More Proof Democrats Destroyed The Economy In 2008: The Ongoing Fannie Mae/Freddie Mac Disaster

Who destroyed the economy in 2008?  Democrats say it was Bush.  Why?  Well, because he was president, that’s why.

Why – when applying the same logic – Barack Obama STILL isn’t responsible for any of his economic mess fully two years after George W. Bush left office is anybody’s guess.

But stop and think.  The primary cause for the 2008 economic meltdown was a downturn in the housing market and the underlying mortgage market.

At the core of that meltdown was GSEs (that’s “Government Sponsored Enterprises” to you) Fannie Mae and Freddie Mac.

The problem with Fannie Mae and Freddie Mac has always been that it was – and remains – a social welfare institution masquerading as a financial institution.  And they have made beyond-godawful “financial” decisions because their true loyalty has always been with socialist policies rather than financial ones.

Let’s look at Fannie and Freddie’s current picture:

Fannie, Freddie’s $685B fix
Last Updated: 11:54 PM, November 4, 2010
Posted: 11:54 PM, November 4, 2010

Fannie Mae and Freddie Mac, the mortgage firms operating under federal conservatorship, may cost taxpayers as much as $685 billion as the US covers losses and overhauls the housing-finance system, Standard & Poor’s said.

Costs for resolving the two government-sponsored entities could reach $280 billion, including $148 billion already delivered under a US Treasury Department promise of unlimited support, New York-based S&P said yesterday in a research report. The government may spend an additional $405 billion to capitalize a replacement for the two companies, which own or insure more than half the US mortgage market.

“It appears unlikely in our view that housing and mortgage markets will be able to operate normally without continuing and substantial government involvement,” S&P said, citing the GSEs’ growing portfolio of unsold homes, a sluggish economy, high unemployment, the prospect of rising foreclosures and billions in legacy losses.

Treasury Secretary Timothy F. Geithner, who has said there is a strong case to be made for continued US involvement, has promised to deliver the Obama administration’s plan to overhaul the housing-finance system by the end of January. Republican lawmakers, who will take control of the House of Representatives in January, have called for the government to end its support for Washington-based Fannie Mae and Freddie Mac, of McLean, Va.

“Although federal authorities have taken no concrete public steps toward sponsoring a GSE alternative, Standard & Poor’s believes that it’s a useful exercise to consider how much such a recapitalization might cost taxpayers,” the report said.

$685 BILLION.  That’s quite a mess.

Did it just happen?  Hardly.  This was going on for years.  This was what caused the subprime crisis that destroyed our economy in 2008.

Let’s survey the record.  According to record provided by The New York Times, Fannie and Freddie were in huge trouble PRIOR TO the economic collapse.  And their holdings were so massive that there is simply no reasonable way that one can maintain that their crisis didn’t directly contribute to the greater crisis to be revealed.  Read the article dated July 11, 2008:

Fannie Mae and Freddie Mac are so big — they own or guarantee roughly half of the nation’s $12 trillion mortgage market — that the thought that they might falter once seemed unimaginable. But now a trickle of worries about the companies, which has been slowly building for years, has suddenly become a torrent.

A timeline of the subprime loan crisis of 2008 clearly reveals that it was Fannie Mae’s collapse that started the entire mess rolling downhill.  From Wikipedia:

September 2008

    • September 7: Federal takeover of Fannie Mae and Freddie Mac, which at that point owned or guaranteed about half of the U.S.’s $12 trillion mortgage market, effectively nationalizing them. This causes panic because almost every home mortgage lender and Wall Street bank relied on them to facilitate the mortgage market and investors worldwide owned $5.2 trillion of debt securities backed by them.[151][152]
    • September 14: Merrill Lynch is sold to Bank of America amidst fears of a liquidity crisis and Lehman Brothers collapse[153]
    • September 15: Lehman Brothers files for bankruptcy protection[154]
    • September 16: Moody’s and Standard and Poor’s downgrade ratings on AIG‘s credit on concerns over continuing losses to mortgage-backed securities, sending the company into fears of insolvency.[155][156] In addition, the Reserve Primary Fund “breaks the buck” leading to a run on the money market funds. Over $140 billion is withdrawn vs. $7 billion the week prior. This leads to problems for the commercial paper market, a key source of funding for corporations, which suddenly could not get funds or had to pay much higher interest rates.[157]
    • September 17: The US Federal Reserve lends $85 billion to American International Group (AIG) to avoid bankruptcy.
    • September 18: Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke meet with key legislators to propose a $700 billion emergency bailout through the purchase of toxic assets. Bernanke tells them: “If we don’t do this, we may not have an economy on Monday.”[158]
    • September 19: Paulson financial rescue plan is unveiled after a volatile week in stock and debt markets.

Democrats who bother to offer any reason at all why “Republicans got us into this mess” claim that the Republicans refused to regulate and reform the economic sector.

Well, let’s dig a little further.  Was it George Bush who refused to regulate or reform?


From US News & World Report:

Seventeen. That’s how many times, according to this White House statement (hat tip Gateway Pundit), that the Bush administration has called for tighter regulation of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

That’s right.  George Bush tried SEVENTEEN TIMES to reform and regulate Fannie Mae and Freddie Mac, the agencies at the epicenter of the economic crisis.

When did this thing start?  Under Bush?  Not according to The New York Times, as I have pointed out before in a previous article.

From the New York Times, September 30, 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.

More.  Again from the New York Times, September 30, 1999:

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.”

What do we have, even in the pages of the New York Times?  A prediction that as soon as the economy cooled off, the mortgage market would explode like a depth charge and the government would have to step in to prevent a catastrophe.  And from a Clinton program, at that.

The same man – Peter Wallison – who had predicted the disaster from 1999 wrote a September 23, 2008 article in the Wall Street Journal entitled “Blame Fannie Mae and Congress For the Credit Mess.”

So this disaster began under Bill Clinton.  Specifically, it began in the very final years of the Clinton administration.  Interestingly, at the same time that the Dot-com bubble was getting ready to explode on Clinton’s watch.  Clinton got all the credit for a great economy, and Bush got to watch 78% of the value of Nasdaq destroyed just as he was taking office.  $7.1 TRILLION in wealth was vaporized (43% of the the Market Capitalization of the Dow Jones Wilshire 5000 Full Cap between 2000 Q1 and Q1 2003).  Bill Clinton handed George Bush a massive economic disaster (made even worse by the shocking 9/11 attacks), and Bush turned economic calamity into the longest consecutive period of job growth (52 straight months) in history.  In diametrical contradiction to all the lies that you have  heard from Democrats and from a mainstream media propaganda machine that often puts Joseph Goebbels to shame

What did George W. Bush do to deal with the necessary regulation and reform of these government-subsidized behemoths Fannie and Freddie?

Read what the New York Times said back in September 11, 2003:

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

So Bush WANTED to regulate and reform the industry that would destroy the economy five years later, again, in contradiction to a blatantly dishonest and ideologically liberal and biased media.  Bush didn’t “refuse to regulate.”  Bush TRIED to provide the necessary regulatory steps that could have averted disaster.

And who blocked those regulations and reforms that Bush tried to provide?  None other than Barney Frank and his Democrat buddies:

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.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Democrats blocked reform and regulation of Fannie and Freddie.  They threatened to filibuster any attempt at regulation and reform.  Meanwhile John McCain wrote a letter in 2006 urging reform and regulation of the GSEs.  He said:

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

And it came to pass exactly as John McCain warned.

Because of Democrats.  Who were virtually entirely to blame for the disaster that ensued as a result of their blocking of reform and regulation.

What did Democrats do with the mainstream media’s culpability?  They falsely dropped the crisis at the feet of “greedy” Wall Street.  But while examples of Wall Street greed abound, the liberal intelligentsia deliberately overlooked the central and preceding role of Democrat-dominated Fannie Mae and Freddie Mac.

Here’s how the mess actually happened:

The New York Times acknowledged that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac “buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.”

And the Los Angeles Times on May 31, 1999 describes how this process turned into a bubble, as more begat more, and then more and more begat more and more and more:

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . .

In a nutshell, Fannie and Freddie, in their role as Government Sponsored Enterprises, bought tens of millions of mortgages, and then repackaged them into huge mortgage-backed securities that giant private entities such as Bear Stearns, AIG and Lehman Brothers purchased.  What made these securities particularly attractive to the private banking entities was that these securities were essentially being sold – and had the backing – of the United States government.  Fannie Mae and Freddie Mac, again, are Government Sponsored Enterprises.

Here’s the process:

The Role of the GSEs is to provide liquidity and stability to the U.S. housing and mortgage markets. Step 1 Banks lend money to Households to purchase and refinance home mortgages Step 2 The GSEs purchase these mortgage from the banks Step 3 GSEs bundle the mortgages into mortgage-backed securities Step 4 GSEs sell mortgage-backed and debt securities to domestic and international capital investors Step 5 Investors pay GSEs for purchase of debt and securities Step 6 GSEs return funds to banks to lend out again for the issuance of new mortgage loans.

Now, any intelligent observer should note a primary conflict that amounts to a fundamental hypocritical contradiction: the GSE’s role was to “provide stability,” and yet at the same time they were taking on “significantly more risk” in the final year of the Clinton presidency.  What’s wrong with this picture?

The GSEs Fannie Mae and Freddie Mac were designed to bundle up the mortgages into mortgage backed securities and then sell them to the private market.

Fannie Mae is exempt from SEC [Securities and Exchange Commission] regulation. Which screams why Bush wanted to regulate them.  This allowed Fannie Mae to bundle up mortgages, which were then rated AAA with no requirement to make clear what is in the bundle.  Which screams why Bush wanted to regulate them.

This is what allowed the toxic instruments that have been sold across the world to proliferate.  And then to explode.  It also created a situation where money institutions did not know and could not find out whether potential inter-bank business partners were holding these “boiled babies on their books, complete with a golden stamp on the wrapping,” rather than safe instruments.  This then inclined banks to a natural caution, to be wary of lending good money to other banks against these ‘assets’.  And thus banks refused to lend to one another.

And it was Democrats, not Bush, and not Republicans, who were all over this disaster that destroyed our economy in 2008.

We were led by a pathologically dishonest media to believe that Republicans had created this mess, when it fact it had been Democrats.  And so we gave the very fools who destroyed our economy total power.

And what have they done in the two years since?

They made bad far, far worse.

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17 Responses to “More Proof Democrats Destroyed The Economy In 2008: The Ongoing Fannie Mae/Freddie Mac Disaster”

  1. wm Says:

    Remember also that it was President Carter in the 70’s that made a push for houses being available to everyone, an agenda he still espouses with “habititat for humanity”. A small fact that becomes more important in light of Barney Frank’s involvement with Fannie Mae:,2933,432501,00.html
    This is not really news but it has certainly been pushed to the back of the closet by liberal socialists.

  2. Michael Eden Says:

    I glossed over that story (re: Barney Frank’s “boyfriend” being a Fannie exec during a period in which Frank’s committee had oversight over Fannie), and will read over it further.

    It continues to amaze me that the Republican Party did such a miserable job trying to respond to the charge that “Republicans destroyed the economy.” They didn’t even TRY to respond, even though we had all the facts.

    Kind of like John McCain refusing to mention the fact that Obama belonged to an evil, anti-American, Marxist and racist church for more than 20 years. You just can’t believe it.

    Fannie and Freddie controlled well over half the mortgage market. It was Fannie and Freddie ALONE who were authorized to bundle mortgages together and sell them as securities. Fannie and Freddie were the ones who brought subprime loans into mortgages. And, of course, Fannie and Freddie which crashed before the private firms – which in turn caused the assets that the private firms had purchased from Fannie and Freddie to be called into question.

    And it was Democrats who filled all the top leadership positions.

    And it was Democrats who initiated the policies that proved so disastrous.

    And it was Democrats who refused any regulation or reform whatsoever for Fannie and Freddie.

    Meanwhile it was Republicans who accurately predicted that the GSEs would crash the system.

    It was Republicans who tried again and again to overcome Democrat filibusters to regulate and reform Fannie and Freddie.

    But when Fannie and Freddie exploded, and took the economy with it, who did the mainstream media blame????

    P.S. You rightly point out that the Community Reinvestment Act began under Carter. But it also needs to be realized that Bill Clinton – in the final year of his administration – turned the CRA into the monster that destroyed our economy. And when Bush tried to deal with what he rightly saw as a future crisis in the making, the Democrats screamed “racist” at him.

  3. Penny Stock Alerts Says:

    Could be the top blog I have read all year.

  4. sodomie Says:

    Thanks seeking this discriminating article, it’s very famous blogs

  5. Michael Eden Says:


  6. Rose McDonald Says:


  7. Michael Eden Says:


    You sure showed how wrong I was with that penetrating insight of yours, Rose.

    It’s amazing. Rose is the brightest mind the left has. She just gave me her very best shot.

    This is why arguing with a liberal is pointless. Utterly vaccuous people, these.

  8. tdbach Says:

    You need to date your posts. When did you post this one? The Dick Morris -inspired post was published when? Because as of now, it Morris (and by extention, you) is laughable.

  9. Michael Eden Says:

    Your critique itself is quite laughable, coming from a guy who is unable to spell (it’s “by extension” you dumbass), and from a guy who is unable to uncover the date of a post.

    WordPress automatically dates posts. I don’t know what browser you’re using, but for me it appears as plain as day even before my name. In this case, this article was written on November 8, 2010.

    For the sake of argument, let’s say for whatever reason that information didn’t appear right after the title and right before my name. Then just pass your cursor over the title, and the html address should appear. And in the case of this article, it looks like this:

    Note the 2010/11/08. Again, you dumbass.

    Lastly, people like you just make me want to vomit. You don’t have a single substantial criticism to make, so you just say it’s stupid, or its laughable, or some other inane remark without having the decency or integrity – or the intelligence – to offer so much as a single actual reason WHY my post is allegedly so laughable.

    Not that people like you NEED to deal with reality or anything like that.

    You dumbass.

  10. Anonymous Says:

    Typical of the smokescreens laid down by neoconservatives and their media outlets. A concept as simple as cause and effect is something that eludes them when the end result is inconvenient.

    What will Rush have you speaking as an expert about tomorrow?

  11. Michael Eden Says:


    Other than the fact that you are an arrogant sneering turd, you don’t even TRY to refute so much as a single fact or argument I offer.

    I frankly marvel that there are people like you out there who are so stupid, and so completely full of crap, that they feel they have refuted an article by offering such a pathetic response.

    Either offer something substantial and worthy of consideration or please just kiss off.

  12. Jim Facciuto Says:


  13. Michael Eden Says:


  14. Chris H Says:

    Great article Michael. It’s a dam shame the MSM has their head in the sand when it comes to the pressure put on banks by the Clinton administration and democrats to give loans to people that couldn’t afford them. This was a slow train wreck in the making that took 12 years to derail. It might take several more years to get beyond this.

    Any way, thanks for taking your time in putting this together.

  15. Michael Eden Says:

    Chris H,

    Thanks. It is frankly beyond amazing how willfully irresponsible the MSM propagandists are and how hypocrite the Democrat Party is. Both keep harping on “Republican obstructionism” as why Obama can’t get anything done. This turd Obama had two full years of total Democrat control of both the House and the Senate and even FILIBUSTER-PROOF control in the Senate. And these last two years Obama has still had control of the Senate.

    Compare that to Bush and the unrelenting DEMOCRAT OBSTRUCTIONISM he faced particularly his last two years in office when the Democrats controlled both the House AND the Senate. Where were the outcries against DEMOCRAT OBSTRUCTIONISM then from the media??? These people are so damn dishonest it is beyond unreal.

    Bush was blamed for everything that happened and the ONLY damn reason they blamed him was because he was president when it all happened. Well, WHY ISN’T OBAMA ENTIRELY TO BLAME FOR HIS LAST FOUR YEARS???

    The answer is because if you are a Democrat and particularly if you are a “journalist” (defined as a Democrat who gets to write the “news”) you are a pathologically dishonest hypocrite.

    Fannie Mae and Freddie Mac and the DEMOCRAT POLICIES behind them was what caused the economy to crash in 2008. Conservatives literally had been warning about it for ten years and EXACTLY what they said would happen is what happened. That’s pretty much a scientific proof: Republicans predicted what would happen if Democrats did these things and their prediction was born out when Democrats got to experiment. Further, Bush tried SEVENTEEN TIMES to reform Fannie and Freddie to total Democrat obstructionism, so the “Republicans failed to regulate” bullcrap is a lie from hell. And John McCain wrote about as clear a letter warning of an economic collapse if Fannie and Freddie collapsed as you could get. He wrote that at a time when Democrats would allow ABSOLUTELY NOTHING to fix these giant GSEs which controlled 80% of the mortgage market when there was still time to do something.

  16. economy Says:

    Spot on with this write-up, I honestly believe this amazing site needs a lot more attention. I’ll probably be back again to read through more, thanks for the advice!

  17. Michael Eden Says:

    Thanks, economy.

    All we can do is present the truth. We can’t make fools wise.

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