Clinton Administration Sought Advice From Fraud King Madoff

Before we get too far into the media narrative that tells us all about how Bernie Madoff and his $50 billion securities fraud represent yet another example of the Bush administration’s “disastrous policy of deregulation,” let it be known that the Clinton administration not only , but even went one step further.  And if the media WERE fair, the narrative would at the very least include the part about how the Clinton administration actually stupidly, idiotically, and moronically turned to the worst securities fraud king in the world for advice.

You know what I’m talking about.  Watch Saturday Night Live reruns: Bill Clinton is presented as a charming rogue, as someone who cleverly spins everything to his side; but he’s never presented as a moron.  That’s only reserved for Republicans like “Dubya.”  Clinton is crafty; Bush says, “strategery.”  Over and over again he has been depicted as a bumbling, incompetent imbecile.

Credible and specific allegations regarding Madoff’s financial wrongdoing go back to at least 1999, and yet:

But Mr. Levitt, who served as chairman for all eight years of the Clinton administration, also occasionally turned to Mr. Madoff for advice about how the markets worked, and appointed him as a member of a large advisory commission that included a wide range of industry representatives that explored the rapidly changing structure of the financial markets.

But we’re not going to hear about how the SEC under Clinton asked financial fraudster Madoff for financial advice; what we’re going to hear about is how the SEC under Bush completely screwed everything up.

Arianna Huffington wrote a piece pretty much painting coat after coat of scarlet-red-colored blame on President Bush for his failure to know about Madoff’s shenanigans.  But, again, what about Clinton’s failure to catch the guy?  Was Bush the only President who failed to catch on to Madoff?

As the Wall Street Journal has reported, one individual more or less laid out the issue for the regulators in language that does not get much clearer, nor much further from the actual truth:

Harry Markopolos, who years ago worked for a rival firm, researched Mr. Madoff’s stock-options strategy and was convinced the results likely weren’t real.

“Madoff Securities is the world’s largest Ponzi Scheme,” Mr. Markopolos, wrote in a letter to the U.S. Securities and Exchange Commission in 1999.

We saw this same pile of journalistic cowpies during the Presidential election.  The media took careful notes on Democratic talking points, and then broadcast them as fact.  “Bush’s failed economic policies”; “Republican deregulation”; that sort of thing.

Did the media tell the real story?  Was this disaster Bush’s fault?

According to The Wall Street Journal:

Beginning in 1992, Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low and moderate income borrowers. For 1996, the Department of Housing and Urban Development (HUD) gave Fannie and Freddie an explicit target — 42% of their mortgage financing had to go to borrowers with income below the median in their area. The target increased to 50% in 2000 and 52% in 2005.

For 1996, HUD required that 12% of all mortgage purchases by Fannie and Freddie be “special affordable” loans, typically to borrowers with income less than 60% of their area’s median income. That number was increased to 20% in 2000 and 22% in 2005. The 2008 goal was to be 28%. Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable-rate loans, and made to borrowers who bought houses with less than 10% down.

Fannie and Freddie also purchased hundreds of billions of subprime securities for their own portfolios to make money and to help satisfy HUD affordable housing goals. Fannie and Freddie were important contributors to the demand for subprime securities.

It points out:

Fannie and Freddie played a significant role in the explosion of subprime mortgages and subprime mortgage-backed securities. Without Fannie and Freddie’s implicit guarantee of government support (which turned out to be all too real), would the mortgage-backed securities market and the subprime part of it have expanded the way they did?

There’s more.  Much more.  The New York Times had this story back in 1999:

“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. . . .

Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.” . . .

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.” . . .

So, no.  The foundations of the financial meltdown were laid before President Bush took office.  And once these bureaucracies are in place, they never go away.

We saw why Government Sponsored Enterprises like Gannie and Freddie are such a terrible idea: the profits are privatized and the risks end up becoming socialized.

Whose fault was it that GSEs Fannie and Freddie didn’t have appropriate regulation?  Was it Republicans’ fault, the way we kept hearing in the media over and over again?

On September 11, 2003 The New York Times announced:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

But that effort at regulatory reform, along with a similar effort in 2005/06 – at a time when it actually would have averted the disaster that has overtaken our economy – was killed by Democrats like Barney Frank, who is quoted in the same article as saying:

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Even as late as July 14, 2008, Barney Frank was taking the line that the GSEs Fannie and Freddie which were under HIS direct oversight as the Chairman of the House Financial Services Committee, was spouting the same line:

I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.

This even as Fannie and Freddie stock plunged 90% while Democrats presided over Congress.

Even Bill Clinton of all people laid the blame for failing to regulate Fannie and Freddie squarely on Democrats:

Bill Clinton on Thursday told ABC’s Chris Cuomo that Democrats for years have been “resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.”

But the media are no longer in the business of reporting the facts.  They are in the business of serving as the propaganda wing of the Democratic Party.  In order to get the truth you have to do your own digging, because the media is inherently dishonest and corrupt.

I don’t mind reporting that the Bush administration dropped the ball on Bernie Madoff, and has dropped a lot of other balls during the last 8 years.  I’m just asking the media to have the integrity to point out that Bill Clinton dropped a lot of balls, too.  In fact, he dropped a lot of the very same balls.

By the way, fraudster Bernie Madoff was a big-time Democrat donor, with fully 88% of his contributions going to Democratic Party causes.  Thought I’d tell you that, because CBS and NBC (among many others) wouldn’t dream of pointing that little factoid out to you.

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