Senator Chris Dodd: Blocking Reform at Fannie Mae and Freddie Mac
Government-backed mortgage giants Fannie Mae and Freddie Mac were at the center of the housing crisis, buying up risky subprime mortgages that were a primary cause of the housing collapse. In September 2008, the Federal government bailed out Fannie Mae and Freddie Mac, after their exposure to subprime debt threatened their collapse. The bailout capped off years of mismanagement and accounting scandals at the mortgage giants. Proposed reforms that would have reined in Fannie and Freddie's dominant position and helped prevent the collapse were presented to Congress -- and summarily dismissed.
The Senate's number one patron of Fannie Mae and Freddie Mac? Senator Chris Dodd.
As Senate Banking Chair, Dodd stymied reform of Fannie Mae and Freddie Mac and worked to weaken regulation of the mortgage giants.
“During this period, Sen. Richard Shelby led a small group of legislators favoring reform, including fellow Republican Sens. John Sununu, Chuck Hagel and Elizabeth Dole. Meanwhile, Dodd -- who along with Democratic Sens. John Kerry, Barack Obama and Hillary Clinton were the top four recipients of Fannie and Freddie campaign contributions from 1988 to 2008 -- actively opposed such measures and further weakened existing regulation.” (The Washington Post, 9/12/08)
Not only did Dodd protect Fannie and Freddie from reform -- he wanted to give them more power to buy up bad loans.
“Both Schumer and Christopher J. Dodd, D-Conn., the chairman of the Senate Banking, Housing and Urban Affairs Committee, have called on Fannie Mae and Freddie Mac’s regulator to lift the portfolio caps. They argue that allowing the two firms to buy more mortgages, at least temporarily, would inject much needed liquidity into the market and calm the financial markets.” (Congressional Quarterly Today, 8/16/07)
And Dodd wanted to further weaken mortgage regulations to give loans to the least creditworthy.
“Dodd and other Democrats want to relax FHA eligibility standards further, authorizing the agency to insure mortgages for even the least creditworthy borrowers if lenders will forgive a portion of their debt and issue new, smaller loans with lower monthly payments. The government would not hold the mortgages but would agree to pay off lenders if borrowers default.” (The Washington Post, 5/16/08)
All of this came after Fannie Mae and Freddie Mac committed financial fraud.
“[Former Fannie Mae CEO Franklin] Raines, for instance, collected $90.1 million in salary, bonuses and stocks over his last six years at Fannie Mae - also known as the Federal National Mortgage Association - and was ousted in December 2004 during an investigation into whether accounting irregularities allowed him to qualify for larger bonuses.” (The Washington Times, 9/14/08)
“Mortgage-finance giant Freddie Mac has agreed to pay a $125 million civil fine to settle a federal regulatory inquiry into management lapses that resulted in the company misreporting earnings by $5 billion from 2000 to 2002, sources said. Freddie Mac’s board, in a conference call, last night agreed to a consent decree with its regulator, the Office of Federal Housing Enterprise Oversight. Without admitting or denying wrongdoing, the McLean-based company also agreed to strengthen internal accounting controls and to beef up its public disclosure, according to sources familiar with the agreement.” (The Washington Post, 12/10/03)
The Payoff: Dodd was the #1 recipient of campaign cash from Fannie Mae and Freddie Mac.
Since 1989, Sen. Chris Dodd Has Received At Least $165,400 From Fannie Mae And Freddie Mac: $48,500 From PACs And $116,900 From Individuals, Receiving More Than Any Other Politician. (www.opensecrets.org, 9/11/08)
In September 2008, the Federal Government bailed out Fannie Mae and Freddie Mac with $200 billion of your tax dollars.
“In its most dramatic market intervention in years, the US government seized two of the nation’s largest financial companies, taking direct responsibility for firms that provide funding for around three-quarters of new home mortgages. Treasury Secretary Henry Paulson announced plans Sunday to take control of troubled mortgage giants Fannie Mae and Freddie Mac and replace the companies’ chief executives. The Treasury will acquire $1bn (€697m) of preferred shares in each company without providing immediate cash, and has pledged to provide as much as $200bn to the companies as they cope with heavy losses on mortgage defaults. The Treasury’s plan puts the two companies under a conservatorship, giving management control to their regulator, the Federal Housing Finance Agency, or FHFA.” (The Wall Street Journal, 9/8/08)
