Congress Dodging the Meltdown

When the lights come on, the cockroaches scatter. That’s why Congress will adjourn this year without addressing the financial crisis that has hit Wall Street.

As more details emerge about who was in bed with who, it’s becoming increasingly obvious who bears significant, if not primary, responsibility for this mess.

President Bush in 2003 tried desperately to stop Fannie Mae and Freddie Mac from metastasizing into the problem they have since become.

Here’s the lead of a New York Times story on Sept. 11, 2003: “The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”

Bush tried to act. Who stopped him? Congress, especially Democrats with their deep financial and patronage ties to the two government-sponsored enterprises, Fannie and Freddie.

And Bush was not the only one who tried to warn the country of what was coming.

Just two years after Bush’s plan, McCain also called for badly needed reforms to prevent a crisis like the one we’re now in.

“If Congress does not act,” McCain said in 2005, “American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”

Sounds like McCain was spot on.

But his warnings, too, were ignored by Congress.

Of course, with the media now a bona fide adjunct to the Democratic Party, the public likely will not hear much of these details until after the election — or maybe never.

UPDATE: Okay, Congress is not entirely passive. Barney Frank’s House Financial Services Committee just voted to overturn a ban on seller-financed down payments for some government-backed loans. According to Nicole Gelinas, this move perpetuates the very high-risk atmosphere that got us in the mess we’re in now.

It seems that Frank and his colleagues remain keen on coddling the tenacious bad-lending lobby (including the National Association of Homebuilders and what’s left of the banking industry), which desperately needs suckers to buy newly built homes at inflated prices so that builders can pay back at least some of their construction debt to the banks and investors. Frank is certainly not looking out for average-Joe home buyers and sellers with this action.

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