Friday, October 03, 2008


A Target Rich Envirornment

Some people think Senator Joe Biden did OK in the vice presidential debate last night. Getting basic facts wrong again and again and again is not doing OK in my book. Let's look at one of the many:

Biden said that "...two years ago Barack Obama warned about the sub prime mortgage crisis." I didn't remember any such warning in 2006. So I googled the phrase and this is all I got, a March 22, 2007 letter from Senator Obama to Bernanke and Paulson. So not actually 2 years ago. But rather than a warning about the CRA mandated risky mortgages, which is the crux and source of most of our finance troubles lately, and the reason for the 'bailouts,' the letter was about protecting the end users of the financial market, the mortgagors. See for yourself:

There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.

We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes.

Let's compare that milktoasty, 'jumping late on the bandwagon' letter to the legislation Senator John McCain co-sponsored in 2005 and the speech he gave in support of it on May 25, 2006:

Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.


I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation. (Emphasis added).

So what Biden said was not an actual lie, but it was far, far from the truth, particularly in light of the clear warning about what has just happened which McCain voiced and sought to remedy a full 3 2 years ago.

Oh, so what happened to the bill? The Democrats killed it.

UPDATE: More on the subject here.

UPDATE II: Michael Totten throws in his two cents (and the first part, at least, is funny) here.

CORRECTION: The legislation to rein in Fan and Fred, the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, was 2005 but McCain became a co-sponsor in 2006.


really? according to Govtrack McCain added his name to the list in May 2006. It was not "killed by Democrats" but rather never got scheduled for debate by the full senate because Bush and Greenspan disliked it:

"The original author of the bill (in the House) himself blamed Bush and Greenspan for their lack of support for his legislation as the reason for its not passing."

Obama gave his warning in March 2007 - just over 18 months ago - 2 years, rounding up. The warning was about the "environment that is leading to rising rates of home foreclosure in the subprime mortgage market" and urged " consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don’t let this opportunity pass us by."

So what was the basic fact Biden got wrong?
I disagree about 'not scheduled because of Bush and Greenspan.' It never got out of committee. Hegel, who appears to be in open warfare with his all but former party, is not a reliable historian here. Mark, it's one thing to talk about the threat FNM and FRD posed to the market and the economy in general, as McCain did, and another to wish the lenders would help out the poor homeowners who could or would not pay the mortgages. It's a vast difference in the nature of the warning. To call Obama's warning about foreclosures a waring about the "sub prime mortgage crisis" is to miss the central point of his complaint, which is what I accuse Biden of doing--not a lie, but not the truth. I'm now accusing you of missing the difference.
Roger, your accusation was about 'basic facts'. And the basic facts are that Obama did warn about the sub-prime crisis (albeit a focus on the plight of its victims) and, while we're at it, McCain was surprised there was a problem: "I'd like to tell you I did anticipate it, but I have to give you straight talk, I did not."

If you wish to talk about being scared so as to lose all stercoraceous interior material, please do not morph into one of the conservative bloggers whose regard for the facts is cavalier. Chuck Hegel introduced his proposal in 1 /05; McCain wrote his letter in 5/06 which hardly renders him prescient.

Meanwhile, do not, I repeat do not, try and blame anything on the CRA.

Keep talking about the weather Brother.

Mark, last reiteration--warning about increased foreclosures is not a warning about the subprime mortgage crisis recently come home to roost. I'll look at the context of your McCain quote. Is he so aged that he forgot his prescient warning later? I guess it's possible. My memory is certainly not as sharp as it was 30 years ago.

T, I won't blame everything on the CRA if you'll stop ingoring it's pivotol role in the recent lending meltdown. Deal?

The CRA played no pivotal role. It may not have even played an ancillary role.

The CRA has become the scapegoat of conservatives.

I was a settlement conference yesterday w/ a C who had regrettably played fast and lose w/ the true in his medical hx. When asked to explain, he proffered a justification and th ejudge looked at him and said, "That dog won't hunt."

The CRA argument is such a dog.

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