Congress Pushed Fannie, Freddie In Wrong Direction During 1990s

BY TERRY JONES
INVESTOR'S BUSINESS DAILY

Posted 9/25/2008

It was October 1992, nearly 15 years before the housing meltdown and subprime crisis.

Republican Rep. Jim Leach of Iowa was on the floor of the House, talking about something that no one at the time seemed to care about: the potential danger that Fannie Mae (FNM) and Freddie Mac (FRE) posed to the economy.

In remarks later reported by the Washington Post, Leach warned that Fannie and Freddie were changing "from being agencies of the public at large to money machines for the stockholding few."

Leach's prescient comments went unheeded — indeed, Congress spent the next decade and a half avoiding the alarms going off around Fannie and Freddie. Until, that is, it was too late.

Led by top Democrats, including Rep. Barney Frank in the House and Sen. Chris Dodd in the Senate, Congress not only did nothing about the growing risks at Fannie and Freddie, it in essence doubled down on their risks.

Congress Pushed Fannie, Freddie In Wrong Direction During 1990s