Washington's Greed
IBD Editorials
Posted 07:06 PM ET
Subprime Scandal: Democrats blame "greedy" Wall Street for the financial crisis, but Democratic operatives lined their own pockets throughout the mess.
Take Democrat Sen. Chris Dodd. The Senate Banking Committee chairman recently blew a gasket on the Senate floor over GOP opposition to his tougher financial regulations.
"You have to ask yourself: 'Who benefits if this bill to rein in Wall Street or large financial institutions is strangled by a filibuster?'" he said. "Certainly no one can make the case that the American family would benefit. These families have seen millions of jobs lost, trillions in savings wiped out, because of the greedy few on Wall Street who gambled with money that didn't even belong to them."
But Dodd was one of the power brokers who played fast and loose with taxpayer-backed money at Fannie Mae and Freddie Mac.
As late as July 2008, as the congressionally chartered mortgage giants buckled under the weight of HUD-mandated subprime loans, the banking panel chief insisted they were "viable, strong institutions." Dodd asserted that there was no need to rein in their risky affordable-lending programs.
By suspending oversight, Dodd helped gamble away more than $400 billion — the current estimate of how much it will cost the Treasury to bail out Fannie and Freddie.
At the same time, Dodd personally took advantage of the easy credit scam that he and his affordable-housing cronies fostered. He received not one, but two sweetheart mortgages from subprime giant Countrywide Financial, which at the time was the darling of the affordable-housing movement. Points were shaved from the loans, and Dodd saved thousands of dollars.
Fannie CEO Franklin Raines also got special treatment from Countrywide, which became Fannie's top client. Democrat Raines, who griped that homeownership was "unevenly distributed in society," even held it up as the model for affordable lending.
After stepping down as White House budget director, Clinton installed him at the helm of Fannie where he proceeded to cook the books and pocket huge bonuses. By the time he left in early 2005 under an ethical cloud, Raines had looted Fannie for nearly $100 million in compensation. Other Clinton cronies padded their pockets with sums that make some Wall Street CEOs look like pikers.
Raines is now an informal housing adviser to President Obama. Obama maintains that "fat cat bankers" caused the mortgage meltdown. But it was HUD that encouraged Fannie and Freddie to take "reckless risks" to satisfy affirmative-lending quotas. And Democrats on the Hill looked the other way.
Dodd and others abdicated their oversight duties. In effect, they gave the mortgage giants a blank check and told them to make it out to uncreditworthy minority and low-income homebuyers, who could not afford to repay loans.
As long as Fannie and Freddie kept underwriting politically correct mortgages, Democrats turned a blind eye to the mounting risk. And they also ignored the book-cooking and looting going on there.
In turn, Fannie and Freddie paid them protection money in the form of generous political donations. In fact, Dodd and Obama were among the top recipients of their largesse in the Senate.
Then there is White House Chief of Staff Rahm Emanuel, an old Chicago crony of Obama. In 2000, after serving as a top White House aide, President Clinton appointed Emanuel to the Freddie Mac board, where he raked in a cool $320,000 in compensation.
Following his stint there, Emanuel hauled in millions of dollars working for a Chicago investment firm that backed — you guessed it — subprime mortgage lending firms.
Before demonizing greedy bankers on Wall Street, Democrats in Washington ought to take a long, hard look in the mirror.
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