Did Congress Sell Out the U.S. Economy?
Friday, December 12, 2008 | Ethan RobertsRating:
Tycoon readers, there is a stink in the air, and it's coming from Washington!
Not exactly the cherry blossoms in bloom...
Internal Freddie Mac documents, obtained by the Associated Press, show that two members of the House Financial Services Committee, Bob Ney (R-Ohio), and Paul Kanjorski (D-Pa) were given expensive tickets to the first Washington Nationals home game in 2006, right near the dugout, and next to Freddie Mac executive, Hollis McLoughlin and four Freddie Mac in-house lobbyists.
View of Nationals stadium, far above where congressmen sit...
In addition, 11.7 million dollars were paid to 52 outside lobbyists and consultants that same year, including former House Speaker Newt Gingrich, who was paid $300,000. According to CNBC, "Gingrich talked and wrote about what he saw as the benefits of the Freddie Mac business model."
Furthermore, Freddie Mac reportedly spent $2 million on a Republican consulting firm called the DCI group to kill a tough regulatory bill sponsored by Chuck Hagel (R-Nebraska), John McCain (R-AZ) and others, before it could reach the floor for a vote. DCI targeted Republicans on Capitol Hill to put pressure on the party not to regulate Freddie Mac.
So much has been written about predatory lenders, crooked appraisers, and irresponsible borrowers who should have known better, and the debate has raged on for many months about who was at fault for the sub-prime mortgage meltdown that has now ravaged our economy.
But the real truth is, the people who should have been watching out for the folks, to quote Bill O'Reilly's favorite phrase, were not only asleep at the wheel, they were seduced with money to turn a blind eye to what was going on. Our elected representatives, the ones that are paid by our hard-earned tax monies, through their inaction, were doing everything possible to ensure that eventually the U.S. financial house of cards would come tumbling down. Remember that Freddie Mac and Fannie Mae combined to own or guarantee $5 trillion in mortgages, and that 20% of those loans were sub-prime.
After checking on their campaign contributions, Senators file back into the committee hearings on Fannie Mae and Freddie Mac...
Now we have a congressional "hearing" into how it all happened, with finger pointing on all sides. Yeah, that's the fox guarding the hen house all right. See what good it does.
Senator Chris Dodd (D-Conn) called for the resignation of Rick Wagoner, the CEO of General Motors, this week. Well I say it's time for Chris Dodd (who reportedly received a special low interest rate mortgage from Fannie Mae along with regular campaign contributions, and then sat on the committee to decide whether or not to regulate Fannie) to resign. And if Chris Dodd and the others in Congress who allowed things to get out of hand won't resign, then we the citizens will just have to vote them out when they run for re-election.
By the way, have you seen the chart of the top recipients of Fannie Mae and Freddie Mac Campaign Contributions between 1989-2008?
| NAME |
Office |
Party/State | Total |
| Christopher Dodd | S | D-CT | $165,400 |
| Barack Obama | S | D-IL | $126,349 |
| John Kerry | S | D-IL | $111,000 |
| Robert Bennett | S | R_UT | $107,999 |
| Spencer Bachus | H | R-AL | $65,000 |
| Roy Blunt | H | R-MO | $96,950 |
Now I realize that politicians of both parties are allowed to receive campaign contributions from large companies, but don't you think they should recuse themselves from sitting on committees where decisions that have a major effect upon those companies are decided?!
Door sign at the entrance to the Capitol Building...
Speaking of Fannie Mae and Freddie Mac, unfortunately things could be getting worse on the foreclosure front. Congressional efforts to help the so called "innocent borrower who was snookered by the big bad mortgage company into taking loans they could not afford", are not going well. There is a report out now that says that of those borrowers who were given loan modification programs, after only three months, almost 36 percent had 30-day re-defaults. After six months, the default rate was almost 53% and after eight months the 30-day default rate was 58%!
Obviously, holding hands and singing "Kumbaya" is not working here. Could it be time for some "Tough Love"? Months ago when I suggested mandatory direct withdrawal of loan payments from high-risk borrowers' bank accounts, some readers took me to task, saying it creates another level of expensive bureaucracy. While that may be true, I think the alternative we are seeing now is worse.
Lowering interest rates or principal is not enough when it comes to irresponsible borrowers. In my opinion, all high-risk borrowers (those who have defaults more than 60 days) should be mandated to take a financial education course, to learn how to budget, save, and get off the credit card merry-go-round. Don't want to take the course? Then give the keys back to the bank and go find other housing arrangements. If we don't take some drastic action, our permissive, nice guy attitude is going to bankrupt our country and strangle our future economic development!
Come on, Congress. Get it together!
Obviously, holding hands and singing "Kumbaya" is not working here. Could it be time for some "Tough Love"? Months ago when I suggested mandatory direct withdrawal of loan payments from high-risk borrowers' bank accounts, some readers took me to task, saying it creates another level of expensive bureaucracy. While that may be true, I think the alternative we are seeing now is worse.
Lowering interest rates or principal is not enough when it comes to irresponsible borrowers. In my opinion, all high-risk borrowers (those who have defaults more than 60 days) should be mandated to take a financial education course, to learn how to budget, save, and get off the credit card merry-go-round. Don't want to take the course? Then give the keys back to the bank and go find other housing arrangements. If we don't take some drastic action, our permissive, nice guy attitude is going to bankrupt our country and strangle our future economic development!
Come on, Congress. Get it together!
Sing "Kumbaya" to this, Congress....
See you next week!
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Ethan Roberts
Contributing Editor
The Tycoon Report
