Sunday, August 10, 2008

We don't need no stinking accountability

Newsweek has a look at how Freddie and Fannie used their enormous clout to stop efforts to end their mortgage madness.
It was when Roy Barnes started talking about accountability that the Feds began marching into Georgia. Barnes found himself besieged by lobbyists from major banks and national regulators—as well as Fannie Mae and Freddie Mac, the government-sponsored mortgage issuers whose mandate is to help people obtain affordable homes at fair prices; today, Fannie and Freddie are so financially fragile that the government has agreed to bail them out if necessary.

The major mortgage issuers hinted that they would turn Georgia into a financial pariah if the state made them liable. They let Barnes know in no uncertain terms that he was something of a "country bumpkin" when it came to banking, says his legislative aide, Chris Carpenter. As Barnes recalls, "They would say—and Fannie Mae and Freddie Mac were part of it—'This is a complex global market. If you start interfering with the free flow of money, then Georgia will become an island that has no credit'. I kept telling them, 'You're in for a crash here'."
So Roy Barnes was right and Freddie and Fannie are in line for a federal bailout with no requirement that they reform or make any effort to clean up their acts.

Regulation is bad, em-kay?

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