Bush Administration Tried to Reform Freddie and Fannie Five Years Ago
Fox News’s Bill O’Reilly asked former White House adviser Karl Rove that question on Wednesday’s “O’Reilly Factor.”
“You left the Bush administration 15 months before the president did,” O’Reilly said to Rove. “While you were there at the end, was there any inkling, did you have any idea that the underpinnings of the economy were eroding so seriously?”
Rove responded, “Well, there was concern about it, particularly in the housing area, we were briefed as far back as 2001 about the problems with Fannie and Freddie; in fact, we moved aggressively in 2004 to regulate Fannie and Freddie, actually got a bill through the Senate Banking and Finance Committee only to have it filibustered by [Sen.] Chris Dodd.”
Rove said Fannie Mae and Freddie Mac “accelerated their imprudent behavior after we attempted to regulate them. They bought almost as much mortgage debt from 2005 through 2008” as they bought in their first 30 years of their existence.
A Google search brings up the following Sept. 11, 2003 New York Times article, which shows the Bush administration was aware of potential lending problems and did try to do something about it:
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.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
Rove told O’Reilly on Thursday that Rep. Barney Frank (D-Mass.) was among those in Congress who attacked the proposed reform of Fannie Mae and Freddie Mac.
“In fact, in 2003, when we sent our first members of the Cabinet up to talk about this on Capitol Hill, Barney Frank had a hearing in which they basically beat up everybody we sent up there in pretty vociferous language. This is the famous hearing where one of the Democratic members literally says that he is ‘pissed off’ that the administration is even raising this issue,” Rove said.
Rep. Gregory Meeks, a New York Democrat, said at that Sept. 25, 2003 House Financial Services Committee hearing that he was “pissed off at OFHEO (Office of Federal Housing Enterprise Oversight),” because of the agency’s suggestion that Fannie Mae and Freddie Mac should be regulated more closely. A number of other Democrats agreed there was no need for reform.
Nevertheless, O’Reilly on Thursday said that President Bush could have done a better job of getting the word out to the public: “I think that if the president had made it a central issue, had sounded the alarm, called some of us, gone on the “Factor” on radio and television – it might have been better than working as they did, not behind the scenes, but under the radar.”
The Bush administration was above the radar, Rove replied. “But at a time when housing prices were going up and when we have two of the biggest, most positively treated companies in America, particularly Fannie Mae...it was hard to get people to focus on the underlying problem,” Rove replied.