Where was the President?

Senator Dodd (D - Countrywide) looks to the collapse of Fannie Mae and Freddie Mac and "has the gall to ask in a Bloomberg Television interview: 'I have a lot of questions about where was the administration over the last eight years.'" Sorry for Senator Dodd, Al Hubbard and Noam Neusner answer him in the Washington Post today. The whole article is great fun, but the short answer is pretty much "dealing with intransigent House and Senate Banking Committees that refused to acknowledge a problem as they lapped up lobbying funds."

The two former Administration representatives document the number of times that concerns were raised by President Bush (including last year's SOTU) as well as President Clinton, former FOMC Chairman Alan Greenspan, Republican Senator Richard Shelby, &c.

How did Fannie and Freddie counter such efforts? They flooded Washington with lobbying dollars, doled out tens of thousands in political contributions and put offices in key congressional districts. Not surprisingly, these efforts worked. Leaders in Congress did not just balk at proposals to rein in Fannie and Freddie. They mocked the proposals as unserious and unnecessary.
[...]
As recently as last summer, when housing prices had clearly peaked and the mortgage market had started to seize up, Dodd called on Bush to "immediately reconsider his ill-advised" reform proposals. [Rep. Barney] Frank, now chairman of the House Financial Services Committee, said that the president's suggestion for a strong, independent regulator of Fannie and Freddie was "inane."

Hubbard and Neusner ask "Where was Senator Dodd?" -- Ooh, I know this one! He was at Countrywide getting a loan!

Hat-tip: Greg Mankiw

Economics and Markets Posted by jk at September 12, 2008 5:21 PM