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Sunday, September 14, 2008

Strangle the Democrats with Fannie, Freddie, and the Housing crisis

Cross posted from The Next Right.

By Soren Dayton | September 13, 2008 at 11:34 AM 

The meltdown of Fannie and Freddie should be a transformative moment in American politics. It should discredit the whole Democratic economic agenda. It is too bad that it happened in the middle of the most interesting Presidential election in a generation because there are lessons to learn from it. Several points.

Let's start with some numbers. Contributions since 1989(!) to ALL members of Congress. Note that this is an aggregate over time. Note how a guy who has been in Congress for 3 years manages to come in 3rd on the list.

1. Dodd, Christopher J
2. Kerry, John
3. Obama, Barack
4. Clinton, Hillary
5. Kanjorski, Paul E

First, this is a Democratic scandal. In yesterday's WaPo Al Hubbard and Noam Neusner ask "Where was Senator Dodd?" The answer is clear. On the take. Open Secrets notes who gets money from these guys:
Fifteen of the 25 lawmakers who have received the most from the two companies combined since the 1990 election sit on either the House Financial Services Committee; the Senate Banking, Housing & Urban Affairs Committee; or the Senate Finance Committee. The others have seats on the powerful Appropriations or Ways & Means committees, are members of the congressional leadership or have run for president. Sen. Chris Dodd (D-Conn.), chairman of the Senate banking committee, has received the most from Fannie and Freddie's PACs and employees ($133,900 since 1989). Rep. Paul Kanjorski (D-Pa.) has received $65,500. Kanjorski chairs the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, and Freddie Mac and Fannie Mae are government-sponsored enterprises, or GSEs.

But they miss the important point. The GSEs give to Democrats primarily.
And this is the second point. These are partisan instituttions. Republicans tried to reform it, but got out lobbied every time. Hubbard and Neusner described how this works:
The administration did not accept half-measures. In 2005, Republican Mike Oxley, then chairman of the House Financial Services Committee, brought up a reform bill (H.R. 1461), and Fannie and Freddie's lobbyists set out to weaken it. The bill was rendered so toothless that Card called Oxley the night before markup and promised to oppose it. Oxley pulled the bill instead.
When there was a Republican Congress, Congressional leadership tried to do the right thing, but Fannie and Freddie's lobbyists picked off some weak Republicans. With a Democratic Congress, Fannie and Freddie just feed at the trough.

Third, these guys are some of the most powerful figures in the Democratic lobbyist-operative firmament. Obama was forced to fire James Johnson, his first VP Vetter. Johnson had been CEO of Fannie Mae.  But it doesn't stop there. Johnson, while a consultant for Fannie and Countrywide, was passing out below market loans to Senator Dodd, among others.

The recent CEO of Fannie was Franklin Delano Raines. (what do you bet his parents politics were?) Raines was a Clinton OMB Director and worked in the Carter White House. Raines was replaced with an actual business guy.

Fourth, it doesn't stop there. Not only that, but the affordable housing racket is also used as a way to launder government money into corrupt Democratic voter registration practices. One of the organizations pushing subprime loans and other "affordable housing" financial vehicles... ACORN, which got a sweet deal in the Housing Bill.

What is the upshot of all of this?  The housing meltdown has both causes and effects that are ideologically aligned with Democratic objectives.  While gutting the regulatory apparatus for a huge segment of our economy, leading Democrats were receiving contributions and below market loans from the very people whose regulations their were gutting. It was used to move money into Democratic grassroots campaign vehicles. And it moved substantial parts of the economy into government control. According to financial analyst Barry Richoltz, "socialism for the rich."

This should be a long-term stain on the credibility of Democratic Party's economic management.  Too bad no one has the attention span to notice.