Limited Oversight Doomed Mortgage Giants

(CBS)  What brought the financial powerhouses Fannie Mae and Freddie Mac to the brink of collapse? Critics say it was a combination of the companies' political clout - and too little government regulation. CBS News chief investigative correspondent Armen Keteyian has the story.

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Whenever Fannie and Freddie found themselves in trouble they would invariably point the finger to a government mandate that dates back to the depression: The need to provide affordable housing to every American.

To help make that happen, the government granted them privileged status, including:

guaranteed lines of credit

exemption from state and local taxes

and limited oversight

Those are powers that would only expand over the years.

"You'd have people in Congress that would make it very clear they wanted nothing to touch Fannie and Freddie," said former Rep. Jim Leach.

He said he tried to hold Fannie and Freddie's feet to the fire - with little or no success.

"At one point in time, they had more lobbyists in their employ that any other institution ever," Leach said.

In fact, CBS News has learned, Fannie and Freddie now boast nearly 150 lobbyists, spending almost $175 million combined over the past decade alone. That's more than pharmaceutical giant Pfizer and defense contractor Boeing.

The mortgage giants doled out $2 million more over the last four years through political action committees. It was money used to fend-off regulation that would have required it to maintain deeper financial reserves to act as a cushion to the kind of risky loans that led to their undoing.

"Fannie and Freddie were thuggish," said Amity Shlaes, the deputy director of the Council on Foreign Relations. "People who worked there misled other people. They used political power in an ugly way."

A few years ago, Fannie was fined nearly $400 million after an investigation revealed it overstated earnings by $10 billion to maximize executive pay. That cost former CEO Franklin Raines his job but not $65 million of the $90 million he received in bonuses.

Now the CEO's who presided over the demise of Fannie and Freddie are out the door as well, walking away with some $30 million.

While every American, it seems, is paying the price.

[random_radar]

This is the expected result with any business that is indemnified against unlimited losses. No risk or liability leads to taking reckless risks and unbelievable liability.

[payasyougo]

"Limited Oversight Doomed Mortgage Giants"
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The institutions were doomed as soon as the Government promised to back them with the taxpayer funded "endless piggy bank".

[neoconslayer]

GOP = Incompetence and Corruption

[Skysblue]

Republican mantra for years has been LESS GOVERNMENT REGULATION and now you can see first hand, the results of that hands off approach.

[nilent]

This is just a scam to help McCain win the election.

Rates will go up after November as will gas prices.

Meanwhile, it''s the ordinary American that will continue to be the cash cow for the con artists in charge.

Where did all that money go? You know, the trillions that were and continue to be lost due to the mortgage con job? That money didn''t just disappear, lots of people became filthy rich off of that scam......and now they get more taxpayer money to bail them out once again.

The government had no business setting these up.

Imagine an economy where if you lent money you actually had to HAVE THE MONEY TO LEND!!! What a radical concept.

If that means no 30 year mortgages; then so much the better.

Now the same crooks who made billions on the scam, will buy up all the foreclosed properties in time to pump things up again in time for the 2012 elections.

Don''t ya get it folks? We''re being played.

Meanwhile pollution and global warming just might kill the whole species in the next century.....but hey, what does John McCain care....he''ll be long gone by then eh? And Palin, hey, she don''t care either as she''ll be "Raptured" into heaven.

Where have all the brain cells gone? When will we ever learn?

[aaabee-2009]

Greed and stupidity brought it down, nothing else, so now we all pay, typical liberal program.
Posted by zgomer at 10:39 AM : Sep 09, 2008

And what do you suggest, O Great Compassionate Conservative, to replace social programs?

Are YOU going to stand up in your community and provide money for the elderly, the kids, the single moms who didn''t get abortions, the sick, the mentally disabled, small business start-ups, FDIC bank insurances, veterans assistance for our soldiers, and on and on?

Why don''t you open your eyes and see how much pressure social programs take off your shoulders. They take responsibility for the things you don''t even see.

And lets not forget YOU YOURSELF have used social programs, doesn''t matter if it is unemployment benefits or school loans or food stamps, or what it is. They were there when YOU needed them, you don''t want them there when someone else needs them, maybe someone you love?

Tax payers money going to the equalibrium of a nation''s entire population is a far better thing than what this article details: the governmental "bailing out" of corporations whose CEOs not only made bad business decisions but also made 19.8 million for doing so.

You, and other conservatives, need to get off the ever easy liberal-blame button already and start facing reality again. It was fun for you guys but the free ride is over.

[aaabee-2009]

When did "bail-out" become "take-over"?

Hey, Taxpayers: how do you feel about helping out these corporations and the bad business decisions of their high-paid CEOs (Freddie Mac CEO got $19.8 million in 2007)?

Your 3 or 4 digit paycheck stretches how far these days?

OUR GOVERNMENT has gotten our national debt up to $9,375,000,000,000. That is $149,314 per US family to pay off.*

Now Bush is bailing out corporations at our expense, on credit. He will leave these "take-overs" for you and me, the taxpayers, to pay for.
Bush will leave our nations over-extended credit for the next administration to clean up.
Bush will leave our national debt for the next generations of Americans to clean up.

Let''s vote John (95% of his votes are with Bush*) McCain and Sarah (government can fix social ills**) Palin into office to make more of these kinds of America-first decisions, shall we?

*
http://www.babylontoday.com/national_debt_clock.htm
**
http://www.aflcio.org/issues/politics/mccain_bush.cfm
***
http://www.cbsnews.com/stories/2008/09/08/cbsnews_investigates/main4427776.shtml

[hypnotoad72]

Typical misguided under supervision of the industry including both the industry agents and the borrowers. I won''''t blame the conservatives because a real conservative knows better. However clearly the current administration whatever they are do not.

Posted by misha128
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Bingo. You nailed it on the head.

[sebastian27-2009]

Hey, Zygomer! Liberal program? A liberal congress may have established FNMA back in the 30''s, but it took the monied folks to see how they could loot wreck the program for personal gain, and they are mostly Republicans. Remember the "Keating Five" and the S&L mess, whick were defended by none other than McCain?

[despido]

When standards are lowered - performance suffers and everyone pays. We lowered border security standards in the name of opportunity and suffered a virtual invasion. We lowered educational standards in the name of fairness and sank the the level of Bosnia. We lowered financial lending standards in the name of increasing home ownership and are facing collapse of our financial system. When standards are lowered to accomodate a special interest mandate by congress there will always be those who rush to take advantage. The fault lies not with those grifters so much as with those that let them in.