Let's set the record straight

The Wall Street Journal reports on a bit of recent history that we need to remember. The good news is that nearly all the TARP funds used to bail out Wall Street banks have been repaid. The bad news is that the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac stand out as the source of the greatest taxpayer losses. How much are we talking about? The Congressional Budget Office has estimated that, in the wake of the housing bubble and the unprecedented deflation in housing values that resulted, the government's cost to bail out Fannie and Freddie will eventually reach $381 billion. It may go higher.

Here comes the interesting, historical part—the government had a chance to prevent this disaster but didn’t. Without a bit of shame, these same people now ask for more power. The Journal gives an interesting account of their earlier failings.

One chapter of this sad story took place in July 2005, when the Senate Banking Committee, then controlled by the Republicans, adopted tough regulatory legislation for Fannie Mae and Freddie Mac on a party-line vote—all Republicans in favor, all Democrats opposed. The bill would have established a new regulator for Fannie and Freddie and given it authority to ensure that they maintained adequate capital, properly managed their interest rate risk, had adequate liquidity and reserves, and controlled their asset and investment portfolio growth. If legislation along the lines of the Senate committee's bill had been enacted in that year, many if not all the losses that Fannie and Freddie have suffered, and will suffer in the future, might have been avoided.

Of course, a question comes to mind--Why was there no action in the full Senate? As most Americans know today, it takes 60 votes to cut off debate in the Senate, and the Republicans had only 55. To close debate and proceed to the enactment of the committee-passed bill, the Republicans needed five Democrats to vote with them. But, and here’s where it gets interesting, in a 45 member Democratic caucus that included Barack Obama and the current Senate Banking Chairman Christopher Dodd (D., Conn.), these votes could not be found.

Yes, the same Barack Obama who warns us of the power of special interests today was silent back when help was needed. As a senator, he was the third largest recipient of campaign contributions from Fannie Mae and Freddie Mac, behind only Sens. Chris Dodd and John Kerry. Can you say “hypocrite”?

Are you surprised that nearly 80% of Americans, according to new Pew polling, don't trust the federal government or its ability to solve the country's problems? The ones who helped create the mess are asking us to turn over even more power to them. How’s that for ultimate nerve?