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Wednesday, December 10, 2008

Congress Finally Acknowledges Some Of The True Culprits Of The Credit Crisis

Former Fannie Mae and Freddie Mac executives were scheduled to be questioned about their roles in the sub-prime credit crash. Names like Leland Brendsel, Daniel Mudd and Franklin Raines as well as Richard Syron are being mentioned.

These are the people who should have been hauled before Congress back in September-October when the House and Senate were discussing the failed bailout of Wall Street. Maybe now we can get some real answers to the problem and Congress will see that the 1977 Community Reinvestment Act needs to be repealed if we really want to clean up the entire mess.

From CNN:

“The companies made irresponsible investments, costing taxpayers hundreds of billions of dollars,” said Rep. Henry Waxman, D-Calif., committee chairman. “Their own risk managers warned time after time of the dangers of investing in subprime market, but those risks were ignored.”

The companies have drawn criticism from lawmakers on both sides of the aisle for taking on too much risk, exacerbating the credit crisis when the housing market declined.

Sen. John McCain, R-Ariz., during his recent failed presidential bid, said Fannie and Freddie were the “catalyst - the match that started this forest fire.”

The publicly traded but federally backed companies together control or guarantee about $5 trillion in mortgage loans. They purchase large amounts of home loans, bundle them together and divide them into securities that can be sold to investors.

I'm gald to see that people like Franklin Raines (who made over $90 million in personal income off of these high risk, sub-prime loans) are finally being brought before the cameras so that the American people can see who profited by this whole thing and why.

You can access the original blog entry on-line here:

Fannie, Freddie Ignored Warning Signs
David Goldman
December 9, 2008

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