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Dollars To Dems
Meanwhile, Fannie and Freddie also became a kind of jobs program for out-of-work Democrats.
Franklin Raines and Jim Johnson, the CEOs under whom the worst excesses took place in the late 1990s to mid-2000s, were both high-placed Democratic operatives and advisers to presidential candidate Barack Obama.
Clinton administration official Jamie Gorelick also got taken care of by the Fannie-Freddie circle. So did top Clinton aide Rahm Emanuel, among others.
On the surface, this sounds innocent. Someone has to head the highly political Fannie and Freddie, right?
But this is why crony capitalism is so dangerous. Those in power at Fannie and Freddie, as the sirens began to wail about some of their more egregious practices, began to bully those who opposed them.
That included journalists, like the Wall Street Journal's Paul Gigot, and GOP congressmen, like Wisconsin Rep. Paul Ryan, whom Fannie and Freddie actively lobbied against in his own district. Rep. Cliff Stearns, R-Fla., who tried to hold hearings on Fannie's and Freddie's questionable accounting practices in 2004, found himself stripped of responsibility for their oversight by House Speaker Dennis Hastert — a Republican.
Where, you ask, were the regulators?
Congress created a weak regulator to oversee Freddie and Fannie — the Office of Federal Housing Enterprise Oversight — which had to go hat in hand each year to Capitol Hill for its budget, unlike other major regulators.
With lax oversight, Fannie and Freddie had a green light to expand their operations at breakneck speed.
Fannie and Freddie had a reliable coterie of supporters in the Senate, especially among Democrats.
"We now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Senator Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years," wrote economist Kevin Hassett on Bloomberg.com this week.