Elected officials facilitated financial crisis, profited nicely

Senator Christopher Dodd (D-CT) was the largest recipient of campaign contributions from Fannie Mae and Freddie Mac in the past decade. Dodd also turned a blind eye to the risks posed by the GSE’s.

Franklin Raines, CEO of Fannie Mae. Raines made millions in bonuses when Fannie Mae manipulated earnings to meet the highest profit and “affordable housing” targets. He settled with the SEC in a sweetheart deal that cost him little or nothing out of his own pocket, even though Fannie Mae was slapped with the biggest fine in SEC history for overstating Fannie Mae’s profits by $6.3 billion over several years.

Representative Maxine Waters (born Maxine Moore Carr; August 15, 1938) is the U.S. Representative for California’s 35th congressional district. Representative Waters continued her contribution to the discussion by making clear the Democrats’ true mission for Fannie and Freddie, namely to find a way to get minorities into houses even if they would not meet the qualifications for standard loans, such as in having the ability to bring a down payment to the transaction.

Waters seemed particularly proud to say “since the inception of goals from 1993 to 2002, loans to African-Americans increased 219 percent and loans to Hispanics increased 244 percent, while loans to non-minorities increased 62 percent. Additionally, in 2001, 43.1 percent of Fannie Mae’s single-family business served low-and moderate-income borrowers…” She then said “the GSEs are working” and reiterated her opposition to more oversight.

Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.) relentlessly gamed the political system to clear the way for their friends at government-sponsored Fannie Mae and Freddie Mac to make billions at the expense of taxpayers.

Fact from the history books:

In 1999 Alan Greenspan, Larry Summers, and Bob Rubin advised Congress to repeal the Glass-Steagall Act, which since 1933 had separated commercial from investment banking.

On the third anniversary of the collapse of Lehman Brothers we see the outcome.

The investigation by the Senate Permanent Subcommittee on Investigations suggests that Goldman Sachs actions may also have helped fuel the financial crisis by creating risky investments and then ensuring that other parties were exposed when they lost value.

“Goldman Sachs was slicing, dicing, and selling toxic mortgage-related securities on Wall Street like many other investment banks, but its executives continue to downplay the firm’s role in the financial engineering that blew up the financial markets and cost millions of Americans their jobs, homes, and livelihoods,” said Sen. Carl Levin (D-Mich.), chairman of the subcommittee.

“Goldman Sachs made billions of dollars from betting against the housing market, and it placed those bets in some cases at the same time it was selling mortgage related securities to its clients,” Levin said. “They have a lot to answer for.”

Treasury Secretary Timothy Geithner said:
“A large parallel financial system emerged outside of the framework of protections established for traditional banks,” he said. “The shift in mortgage lending away from banks, the growth of the relative importance of non-bank financial institutions, the increase in the size of investment banks and the emergence of a range of specialized financing vehicles are all manifestations of this phenomenon.”