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Bush Called For Reform 17 Times In 2008

Somehow our ever vigilant media has failed to notice this press release from September 19, 2008 From White House.

(Maybe if the White House had posted this at the Daily Kos our media may have noticed it.)

The Administration’s Unheeded Warnings About the Systemic Risk Posed by the GSEs

For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties.

President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President’s repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.

2001

April: The Administration’s FY02 budget declares that the size of Fannie Mae and Freddie Mac is “a potential problem,” because “financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.”

2002

May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

2003

January: Freddie Mac announces it has to restate financial results for the previous three years.

February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that “although investors perceive an implicit Federal guarantee of [GSE] obligations,” “the government has provided no explicit legal backing for them.” As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. (“Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO,” OFHEO Report, 2/4/03)

September: Fannie Mae discloses SEC investigation and acknowledges OFHEO’s review found earnings manipulations.

September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact “legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises” and set prudent and appropriate minimum capital adequacy requirements.

October: Fannie Mae discloses $1.2 billion accounting error.

November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any “legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk.” To reduce the potential for systemic instability, the regulator would have “broad authority to set both risk-based and minimum capital standards” and “receivership powers necessary to wind down the affairs of a troubled GSE.” (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

2004

February: The President’s FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: “The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.” (2005 Budget Analytic Perspectives, pg. 83)

February: CEA Chairman Mankiw cautions Congress to “not take [the financial market’s] strength for granted.” Again, the call from the Administration was to reduce this risk by “ensuring that the housing GSEs are overseen by an effective regulator.” (N. Gregory Mankiw, Op-Ed, “Keeping Fannie And Freddie’s House In Order,” Financial Times, 2/24/04)

June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying “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 to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System.” (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

2005

April: Treasury Secretary John Snow repeats his call for GSE reform, saying “Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system.” (Secretary John W. Snow, “Testimony Before The U.S. House Financial Services Committee,” 4/13/05)

2007

July: Two Bear Stearns hedge funds invested in mortgage securities collapse.

August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying “first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.” (President George W. Bush, Press Conference, The White House, 8/9/07)

September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before.

September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.

December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying “These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I’ve called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon.” (President George W. Bush, Discusses Housing, The White House, 12/6/07)

2008

January: Bank of America announces it will buy Countrywide.

January: Citigroup announces mortgage portfolio lost $18.1 billion in value.

February: Assistant Secretary David Nason reiterates the urgency of reforms, says “A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully.” (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

March: Bear Stearns announces it will sell itself to JPMorgan Chase.

March: President Bush calls on Congress to take action and “move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages.” (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

April: President Bush urges Congress to pass the much needed legislation and “modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes.” (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

# “Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans.” (President George W. Bush, Radio Address, 5/3/08)

# “[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator.” (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)

# “Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans.” (President George W. Bush, Radio Address, 5/31/08)

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying “we need to pass legislation to reform Fannie Mae and Freddie Mac.” (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

July: Congress heeds the President’s call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

Needless to say, our ever vigilant Congress, who after all control these such things, ignored these warnings studiously.

So much so that now, like the media, they pretend they never happened.

(Thanks to RealityBytes for the heads up.)

This article was posted by Steve Gilbert on Tuesday, October 7th, 2008. Comments are currently closed.

7 Responses to “Bush Called For Reform 17 Times In 2008”

  1. U NO HOO

    Sometimes the sky IS falling.

  2. EvaTheFrisbeeDog

    1. We need terms limits. We need a constitutional amendment. Who’s with me?

    2. Markets work. Trust them.

    3. IRS did the right thing by allowing companies to access their own money offshore in lieu of usury commercial paper rates. This and the changes in mark-to-market accounting were long over due. Now, when will SOX be repealed?

    4. Government doesn’t know how to value assets. Fed-backed Citi bid of $2 billion for Wachovia was trumped by a private market $15 billion bid by Wells Fargo. Remember the Fed-backed JP Morgan bid of $2 per share for Bear that was upped to $10 after a huge protest?

    5. Jim Kramer should cancel his show immediately. How could he in good conscience recommend any stock after his statements yesterday? And, since he knows nothing about the bond market, he ought to just go away.

  3. Reality Bytes

    Oh but there’s so much more! This from Affordable Housing . com.
    July 2005 complaining about Senator Richard Shelby wanting stricter rules for Fannie Mae

    “Shelby cited concern over the companies’ investment portfolios when he came out against a proposal in the House bill that would require Fannie Mae and Freddie Mac to contribute a portion of their profit to fund the creation of low-income housing. He said such a fund would give the companies an incentive to expand their investment holdings to boost profit.

    With the greatest respect, Senator, are you really trying to argue that allocating 5% of profits to an affordable housing fund is a greater incentive than pocketing 95% for shareholders?

    RB – (IMAGINE THAT?! REMEMBER WHO THE SHAREHOLDERS WERE?)

    Shelby did not include the proposed set-aside in the bill he released yesterday, making it less likely that Democrats will vote for it.

    As a result, the bill, while likely to be approved by the Banking Committee next week, may not reach the Senate floor, said analysts.

    “Chairman Shelby has tailored a bill to gain administration support at the expense of obtaining bipartisan legislation,” said Howard Glaser, a housing industry consultant. “A partisan split tends not to launch a bill to the head of the line for consideration by the full Senate.”

    Theoretically, should the House and Senate both pass legislation, the House-Senate conference committee will iron out differences by working between all sets of opposed points. But what if the Senate never passes anything? Then the House conferences with itself

    http://affordablehousinginstit.....ion_2.html

  4. BannedbytheTaliban

    Could it be that the democrap controlled congress has done nothing for the last two years to let country slip into economic turmoil? Talk up a non-existent recession until they could create one? Then try to win an election by blaming Bush and the Republicans? They would never do something like that. After all, they are patriotic too. Unfortunately the country for which they would choose to bleed isn’t the USA.

    And I will second that motion on term limits.

  5. BillK

    BannedbytheTaliban, come on now, Democrats would never do anything like that… sigh.

  6. 4USA

    In my perfect political world:

    Term Limits. No more than 2 terms for any office.
    No more lawyers can ever run for political office.
    No politician, or family member, may ever have been or ever become a lobbyist.
    No retirement benefits for any member of Congress, except the Executive Office.
    Freeze any new hires at all levels of government and all non-security-essential positions cannot be refilled.
    All political candidates must have been previously employed in the private sector (paying job) for at least 10 years.
    No more Ivy league graduates will be allowed to ever run for political office.
    No more earmarks.
    Executive line-item veto.
    Sedition will again be prosecuted, including exile, prison, and execution.
    Fairness Doctrine will be Constitutionally illegal.
    All people will serve 2 years in the armed services at the end of their chosen education.
    Universities will be required to hire a 50-50 ratio of conservative and liberal professors.
    Public Education protocol will be decided by the parents. Not the majority of voters, but people that actually have kids.
    PBS will be de-funded, based on the fact that it is politically biased.
    Illegal immigrants will not be awarded any benefits and children born to illegal immigrants will not be awarded automatic US citizenship.
    All voter fraud will be investigated and prosecuted to the fullest extent of the law. It won’t be laughed off, or accepted on any premise. Those caught will be subject to the new Sedition Laws referenced above.
    Government will abide by the Constitution and nothing else.
    Anyone suggesting that the Constitution is a living document will be subject to Sedition.
    Freedom OF religion, not freedom FROM religion.
    Socialists, Marxists, Fascists, Nazis, Racists, etc…will be defined and studied as undesirable.
    US History will be taught with the goal of patriotism. Admitting mistakes, but understanding the greatness of this country relative to any other governmental system known in the history of the world.

    If anyone disagrees with the above tenants, they are welcome to leave. The only reason we’ll miss you is because we will immediately notice an improvement in our society.

  7. BillK

    You could never implement it; the Supreme Court would never allow it.

    Instead, I would not be surprised to find within 20 years that in the same way Wisconsin Judges are trying to say that they, not voters, should choose Wisconsin Supreme Court justices (a regular voter isn’t qualified to choose), either Congress or the Supreme Court will simply “nominate” a President.


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