Congressman
Henry E. Brown, Jr.

Back in October, I led a number of my colleagues in calling for the books of Fannie Mae and Freddie Mac to be opened up so that Americans could see how actions by executives at the two mortgage giants set the ground work for today's financial crisis.  House Republicans also called on the House Democratic leadership to hold hearings on actions by these two companies.  While the Democrats waited until other news took Fannie and Freddie out of the spot light, a recent hearing and the release of internal documents spells out just what I and my Republican colleagues have been saying all along: the leadership of these two institutions were warned about how risky their actions were, yet they ignored these warnings because any change would slow down profits and upset politicians who were pushing them to make loans that would never be repaid. 

You can read the Washington Post article on the story here, and view the documents for yourself here (note, this is a large pdf document).  The Republicans on the House Oversight Committee have also put together some information that is of interest.  I found this quote a prime example of how the leadership of Fannie and Freddie failed the American taxpayers and put our financial system in the situation it faces:

Edward Pinto, former chief credit officer for Fannie Mae and now a real estate finance consultant, estimates that 1 million of the GSEs’ Alt-A loans had no down payment. Pinto said one in six home mortgages could fail over the next four years and that, before the crisis tends, 40 percent of all the loans on Fannie and Freddie’s books that originated in 2007 will default. "Fannie and Freddie have subprimed America," Pinto said. "Without their actions, we would not have this unprecedented housing crisis."

While I am pleased that the Democrats on the Oversight Committee held the hearing, the fact that the leaders at these companies were warned about risky loans at the same time they were under political pressure to make these loans demands a more through investigation.  Congress needs to get to the bottom of this situation and find out not only why the executives of Fannie and Freddie were permitted to ignore repeated warnings, and what role Congress itself may have played. 

Posted by Henry E. Brown (12-22-2008, 12:00 PM) filed under Economy

 

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