What Date is It?

From the New York Times:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis…
 
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
 
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios. [emp added]

Freddie Mac and Fannie Mae are absolutely ground zero for the financial collapse. Most of the major lenders who failed did so because the mortgage securities they brought from the
two Government Sponsored Enterprises (GSEs) proved nearly worthless.  

I know what you’re thinking, “It’s too bad Bush didn’t try to fix the problem with the GSEs before the wheels came off.”

The New York Times story is datelined September 11, 2003. 

The Times give the prized final word to these two clowns:

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
 
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
 
”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said. 

The financial collapse was not caused by unbridled capitalism. It was caused by politicians trying to distort the free market to get something for nothing. Far from being oblivious to the dangers posed by the GSEs, Bush and other Republicans tried to make them work more like free-market companies, but Frank and other Democrats blocked them. Bush failed in four attempts to reform the dangerous GSEs, until last summer when it was far too late. 

The Democrats’ creation of the GSEs and their decades-long coddling of them inflated minor, localized housing booms into a single, massive economy-wrecking bubble. We shouldn’t forget how we got here.