"If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions." (Article)
WC - Fannie Mae and Freddie Mac gathered 388 billion in AAA rated mortgages either by owning or guaranteed. The securities being backed by these mortgages were doing fine as long as real estate appreciated. When they failed, the house came down.
If there wasn’t a Fannie Mae or Freddie Mac or if they had been better regulated, there would be no market for these low rated mortgages and therefore none would have been made.
In 2004 these two organizations had an accounting scandal. Legislation was created (co-sponsored by John McCain) to create regulation that would have forced them to diversify out of these mortgages, yet the Democrats tied it up on committee and it was never voted on in the Senate.
The Democrats had very close ties to the lobby groups representing Freddie and Fannie so much that 3 of the biggest recipients of their money were Chris Dodd (1st), Barack Obama (2nd) and Hillary Clinton (12th) and Sen. Obama has only been in the Senate for 3 years!
“Socializing risk, while privatizing profit.” – Peter Wallison
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