Who tried to reform Fannie Mae and Freddie Mac?

When we finally get a full history of what happened with all this mess with subprime mortgages and everything else that has been snaking its way through some of our biggest banks and mortgage houses, people may well look back to the missed opportunity to reform Fannie Mae and Freddie Mac. And John McCain has a legitimate argument to make that was out there supporting reform while the Democrats were blocking it. Read Ed Morrissey's post on McCain's efforts in 2005 to reform the two government-back entities.

With the financial sector in turmoil today, the media and the politicians have started throwing around blame with the same recklessness as lenders threw around credit to create the problem. Politically, the pertinent question is this: Which candidate foresaw the credit crisis and tried to do something about it? As it turns out, John McCain did — and partnered with three other Senate Republicans to reform the government’s involvement in lending three years ago, after an attempt by the Bush administration died in Congress two years earlier. McCain spoke forcefully on May 25, 2006, on behalf of the Federal Housing Enterprise Regulatory Reform Act of 2005

Reading his speech at the time is as if he was looking into a crystal ball to see the problems we are having today.

And as for blaming Bush for all these problems, the Democrats want to ignore that the Bush administration had proposed a reform of the regulation of the two housing finance government entities back in 2003 and the Democrats had been the one to block that reform. Morrissey points to this 2003 New York Times article about how the Democrats killed the Bush administration reform plan.

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''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.

So perhaps Obama can explain again why this is solely a result of the Bush administration policies. And while he's at it, perhaps he can explain whether he has any concern about the policies from the 1990s that pushed banks to lend money to people who weren't really qualified to take out mortgages. Morrissey points to this Investors Business Daily editorial.

Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory."

Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the '90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.

The Republicans aren't pure and members of both parties took contributions from Fannie and Freddie, although in his three years in the Senate, according to Open Secrets.org, Obama shot up to number two of overall recipients of donations since 1989 from the two government-sponsored enterprises and their employees. And he hired Fannie Mae's former CEO to head up his VP search. So Obama's claims that this is all Bush's fault and that McCain represents more of the same is just nonsense.