Still Shielding Democrats from Fannie Mae-Freddie Mac Flak
Even after the election, the Times is still shielding Democrats from any responsibility for the meltdown of Fannie Mae and Freddie Mac. Last Thursday the Times wrote this about the Rhode Island Senate race involving Democrat Jack Reed, who easily won reelection:
As a member of the Senate Committee on Banking, Housing and Urban Affairs, Mr. Reed in 2006 urged Fannie Mae executives to buy more loans that had been extended to low-income home buyers, perhaps contributing to the company's eventual crisis . This fall, he played a role in fashioning the $700 billion Wall Street rescue package, and people in financial industries helped finance his campaign, on which he spent more than $3.3 million.
A brief article about Rhode Island election results in the State by State roundup last Thursday suggested incorrectly that there was a cause-and-effect relationship between a statement by Senator Jack Reed of Rhode Island, a Democrat who was re-elected to a third term, and the financial crisis at the government-sponsored mortgage finance company Fannie Mae. Senator Reed, a long-time advocate of affordable housing, urged Fannie Mae in 2006 to do more to help middle- and low-income home buyers; the bank's decisions to invest in risky subprime mortgages, rather than Senator Reed's urging, led to the Fannie Mae crisis.
It's fair enough to clarify that "Reed's urging" didn't lead directly to the Fannie Mae crisis, although one doubts the Times would have been so sensitive to a Republican who felt himself unfairly tarred in similar fashion.
But the Times is wrong to suggest there's some kind of clear separation of the two issues of "risky subprime mortgages" (bad, in the Times' eyes) and Reed's call for an expansion of affordable housing (which the Times thinks is good), as the Washington Post pointed out in a story back in June. Carol Leonnig reported:
In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending.
Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more "affordable" loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.
Housing experts and some congressional leaders now view those decisions as mistakes that contributed to an escalation of subprime lending that is roiling the U.S. economy.