Issa Threatens To Strip Federal Money From Fannie And Freddie

Taxpayer money shouldn't be used to back some $6 trillion in home mortgages if there is no inspector general keeping watch over those funds, the ranking Republican on the House Oversight and Government Reform Committee said Wednesday in response to a story first reported by Huffington Post.

Thanks to complex maneuvering, the Federal Housing Finance Agency -- which includes Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, comprising more than 80 percent of mortgage purchases and guarantees issued since mid-2008 -- convinced the Department of Justice's Office of Legal Counsel back in September that their inspector general did not have the authority to investigate agency wrongdoing, according to documents obtained by HuffPost.

But if regulators aren't authorized to monitor Fannie and Freddie's use of federal funds, Issa said Wednesday, maybe the government should not be responsible for their loans.

"Until this issue is resolved, Congress should question the wisdom of continuing to provide taxpayer support to Fannie and Freddie until proper oversight is in place," Issa said in a statement. "It is absolutely unconscionable that Fannie Mae and Freddie Mac, which were at the heart of the subprime housing collapse last fall that sent our economy into a tailspin, should be without independent oversight at a time when the federal government now owns over half of all the mortgages in the United States."

Issa's temporary solution would be to reinstate Ed Kelley, who served as the agency's inspector general prior to the OLC ruling, as the acting IG pending a Congressional investigation.

"There is no way that Congress intended for there to be no IG for the FHFA and if we need to go back and fix this legislatively, we should do so immediately," he said.

Comments

[sparky73]

if they strip funding for freddie and fannie it will be the biggest r@cist move in fair housing of all time

[Sharon Corcoran]

I am sorry but I live in Issa's district- I would have a hard time supporting anything he presented- I have met with him many times- I have been to DC to meet with Senators- Congressman to challenge their votes or influence bills coming up- for the housing industry- I have studied his voting records- The group I went with cover all states- Our group was about 500 people-

[sheoples]

too many liars

[alfatu]

From the heading, one would think that this guy can go it alone. Fat chance! We know how Congress works; it's not a one man, so say one, so say all environment and he know this. Just bluffing? Not impressed.

[Tommygun264]

The wealthiest member of Congress (and known car THIEF) threatens to cut loans to low income and minority Americans, even though the OVERWHELMING MAJORITY of sub-prime mortgages defaulted upon were multimillion dollar loans set up for the wealthiest of borrowers who simply walked away when the market went south because they had little or no personal assets invested and could not lose their assets in the default because the loans were taken out under LLCs. The MYTH that poor and minority borrowers triggered the banking crisis has been propagated by the banks as a CYA campaign.

[sparky73]

great point. This would be an overt r@cist move

[John Robert]

Strip threatened..

[chrysb52]

I'm in the mortgage business and I'd like to correct several people's assertions that Fannie and Freddie purchased subprime loans. The very definition of a subprime loan is a loan that does NOT meet Fannie/Freddie guidelines. Fannie and Freddie are, and pretty much always have been, all about vanilla fixed rate loans or longer term adjustables where people document their income. They did ultimately push their guidelines as much as was allowed within their charter. But even the "riskiest" Fannie/Freddie loans pale by comparison to the risks that subprime and "Alt-A" lenders were encouraging. Subprime and Alt-A were all private lender products, by the way, as were Pay Option ARMs. In fact, I specifically remember the day that a sales rep from a subprime bank walked into our office and said the fateful words..."We've come up with a mathematical model that can accurately predict the likelihood that a given borrower will default on his loan and it's going to revolutionize the industry! No more need for income documentation!" So it goes...

[cyrano1]

Thanks for the clarification! And you're absolutely right! Private market loans were beyond belief!

I also agree with Issa that oversight/transparency is needed to track where our federal funds are going - with this and with all other recipients - bailout or not.

[Jannsmoor]

Except that Issa really doesn't want oversight/transparency. If he did he would draft legislation for oversight/transparency instead of legislation to defund Fannie and Freddie.

[Jenny4546]

You are wrong.

In 2004, the U.S. Department of Housing and Urban Development (HUD) directed Fannie Mae and Freddie Mac to purchase more loans made to subprime borrowers.

[Jenny4546]

From 2004-2006, Fannie Mae and Freddie Mac purchased $434 billion in securities backed by subprime loans, further fueling the boom in subprime lending. In 2004 alone, the two GSEs purchased $175 billion in subprime securities, accounting for 44% of the market and an increase of 116% from 2003, when they bought $81 billion in these securities. In 2005, Fannie Mae and Freddie Mac purchased $169 billion of subprime securities, accounting for 33% of the market, and in 2006, scaled their purchases back to $90 billion.

[cyrano1]

Wrong? You're right about HUD and the cause for ignoring loan guidelines. But the degree of abuse with Fannie Mae/Freddie Mac loans paled in comparison to sub-prime lenders like Country-Wide. I've also stated that this should have been investigated and should be subject to oversight. I actually think we agree.

[Jannsmoor]

It's my understanding Fannie and Freddie bought AltA loans, the highest grade of subprime loans. If you have some authority I am wrong, please direct me there.

[LeeCalif]

For once, I agree with the lockstep marching Republican.

[Jannsmoor]

I assume you agree the Wall Street Profiteers should control all home mortgages. I assume that's because you think they did such a bang up job, what with their risk taking almost destroying the American middle class and all.

[cyrano1]

So, rather than clean house, you think the only resort is to hand all mortgages to wall street?

[dzagama]

You understand that 'risk taking' meant, providing loans to poor people.

[cyrano1]

Me too! The Fannie Mae/Freddie Mac mess was bi-partisan. It should have been investigated, and our tax dollars should be accounted for in any further funding for programs within The Federal Housing Finance Agency.

[Sean 6399]

I really feel privileged as a non-homeowner, to be paying taxes so that other people can own property.

I don't see what part of the constitution authorizes the feds to take my money and give it to property owners, but what the heck, 99% of everything the government does is not authorized in the Constitution.

[Jannsmoor]

Yes, because the life style in Waziristan is something we should be reaching for rather than running away from. No roads, no government, no rights for women, but blissfully no taxes. It's a beautiful vision, Reagan's shining city on the hill.

You live in the most privileged society in history. And you want to turn it into Mexico so you're taxes can come down. Absolutely behond comprehension.

[Sean 6399]

Maybe you are in a privileged society. I live in a freaking car.

And yet, the IRS still manages to find me.

[ChicagoLibertarian]

"Taxpayer money shouldn't be used". I wish he stop at that.

[Haus]

If Barney Frank had suggested this, you guys would be falling all over yourselves in love with the plan.

[Jannsmoor]

The plan would be just as idiotic if Abraham Lincoln proposed it. It's not who came up with it, it's a stupid and incredibly dangerous plan. You really want all US mortgages in the hands of the Wall Street Profiteers? Has that really worked for you? Has it really worked for the middle class? How about the millions who have lost their jobs and their homes?

[cyrano1]

What's stupid about insisting on oversight to determine how our tax dollars are being used? Seems to me that lack of oversight got us into this mess.

[NoProblemPablo]

So then he's for more regulation for the private mortgage market, right?

[sarabono]

He is for effective IG and Congressional Oversight of two federalized agencies who received nd continue to receive multi-billions of YOUR tax dollars.

[Jannsmoor]

You are right they have received billions of tax dollars. However, your implication is completely wrong. That money has purchased mortgages, and until the Wall Street Profiteers nearly destroyed America, those mortgages were good collateral. Had Wall Street not created an enormous asset bubble all of those billions would have been paid back with a profit for the taxpayers.

You get two choices in this world. You can create governmental agencies like Fannie and Freddie that loan money to people to own their own homes, or you can rely on Wall Street to make the loans. I am sorry that between the two choices you choose Wall Street. To me they have proven themselves far too greedy and reckless to trust with the most valueable asset most people will ever own.

[sarabono]

What is the Administration trying to pull here? Are they trying to create a multi-billion slush fund for something else? Fire the IG via a legal ruling below the radar screen?

This is not the transparent, honest Government that Candidate Obama Promised. This is the Chicago way of doing things. (I lived there for 24 years.) Create a hidden slush fund so you can fund all your buddies.

Rep. Issa is a very sharp cookie. His solution quickly cuts to the quick. A very smart move.

A feature story should be on the evening news about this action by members of the Administration. Something tells me it won't be, darn it.

[mcmutter]

Issa is a certified axxwhole. He helped ruin California.

[Jannsmoor]

This is of course an absolutely terrible Republican solution to a very real problem that has a much better solution. The Republicans wish to defund Fannie Mae and Freddie Mac because they are another government takeover of the free market, and even after the free market has shown itself completely incompetent to trust with our mortgages, Mr. Issa still loves them.

On the other hand, Progressives wish to keep Fannie and Freddie because when it mattered most, at the height of the housing meltdown, the free market completely failed, and the only thing standing between the middle class and the abyss was Fannie and Freddie, because they were still buying mortgages on the secondary market when our free market Wall Street Profiteers had completely abandoned the market. Without Fannie and Freddie and their government guarantees, the housing market would have declined another 20% to 30%, plunging the US into another Great Depression.


So if you want regulation, why not just write the legislation rather than defund Fannie and Freddie?

[sarabono]

This is about OVERSIGHT. No Federal Money Without effective Oversight, Period!

[Jannsmoor]

I'll ask again. If you truly want oversight, why not write regulations to provide oversight? This proposal is not such regulation. It is an attempt to defund Fannie and Freddie. Can you see the difference?

[jimmygee]

Jannsmoor

Legislation would be too easy and they can't make anything easy even a decision.

[Jannsmoor]

Especially when they really don't want regulation but rather to defund Fannie and Freddie.

[cb750]

It was fannie and freddie who caused the collapse. Free market didn't fail. When the gov orders loan makers to make bad loans then provides them a black hole to dump those loans into (Fannie and Freddie) then we got the collapse. Houses were sold for over 100s of years through free market without some collapse. Its when gov interferes do we get collapses and mismanagement.

Greed would have prevented bad loans. What profit is there in making a loan with someone you know can't pay it? The only profit is if you can sell that loan to someone dumb enough to buy it... or altruistic enough (Fannie)

Its clear progressivism ruined the market. People can manage their own lives, they do not need to be managed by incompetent progressives. You cannot plan society.

Also progressivism isn't new. Its age old. Its kings and queens in castles (elite) telling the surfs how to live their lives. Old. Arcane. Backward.

The individual is new.

[Jannsmoor]

You need to turn off Fox news and actually do some real research. It was not Fannie and Freddie who caused the problem, and it wasn't the CRA either.

It was greed that created the bad loans because there was no down side to selling a bad product. The Wall Street Profiteers came up with money to buy bad mortgages on the secondary market. They sliced and diced them into tranches and paid off the ratings agencies to give them Triple A ratings. They then sold them off, made a tidy profit and left the buyer with the problem.

It is entirely not clear progressivism caused the meltdown. Individuals have absolutely no chance in a world dominated by international corporations and the rich and powerful. You really think an individual can take on a corporation without laws allowing them to do so? What planet are you referring to?

Progressivism is not kings and queens telling people how to live. It's a theory of democracy where the people run their own government through their power to vote. You're drinking the kool-aid if you think corporations running the world has anything to do with individual freedom.

[Haus]

Except the fact that freddie and fannie were out there creating a market for the bad loans that failed. If they would not have bought them, there would have been no sub prime market. No sub prime market would mean no derivatives, and we would not have had a recession then. Thanks freddie/fannie.

[sarabono]

You are exactly correct. Fanny and Freddie became the chief enablers of the housing crash that has screwed ALL of us.

They need massive continuous Oversight by Justice and the Congress.

[Jannsmoor]

Why on earth won't you guys do some research? Subprime loans, securitization of mortgages, slicing and dicing them into tranches, paying off the ratings agencies to give them Triple A ratings - all started on Wall Street. It is true Fannie and Freddie bought a significant number of Alt A loans, but that was years after Wall Street was throat deep in market.

It is my understanding the $180 billion that the government gave to AIG to bail them out, none of that had anything to do with Fannie and Freddie. That all went to CDS's.