Below The Beltway

Here’s a viral video that picks up the meme that Republicans have been trying to get out all week — that the root cause of the economic crisis we’re dealing with now can be found in Clinton-era reforms that made it easier to give mortgages to people with low-income and/or bad credit:

I can’t say I know enough about this to pass judgment, but there’s plenty of evidence out there to support the Republican argument that government-mandated easy credit forced banks to hand out mortgages that, objectively, never should have been given.

Consider, for example, Andrew Cuomo’s role in the Fannie/Freddie debacle:

There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.

Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.

The linked article is from The Village Voice, hardly a conservative mouthpiece, and it goes on for six pages that are well worth reading if you’re at all interested in how we got where we are today.

And then there’s Senator Chris Dodd:

Taxpayers face a tab of as much as $200 billion for a government takeover of Fannie Mae and Freddie Mac, the formerly semi-autonomous mortgage finance clearinghouses. And Sen. Christopher Dodd, the Democratic chairman of the Senate banking committee, has the gall to say in a Bloomberg Television interview: “I have a lot of questions about where was the administration over the last eight years.”

We will save the senator some trouble. Here is what we saw firsthand at the White House from late 2002 through 2007: Starting in 2002, White House and Treasury Department economic policy staffers, with support from then-Chief of Staff Andy Card, began to press for meaningful reforms of Fannie, Freddie and other government-sponsored enterprises, known GSEs.

The crux of their concern was this: Investors believed that the GSEs were government-backed, so shouldn’t the GSEs also be subject to meaningful government supervision?

(…)

How did Fannie and Freddie counter such efforts? They flooded Washington with lobbying dollars, doled out tens of thousands in political contributions and put offices in key congressional districts. Not surprisingly, these efforts worked. Leaders in Congress did not just balk at proposals to rein in Fannie and Freddie. They mocked the proposals as unserious and unnecessary.

As recently as last summer, when housing prices had clearly peaked and the mortgage market had started to seize up, Dodd called on Bush to “immediately reconsider his ill-advised” reform proposals. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said that the president’s suggestion for a strong, independent regulator of Fannie and Freddie was “inane.”

Sen. Dodd wonders what the Bush administration did to address the risks of Fannie and Freddie. Now, he knows. The real question is: Where was he?

If I recall correctly, he was getting preferential mortgages from Countrywide, one of the many companies destroyed in this debacle.

There are, of course, plenty of Republicans who can share in the blame as well, but the important point to recognize here is that it was government intervention that created a real estate bubble, and it is the collapse of that bubble that we’re dealing with today.

H/T: Brendan Loy