http://news.yahoo.com/s/ap/20081023/ap_on_bi_ge/greenspan_9

No mention of Clinton and his alleged "forcing" of subprime lending.

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I'm sure there's no admission of Greenspan's own fault either...

Raising concerns? This bill never became law, but the articles are informative.

http://www.nytimes.com/2005/10/27/business/27fannie.html


House Approves Overhaul at Fannie Mae and Freddie Mac

By STEPHEN LABATON
Published: October 27, 2005
WASHINGTON, Oct. 26 - Responding to the accounting scandals at Fannie Mae and Freddie Mac, the House of Representatives approved legislation on Wednesday overhauling the regulatory oversight of the two huge mortgage financing companies.

The legislation, approved by a lopsided vote of 331 to 90, would create a new regulator for the Federal Home Loan Banks and for Fannie Mae and Freddie Mac, companies formally known as government-sponsored enterprises. The new agency, the Federal Housing Finance Agency, would be financed through assessments on the banks and companies. It would have the authority to set capital requirements, reject new business products being offered by the companies and limit their portfolio holdings. "What we enable with the passage of this bill is the creation of an independent regulator with all the tools necessary to protect the taxpayer," said Representative Richard H. Baker, a Louisiana Republican who is the chief sponsor of the bill. "This is a fair compromise."

But the measure was sharply criticized by the Bush administration and differs significantly from legislation moving through the Senate.

Even as they have weathered financial scandals and management shakeouts, Fannie Mae and Freddie Mac, along with their political alliesin Congress and the mortgage and construction industries, continue to exert considerable political influence on the legislation. They soundly defeated one attempt to eliminate Fannie's and Freddie's ability to borrow money from the federal Treasury and a second amendment that would have given their new regulator greater authority. They also saved a provision that would give them the ability to provide financing for larger and more lucrative loans.

By a voice vote, the House also approved an amendment supported by Fannie and Freddie and opposed by the Bush administration that would continue letting the White House select a number of board members. In the past, investors have inferred that such political appointments mean that the federal government will rescue Fannie and Freddie in case of default. It is that belief that has enabled Fannie and Freddie to pay lower interest rates on their bonds than most other companies pay.

The legislation now awaits action by the full Senate, which is not expected before next year. Last July, the Senate banking committee approved a similar measure on a vote along party lines.

Differences between the House and Senate versions, however, could doom the legislation if not reconciled. The Senate bill would require the companies to slowly divest most of their $1.5 trillion investment portfolios. The House bill leaves portfolio limits to the discretion of the new Federal Housing Finance Agency.

Fannie Mae and Freddie Mac have lobbied against the imposition of such limits, particularly since their portfolios account for most of their earnings.

The strict limits on portfolio size in the Senate version have been sought by the Bush administration and by Alan Greenspan, who is stepping down soon as chairman of the Federal Reserve. Mr. Greenspan and administration officials have said that the enormous portfolios of the companies - nearly a quarter of the home mortgage market - posed significant risks to the nation's financial system should either company face major problems. The White House issued a statement on Wednesday criticizing the legislation adopted by the House, saying it envisioned a regulatory regime that "is considerably weaker than that which governs other large, complex financial institutions."

The legislation "fails to include key elements that are essential to protect the safety and soundness of the housing finance system and the broader financial system at large," the White House statement said.

Ben S. Bernanke, who has been selected by President Bush to succeed Mr. Greenspan, has not publicly taken a position on the regulation of the mortgage financing companies.

The Senate bill, unlike the House bill, would not establish a new affordable housing fund. Administration officials also oppose such a fund because, they say, it could lead to increased risk-taking.

The House bill, unlike the Senate measure, would let Fannie and Freddie enter the jumbo mortgage market by raising the limit on loans that they could purchase from banks and other mortgage lenders.

Currently, Fannie and Freddie are able to purchase loans for mortgages up to $359,000 this year and $400,000 next year. The House bill would raise that amount to $600,000 in many markets. By a vote of 358 to 57, the House defeated an amendment proposed by Representative E. Scott Garrett, Republican of New Jersey, to strike the increase in the loan limit.

The House bill sets aside 3.5 percent to 5 percent of the company's profits over the next five years for grants to build low-income housing. But a provision inserted in the bill at the 11th hour to assuage conservative Republicans provoked considerable debate because it would prohibit any group that engages in voter mobilization efforts from applying for grants.


The provision was opposed by more than 600 nonprofit and faith-based groups, including the National Urban League, Catholic Social Services, the N.A.A.C.P. and the Leadership Conference on Civil Rights. They said the provision was unconstitutional, contending that it interfered with voter registration efforts, and undermined the purpose of creating the housing fund.

"Under the Republican provision, you can't do get-out-the-vote efforts if you work in affordable housing," said Representative Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee. "There is an extremism here that is not comprehensible except if you know the history."

"It has always been clear that the money can only be spent on affordable housing," Mr. Frank said of the housing grants.

Representative John Lewis, the Georgia Democrat who became a national figure for his leading role in civil rights struggles of the 1960's, concurred.

"I can't believe this is happening in 2005," he said. "This is not 1964. This is not 1965. What we are saying is our own people, churches, synagogues, cannot participate in nonpartisan voter registration drives. What are we saying to the world? This provision will take us back to the dark past. We can do better, much better."

But the Republicans disagreed, saying the provision would insulate the money from being used for political purposes.

"This provides accountability for where the money goes," said Representative Michael G. Oxley of Ohio, the chairman of the House Financial Services Committee and a main sponsor of the legislation. "We want to make certain that every dollar we make available goes for housing."

Mr. Baker said that for those groups who want to apply for grants and are also politically involved, "They will have to make a choice

Greenspan steps up criticism of Fannie

Fed chief says company and Freddie Mac have exploited their relationship with the Treasury.
May 19, 2005: 4:56 PM EDT
By Kathleen Hays, CNN/Money contributing writer




NEW YORK (CNN) - Federal Reserve Chairman Alan Greenspan Thursday suggested that the nation's mortgage lending giants, Fannie Mae and Freddie Mac, are taking advantage of their implicit government subsidy to pad their profits with investments that are too risky, which is not helping the nation's homeowners.

"The Federal Reserve has been unable to find any credible purpose for the huge balance sheets built by Fannie and Freddie other than the creation of profit through the exploitation of the market-granted subsidy," Greenspan said in a speech at a conference sponsored by the Federal Reserve Bank of Atlanta.
At the same time that Greenspan was speaking, Fannie Mae was deemed "adequately capitalized" as of March 31 by its chief regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), with a projected surplus over its minimum capital requirements sufficient to absorb the uncertain impact of accounting errors on its capital....
http://money.cnn.com/2005/05/19/news/economy/greenspan_fannie/

Will Mr Waxman ask Mr. Frank to testify?

I found Mr. "Ace" Greenburg's interview on Charlie Rose last night on the subject much more informative and plausible. Bad thing is, he kind of sold me on the bailout idea (moreso than I was leaning).

What threats would be posed when the property values stop rising? God will come in and take care of it? There is no risk of me making a bad loan if someone else will buy it over, is there? If this is what you are using to clear your buddy Clinton, it is a poor defense. I suppose this also clears George Bush Sr then? IIRC, the CRA was during his tenure. The CRA was the item that cleared half the congress and was threatened to be vetoed if it passed congress. Who holds veto over the Congress?

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^^^ CRA passed in 1977.. Jimmy Carter's term.

Well he does engage in some self-criticism. From the beginning of the article:

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IMO there's nothing wrong with subprime lending if it's done right with full disclosure, i.e. don't hide the risk in fancy financial instruments that no one fully understands. That part should have been more regulated.

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My bad. I meant that there was something set to nullify the CRA or at least parts of it but Clinton threatened a veto

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What other disclosure is there? It is all in the paperwork. Do you think the borrowers could care less? Hey! Everybody is making money flipping this house. Lets go do it ourselves. What else do you expect the lender to do? Tell the borrower he is in dangerous waters? Why should he care? It is not his responsibility, is it? After all, any loan is a good loan since it can be packaged up and moved on. No skin off my company.

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I meant full disclosure to the investors. Basically the whole fiasco comes down to those so-called credit default swaps which are a form of unregulated insurance with no backing that was used to lure in the investors.

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Sorry. If it is in the paperwork, it is YOUR fault for not reading it carefully. You invest, you can lose. Study your investment properly or risk loosing it. A fool and his money are soon parted. I have no sympathy. Now, if they fudged the numbers, that is another story.

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I don't think it was in the paperwork though I could be wrong. I think it's more like fraud, like if you needed to make a claim with your insurance company but they just tell you to F off.

Interestingly, in another article that I just found Greenspan also reversed himself on regulating those mortgage securities, something he resisted while it was going good.

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/23/AR2008102300193.html?nav=rss_email/components

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Normally banks operating in their own self-interest will protect their investors and CDS's presented a no-lose scenario in which the risk burden fell on "someone else". In reality the risks were still there but hidden away, several layers deep.

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