Beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Fannie and Freddie became their largest buyers between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and magnified the costs of its eventual collapse.
When irregularities continued to surface, McCain and others warned of the coming mortgage crisis. In 2005, McCain spoke in favor of the Federal Housing Enterprise Regulatory Reform Act of 2005 from the floor of the Senate: "For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…." McCain pointed to a $10.6 billion accounting scandal at Fannie Mae where their quarterly reports of profit growth were "illusions deliberately and systematically created" by the company's senior management. McCain called for reform.
A recent Glenn Beck article chronicles the repeated calls for reform by President Bush and his administration since 2001. They not only warned of the systemic consequences of a Fannie and Freddie failure but suggested thoughtful plans to reduce the risk. His warnings went unheeded and his attempts to reform were blocked by Democratic legislative maneuvering.
What was our champion of change and hope doing about the problem? Nothing! Records from the Federal Election Commission reveal a possible reason for Obama’s silence. In his three complete years in the Senate, he’s the second largest recipient of Freddie-and--Fannie-connected campaign contributions. It took Sen. Christopher Dodd, chairman of the Senate banking committee, eleven years to receive $165,400 in contributions from GSE PACs and individuals. Obama received $126,349 in just three years.
WorldNetDaily’s Jerome R. Corsi reported on Obama advisors with strong Fannie Mae connections. James Johnson, earning millions as Fannie Mae CEO from 1991 to 1998, was appointed to head Obama's vice presidential selection committee until alleged questionable real estate loans from Countrywide Financial forced him to step down. Obama housing advisor, Franklin Raines, earned $90 million as Fannie Mae CEO from 1999 to 2004.
Free market capitalism didn’t create this crisis. The Democrats’ "progressive" social policies helped stifle free market checks and limit appropriate regulatory oversight. The same politicians who today decry the lack of intervention to stop past abuses were the ones who blocked the legislative efforts that might have stopped them. While McCain is leading, Obama’s watching. Barack’s a great talker, but he’s remained inactive when he should have been part of the solution.