According to
conservatives, Freddie Mac and Fannie Mae’s audacity to loan to low-income Americans is to blame for the current financial crisis. During the final presidential debate, for example, Sen. John McCain (R-AZ) called the lending giants “
the catalyst for this housing crisis.”
Today in a House Oversight Committee hearing with former Fed chairman Alan Greenspan, SEC chairman Christopher Cox, and former Treasury secretary John Snow, Rep. John Mica (R-FL) revived that argument. He also tried to tie the crisis to Sen. Barack Obama (D-IL), holding up a chart called “Follow the Money Trail.” He pointed that Obama has been the largest recipient of donations from Freddie and Fannie. (Actually, he’s the
second highest.)
Committee chairman Henry Waxman (D-CA) chastised Mica for trying to turn the financial crisis into a political issue. He noted that Freddie and Fannie “certainly played a role” in the current situation, but then asked the witnesses, “Do any of you believe that they were the cause of this financial crisis?” All three men said no. Watch it:
(
http://thinkprogress.org/">Waxman On Fannie Mae/Freddie Mac)
Federal housing data back up this conclusion — that “
the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.” As Center for American Progress Senior Fellows Michael S. Barr and Gene Sperling explain, Freddie and Fannie
weren’t even securitizing subprime mortgages en-masse until 2005:
moreIn a House Oversight Committee hearing today, former Fed Chairman Alan Greenspan claimed the credit crisis is a “once in a century credit tsunami” that policy makers did not anticipate. Greenspan repeatedly distanced himself from the financial meltdown, however, saying he didn’t foresee the crisis because of a “flaw in the model.”
Greenspan claimed he was “shocked” because his model “was working exceptionally well” for 40 years, adding that the crisis is “broader than anything I could have imagined”:
GREENSPAN: I also want to discuss how my thinking has evolved and what I have learned this past year. In 2005, I raised concerns that the protracted period of the underpricing of risk if history was any guide would have dire consequences. The crisis, however, has turned out to be much broader than anything I could have imagined.
Watch it:
(
http://thinkprogress.org/">Greenspan didn't anticipate financial crisis)
It seems Greenspan was so willing to accommodate
Bush’s ownership society that he refused to take into account the economic risk of subprime borrowing.
By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer – Thu Oct 23, 12:56 pm ET
WASHINGTON – Rising layoffs are hammering American workers, spelling more pain to come for consumer spending, the housing market and the broader economy.
New claims for jobless benefits increased by more than expected last week, the Labor Department said Thursday. And companies from Goldman Sachs to Yahoo have announced thousands of layoffs in the past few days as the financial crisis, tighter credit, rising foreclosures and myriad other woes take their toll on the economy.
The employment outlook for Americans will likely get worse, former Federal Reserve Chairman Alan Greenspan said Thursday.
"Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Greenspan told a House committee Thursday.
The Labor department said new applications for unemployment insurance rose 15,000 to a seasonally adjusted 478,000, above analysts' estimates of 470,000.
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