fannie/Freddie and these weren’t even the riskiest half. Too much liquidity in the market and lack of effective regulation caused the housing bubble. This bubble would have happened (but may have been smaller) even without the existence of Fannie/Freddie.
      As far as the political game of which side is collecting more lobbying dollars from Fannie/Freddie, it is fair to say that whomever was in the current position to influence decisions that would impact Fannie/Freddie was going to get the poliical contributions from them. This includes Dems and Reps. No different for most lobbyists, actually.