16 Days: What exactly has Dole been up to?

DAY 16

Elizabeth Dole claims that this current financial turmoil could have been avoided if mortgage giants Fannie Mae and Freddie Mac had been regulated by “her” bill, of which she was only a co-sponsor, and which didn’t go anywhere, anyway. But more importantly, in trying to champion her own legislation, Dole actually revealed her minimal understanding of this current crisis. Countless economists and analysts explain that Fannie and Freddie, while part of problem, are not wholly to blame for the chaos in the markets. If she is not working for North Carolinians, and she is not working to understand what her committee does, what exactly has Elizabeth Dole been up to?


Dole: Financial Crisis Could Have Been Averted If Fannie & Freddie Were Regulated. Dole said that if Fannie Mae and Freddie Mac were heavily regulated, the financial crisis “could've been prevented.” [Charlotte Observer, 9/29/08]


“Few Analysts” Blame Fannie And Freddie For Origins Of Crisis. The New York Times reported, “Few analysts of the current crisis trace its roots to Fannie and Freddie, whatever their mistakes. The two companies’ investments in subprime mortgages, which are those made to borrowers with spotty credit histories, were a major factor in their financial problems that triggered the government seizure in mid-September. But most financial experts say the companies actually were late to the game of investing in mortgage-backed securities heavy with subprime mortgages.” [New York Times, 10/15/08]

Nobel-winning Economist Paul Krugman: Fannie and Freddie Had “Nothing To Do” With Explosion Of Subprime Lending. Paul Krugman, a noble-prize winning economist, wrote, “Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble. Partly that’s because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn’t do any subprime lending, because they can’t: the definition of a subprime loan is precisely a loan that doesn’t meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.” [New York Times, 7/14/08]

Economist Dean Baker: Notion That Fannie And Freddie Are Responsible For Crisis “Absurd On Its Face.” Dean Baker, an economist and co-director of the Center for Economic Policy and Research, wrote, “Fannie and Freddie got into subprime junk and helped fuel the housing bubble, but they were trailing the irrational exuberance of the private sector. They lost market share in the years 2002-2007, as the volume of private issue mortgage backed securities exploded. In short, while Fannie and Freddie were completely irresponsible in their lending practices, the claim that they were responsible for the financial disaster is absurd on its face -- kind of like the claim that the earth is flat.” [American Prospect, Beat the Press blog, 9/25/08]

Private Sector Was Behind Subprime Lending. According to McClatchey, “Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.” [McClatchey, 10/12/08]

Fannie And Freddie Followed Private Lenders. According to the Washington Post, “Lenders were far more aggressive about offering subprime and other risky loans than Fannie and Freddie. The companies eventually joined in, driven both by pressure to show they were supporting affordable housing and by a desire to maintain market share.” [Washington Post, 10/9/08]

Center For American Progress: Private Lenders Issued “Lion’s Share” Of Subprime Loans. The Center for American Progress noted, “Clearly it was private lenders, not the government-backed Fannie and Freddie, which issued the lion’s share of subprime lending overall, and to low- and moderate-income borrowers in particular.” [Center for American Progress, 10/16/08]

Private Sector, Not Fannie And Freddie, Led The Way In Sale Of Mortgage-Backed Securities. McClatchy reported, “During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.” [McClatchey, 10/12/08]

---Disclosure: I am Kay Hagan's Online Communications Director---