The Bill that Would Have Averted Financial Disaster

Last week, I mentioned a Bush administration proposal in 2003 to clamp down on Fannie and Freddy. This week, Bloomberg reports on a 2005 Fannie/Freddie reform bill that was shot down was supported by Republicans in committee but kept from a full vote in the Senate by Democrats.

Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

And the icing on the cake:

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

Well, folks, the facts are in. We know how we got here. We know who tried to fix it, and who tried to keep it broken (and we know he was paid off to do so). So the only question now is, why the fuck are Obama's numbers climbing from the Wall Street news? Why is the "failed Bush policies"/"failed economic philosophy" argument winning with the public when the facts say exactly the opposite?