By John D. McKinnon
Like nonfiction horror? A document released by investigators provided graphic evidence of the fear officials were feeling during the 2008 financial crisis.
- Daniel Mudd, former president and CEO of Fannie Mae, testifies during an April 9 hearing before the Financial Crisis Inquiry Commission. (Photo by Alex Wong/Getty Images)
The Financial Crisis Inquiry Commission released a partial timeline of events leading up to the seizure of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage companies. At the time, early in 2008, the mortgage market was just beginning to seize up, and Fannie and Freddie were beginning to slide toward insolvency. Federal officials wrestled with what to do.
Despite the companies’ financial problems, some people inside and outside the government were calling for easing their capital limits, so they could spend more money and help bail out the flailing housing market.
Others, including some Treasury officials, worried about investors who held billions of dollars of Fannie and Freddie securities.
Then-Fannie CEO Daniel Mudd summed up the situation in an email to another executive: “It’s a time game….whether they [officials] need us more, sooner to show admin action, or if we hit the capital wall first. Be cool.”
A week later, Treasury Undersecretary Robert Steel expressed his discomfort with yet another remedy being considered – providing explicit government backing for Fannie and Freddie obligations. Steel wrote in an email: “I do not like that [proposal]…I view that as a very significant move, way above my pay grade to double the size of the U.S. dept [debt] in one fell swoop.”
The government eventually was forced to do that, taking over the companies in early September.
After the 2012 elections Washington is going to look like a hurricane evacuation route going north, south and west. This entire leftist incompetent group of elected and appointed henchmen of BHO will be fleeing home to their rat holes. It will take years to repair the damage they have already done. Never Again.
Awhile ago, a constituent was able to get to a microphone and ask Barney Frank if he felt any responsibility for Fannie and Fred, and Frank blew a conniption. These executives bear the same responsibility. Someone at Fan and Fred should’ve woken up and seen that you can’t give out liar loans or purchase liar loans and be confident that they’ll be paid back. If Paulsen and others figured out that if housing prices simply didn’t increase rapidly enough (much less drop) the rate of defaults would skyrocket and lead to a collapse, how come these execs at Fan & Fred missed it? Or if they saw it, what did they do about it?
Not much, apparently, since we’re over $400,000,000,000 in the hole to these companies. Sometimes you have to reject the paycheck and do what’s right. Based on Fan & Fred’s position now, F&F execs didn’t do the right thing.