McCain Letter Demanded 2006 Action on Fannie and Freddie

Human Events | Oct. 10, 2008

Sen. John McCain’s 2006 demand for regulatory action on Fannie Mae and Freddie Mac could have prevented current financial crisis, as HUMAN EVENTS learned from the letter shown in full text below.

McCain’s letter — signed by nineteen other senators — said that it was “…vitally important that Congress take the necessary steps to ensure that [Fannie Mae and Freddie Mac]…operate in a safe and sound manner.[and]..More importantly, Congress must ensure that the American taxpayer is protected in the event that either…should fail.”

Sen. Obama did not sign the letter, nor did any other Democrat.

McCain Letter 2006 Fannie Freddie

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Comments

  1. jeannybaby says:

    I am amazed about a few things.
    1) Obama loves to point his finger at McCain and blame him for the economic crises…or “the Bush regime”‘,’ isn’t the Democratic party dominating the house and the senate…controlling all activities? And where was Senator Obama during all this? hanging out with Ayers, or maybe one of his religious leaders…
    2) Why doesn’t Obama’s associations have more relevance to the general public? My mom always told me to choose my friends wisely since I would be known by their reputions. His choice of associations is terrible. One after another is a poor choice, Ayers, Raines, and both pastors, Wright and the other…I can’t remember his name. The whole thing just blows my mind. These guys hate our country and they’re his buddies.
    3) What is wrong with the American flag? Since when does a presidential nominee create his own emblem eschewing our country’s flag? And why isn’t anyone else insulted by it? It really enrages me! I live in America, not Obamaland!
    I just don’t get it, I wish people would begin thinking instead of being sucked in by all the glitz and glammer!

  2. Dane Dahl says:

    Global-financial terrorism: The next battleground in The War on Terror?

    Here is an unsettling thought regarding the global financial turmoil that has suddenly befallen the entire world. When it comes to global banking and finance, international commerce and communication have resulted in enormous amounts of confidential data on individuals, banks, corporations, and even entire governments such as the United States, all stored in supposedly secure “cyber warehouses”, warehouses that either are, or could soon be vulnerable to Quantum computer attack, because our banks and financial institutions rely on conventional encryption systems that could be hacked open, not in computer attacks lasting millions or even billions of years, which traditional computers would require, but rather weeks, or maybe even days, by quantum computers.

    This sounds far-fetched, but something similar to this has already happened once. During the Second World War, advances in encryption science and computer technology allowed the Allies to crack open supposedly secure military codes used by the Japanese and Germans. The same thing may be happening right now, only this time, United States and Western European financial institutions are being laid bare.

    Quantum computers are based on theoretical models involving multiple universes. Such a concept is mind-boggling to the average person, but so was the Atomic bomb, prior to 1945. The fact is, some of the best minds in science subscribe to this theory, and simplified versions of quantum computers are in development stages, right now. And when it comes to theoretical implications of quantum computer science, don’t make the mistake of assuming well-funded international criminal organizations such as Muslim narco-terrorists and their confederates-in-crime, the Red Mafia, are incapable of developing more sophisticated applications.

    The Red Mafia controls much of the commerce within the territory held by the former Soviet Union. They have vast numbers of scientists, engineers, and financial experts in their upper echelons. On the other side of the equation, narco-terrorists such as Al Qaeda have access to enormous wealth created by a range of activities extending from drug dealing and human trafficking, to legitimate sources of income derived from Arab oil. Their leaders are highly intelligent and they’ve learned to adapt. The FBI says Al Qaeda has been casing international financial institutions such as the New York Stock Exchange, since 2003. Now that it is more difficult to hijack airplanes or blow up important buildings, they are looking for soft targets: soft targets that can cause even more chaos and suffering. I believe narco-terrorists may be using their financial assets and international crime connections to leverage and manipulate volatile segments of our financial markets.

    Narco-terrorist Muslims are not the “weak sister” in this criminal alliance, either. One should remember Arabic numerals and the mathematical concept of zero were Muslim innovations. These advances took place decades ahead of anything Christian Europe was capable of doing. To translate this dismaying historical fact into the Twenty-first Century, I would point out that literally thousands and thousands of Muslims (including Arab,Turkic, Hindu, Pakistani, and Indonesian scientists, engineers, and banking and financial experts) possess advance degrees in mathematics, electrical engineering, computer science, super conductors as well as banking and international finance. Vast numbers of these people were educated in the United States — at considerable expense to the American taxpayer. The current financial quagmire that has suddenly befallen the Western world could be due in part to the actions of Muslim militants… hidden among this mass of otherwise innocent Islamic scientists, engineers, and bankers, acting in concert with their mafia criminal allies to carry out Osama Bin Laden’s latest command (September – 08) to be ready to destroy the enemies of Islam. In this instance, the attacks may have included cyber messages of terrorism and plunder, directed at American and Western European financial institutions.

    Because of this, I believe at least some of the world-wide financial collapse we have witnessed, could be tied to factors much worse than greed, recklessness, and stupidity on the part of international investment bankers, compounded by inadequate oversight by the Bush administration, as well several other western governments. Advances in cryptography, encryption, and computer science may have allowed terrorist-criminal organizations to crack open our secret financial systems. If this is the case, any and everything central banks and international financial markets try to do in the coming weeks, could be doomed to failure. If that happens, the very future of our civilization could depend on finding these global-financial terrorists and destroying them.

    For further information on the origins and beliefs of Islamic narco-terrorism, visit my website: http://www.TheMoslemInstitute.com

    Regards, Dane Dahl

  3. Here is an unsettling thought regarding the global financial turmoil that has suddenly befallen the entire world.

    It didn’t befall the world. It was created. The cycle of ‘boom and bust’ is endemic to fiat currency. Central Banks inflate, then back off as the economies overheat (stock market bubble, housing bubble), then comes the crash.

    Ron Paul and other students of Austrian Economics predicted this last year. I distinctly recall rank and file Republicans talking about how boring it was listen to Ron Paul in the debates talk about the economy.

    The Red Mafia controls much of the commerce within the territory held by the former Soviet Union.

    Would you consider Putin to be part of this Mafia? And what is the purpose of what you allege they are doing? Where is the profit in it? Many of the bratva are invested in global stock markets, where are they getting their piece to make this worthwhile? You aren’t alleging that non-religious gangsters are doing it for Allah?

    Now that it is more difficult to hijack airplanes or blow up important buildings, they are looking for soft targets: soft targets that can cause even more chaos and suffering. I believe narco-terrorists may be using their financial assets and international crime connections to leverage and manipulate volatile segments of our financial markets.

    I designed the mission critical systems that run 4 out of the top ten U.S. banks. To put it mildly, your discussion of quantum computers and encryption is, well, silly. The markets are enormous, and any phantom transactions of that size would be caught in audit. These are real investors and this is real panic.

    If this is the case, any and everything central banks and international financial markets try to do in the coming weeks, could be doomed to failure. If that happens, the very future of our civilization could depend on finding these global-financial terrorists and destroying them.

    Why would the Muslims bother to attack these banks. They are buying these banks. All of my major customers have gone, hat-in-hand, to Gulf Sovereign Wealth funds to get cash injections. Bank of America, Citi, JP Morgan, all of them. The Saudis and other Muslims will exit this mess owning our financial system, why tank it when you can own it?

    And no, they didn’t tank it so they could take it over. The bad loans, the bad balance sheets, the fiat currency inflated to Heaven – many people saw all this coming years ago.

    But coming out of this crisis, the Muslims will be stronger. They will own more of America. That much is true. The Chinese also.

    Regardless of who wins the presidency.

  4. Note 3: Do you see that any of this could have been avoided in a free market such as ours? It seems a necessary by-product, if you will: without some form of legislation that artificially constrains pricing or manages how the markets run their own business, various commodities and products will be priced based on what people can (or think they can) pay for.

    So what has happened in the last decade: people wanted, and the banks found ways of giving it to them. Interest only loans, ARMS and “balloon loans” were given out in to millions of people to get them into homes everyone hoped they’d be able to afford later. Make 70K a year? No problem! We’ll get you into that $700,000 house! After all, it’ll be worth a million-two in five years and you can pull out all sorts of cash in your equity once the real payment becomes due!

    What’s the alternative, however? Is Congress going to send appraisers to various communities to assess “real value” based on some criteria that it devises? To what extent should Congress determine how banks lend and to whom? The call in the past has been to let banks do their thing. Now we seem to be saying that the market cannot be trusted and that left to its own devices, its greed will swallow up itself and everyone else around it. I’m not sure how desirable that is, either. A brave politicians would be pointing fingers directly at the American public right now, but I’m betting that it would not be politically expedient to do so.

    This is why I’m confused by conservative calls for greater oversight. It’s as if they want to be able to eat two entire pizzas without suffering the indigestion afterwards.

  5. So what has happened in the last decade: people wanted, and the banks found ways of giving it to them. Interest only loans, ARMS and “balloon loans” were given out in to millions of people to get them into homes everyone hoped they’d be able to afford later. Make 70K a year? No problem! We’ll get you into that $700,000 house! After all, it’ll be worth a million-two in five years and you can pull out all sorts of cash in your equity once the real payment becomes due!

    What you stated above is impossible in a truly free market. When currencies were based on Gold or Silver, then loans were directly made based on real assets having been entered into the financial system. The problem with Fiat money is that the central bank simply creates it out of thin air, then the banks can infinitely multiple it once it enters their balance sheets.

    All seems to work, until the borrowers start to fail to repay. Then the credit multiplier begins to work in reverse. Whereas before a bank could keep 10% on deposit and loan 90%, the impairment of loan assets means that the bank rapidly becomes illiquid. No liquidity, no ability to meet withdrawal demands.

    An honest financial system does not suffer from these kinds of problems. Boom and bust are native to fiat system that are manipulated by central banks, not to free enterprise.

  6. Nicholas, I believe it was Nixon (a Republican) who took us off the gold standard, and as World Net Daily contributor Vox Day noted, the major investment banks (including Goldman Sachs) had pressured the SEC to lift regulations that would limit the amount of debt they could take on. Republicans may have been interested in Fannie Mae, but as Alan Greenspan admitted recently, too many believed in the ability and desire of the major players to protect their assets and the assets of their investors and that regulating them would impede the flow of the markets. This was a serious error.

    This is why I don’t understand why so much blame has been leveraged against the Democrats. Although they certainly deserve the criticism here in terms of their unwillingness to hold Fannie Mae and Freddie Mac to greater oversight, those two were only bit parts in this play, it seems, and the subprime mess was only a reflection of far greater problems throughout the banking industries.

  7. James K –

    Fannie and Freddie were only “bit parts in this play”? Umm…don’t think so. They hold $6 trillion in mortgage guarantees. That is half of the total mortgage market. They are the 800 lb elephants, not the “bit parts”.

  8. More like 80,000 lbs elephants. Fannie and Freddie created this disaster and was primarily responsible for the crisis. It was their horrendous practices and out-of-control risk-taking that masked the danger and caused the collapse. That leftists like James like to minimize their role is typical of those who want to avoid reality and pin the blame on “capitalism.”

  9. Tom C and Chris B, you have me a bit confused. Are you suggesting that the answer to entities like Fannie and Freddie is for more government regulation and controls over how these companies do business (how they lend, who they lend to, what level of risk is acceptable)? Are you instead suggesting that government placed too tight of regulations on them in terms of how they lent money and that they imposed upon them that they lower their lending standards?

    If the former, how does this support the notion of “free markets”, exactly, when you’re suggesting that the government dictate how companies are run?

    The situation in terms of the mortgage crisis is very complex, and you’re grossly oversimplifying the origins. Most of these investment banks did not have to take on the level of risk that they did (even according to Mike Critelli, the Exec Chairman of Pitney Bowes.

    John McCain and others have talked about “corporate greed” as a root cause. I find that to be an oversimplification of reality. Greed works when it rewards people for doing things that benefit everyone; it fails to work when it triggers destructive or highly-risky behavior.

    In this case, compensation packages caused greed to trigger excessively risky behavior. The simple reason for this was that, in virtually all these cases, the profit from these instruments and transactions came in immediately and financial services executives were rewarded immediately, but the risk was not evident until much later. This gravitation toward excessive risk was made even worse by pay packages that had no meaningful upward limit. Super-sized annual bonuses or stock option grants magnified the misalignment toward excessively risky behavior

    Somehow, this mortgage mess is all the fault of liberals and the poor (in a perverse form of class warfare coming from a Christian site, no less). I just don’t see it. Alan Greenspan also admitted that he had thought (incorrectly) that these enterprises would act in the best interests of their companies and their shareholders. This implies that they had the capacity to.

    What more do you want?

  10. D. George says:

    James K. #9:

    Somehow, this mortgage mess is all the fault of liberals and the poor (in a perverse form of class warfare coming from a Christian site, no less). I just don’t see it.

    There are plenty of people, groups, and corporations to blame here. Who’s singling out the poor? The poor, like any other people, are to blame to the extent that they take mortgages that they cannot afford. Anyone who does this is ignorant of financial principles at best or is immoral at worst. There is nothing un-Christian in pointing out plain truth.

    Mentioning that the Community Reinvestment Act, which mandated extension of loans to high-risk customers, and aggressive enforcement of it and shakedowns of corporations (like the one with which Barack Obama was involved as a lawyer) in the 1990s, was part of the problem is not blaming the poor. It is blaming the malevolent influence of government interference in the free market.

    As for Greenspan, his only admitted mistake was to not see that other people would make mistakes, but his hands are not so clean. He did not mention that his policy of holding interest rates too low for too long spurred much foolish behavior and had profound negative consequences.

    Ultimately, the root cause of all of this nonsense is that Americans want things they cannot afford and that they haven’t earned. They believe comfort is a right. It is not. And they have forgotten that people who cannot pay their debts always end up slaves.

  11. #9 James K

    You are right, the world of finance is highly complex and inter-related. But nearly everyone agrees that poor quality mortgages triggered the crisis. What enabled the accumulation of these was the government’s implicit (some would say explicit) guarantee to Freddie and Fannie that they would be bailed out. This is what emboldened them to take on excessive risk, when in a truly free market they would probably not have.

    As far as Greenspan’s comments, I have only read media reports about them. I would not want to comment until I have actually read what he said without the media filter.