Tags: obama | fannie | freddy

Obama Encouraged Risky Fannie, Freddie Loans

Wednesday, 29 Oct 2008 02:45 PM

By Jim Meyers

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The John McCain campaign has issued a release pointing to a Wall Street Journal editorial questioning Barack Obama’s stance on Fannie Mae, Freddie Mac, and subprime mortgages.

The editorial published on Wednesday notes that, during the Oct. 7 presidential debate, when John McCain said Obama had encouraged Fannie Mae and Freddie Mac to make risky loans, Obama replied that he “never promoted Fannie Mae.” He also stated: “Two years ago I said that we’ve got a subprime lending crisis that has to be dealt with.”

Obama said: “I wrote to [Treasury] Secretary [Henry] Paulson, I wrote to Federal Reserve Chairman [Ben] Bernanke, and told them this is something we have to deal with, and nobody did anything about it.”

The Journal observed: “Mr. Obama's March 2007 letter included a stirring call to ‘assess options’ and boldly suggested that the two men ‘facilitate a serious conversation’ about housing. He was even brave enough to suggest that ‘the relevant private sector entities and regulators’ might be able to provide ‘targeted responses.’ Then in paragraph four, the Harvard-trained lawyer dropped his bombshell: a suggestion that various interest groups get together to ‘consider’ best practices in mortgage lending.

“Some may find it hard to believe that Mr. Obama had nothing to show for this herculean effort to shake up Washington. They may be shocked as well that such passionate language didn't move the Fed and Treasury to action. For our part, we note that nowhere in his letter did Mr. Obama suggest that the government should stop subsidizing loans to people who can't repay them.”

In fact, Obama said in a September 2007 speech: “Subprime lending started out as a good idea, helping Americans buy homes who previously couldn’t afford to.”

And he voted against a bill, which McCain co-sponsored, to reform the way Fannie and Freddie did business.

It also might be noted that two former Fannie Mae CEOs, Franklin Raines and James Johnson, have had roles in Obama’s presidential campaign.

Raines advised the campaign on housing matters, according to the Washington Post. He was paid $20 million by Fannie Mae in 2003 and left under a cloud of alleged corruption and illegal accounting.

Johnson helped Obama select his vice presidential running mate. Johnson received millions of dollars in hidden income from the corporation, according to the Office of Federal Housing Enterprise Oversight’s May 2006 report on mismanagement and corruption inside Fannie Mae.

Obama received more than $126,000 in political donations from Fannie Mae and Freddie Mac, and McCain declared at the debate that Obama was the second largest recipient of campaign cash from the government mortgage giants.

The Journal editorial concludes: “If Barack Obama wants to write any more letters, he should urge his colleagues in Washington to focus on the causes of this crisis, not the effects. Unlike Senators, Presidents are expected to solve problems, not merely write about them.”

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