Senator Supported Flawed Legislation; Then Did Nothing As Mortgage Crisis Loomed
At a press conference today in front of a vacant house in Linden, U.S. Senate candidate Dick Zimmer criticized Frank Lautenberg for his failure to protect New Jersey taxpayers from the current mortgage crisis.
?New Jersey taxpayers will be on the hook for the mortgage on this house and trillions of dollars worth of other mortgages because of bad legislation supported by Frank Lautenberg more than 15 years ago,” Zimmer said. “Senator Lautenberg did nothing in subsequent years to fix that legislation or provide the proper congressional oversight that could have averted the current mortgage crisis.?
?I was one of only a small handful of Members of Congress who stood up against corporate welfare and voted against the law that put us on the road to the taxpayer bailout of Fannie Mae and Freddie Mac,? said Zimmer. ?We foresaw then that lax capital standards, unjustified government subsidies and weak regulation of these companies would create a system of private profit and socialized risk. Frank Lautenberg listened to the special interests and rubber-stamped a bill that allowed Fannie Mae and Freddie Mac to operate without proper oversight and without necessary financial discipline.?
In 1992, by a vote of 377 to 37, the United States House of Representatives passed H.R. 5334 creating the current regulatory system for Fannie Mae and Freddie Mac. Zimmer voted against H.R. 5334. Senator Frank Lautenberg allowed it to pass the Senate by unanimous consent.
On July 15, 2008, The Wall Street Journal analyzed how that law contributed to the current crisis of Fannie Mae and Freddie Mac:
??If there’s one decision that is being second-guessed, it’s the 1992 legislation that created the companies’ regulator, the Office of Federal Housing Enterprise Oversight, or Ofheo. In the 1992 debate, Ofheo came away with fairly weak powers, and capital requirements for the companies were set very low. Lobbyists from the companies are said to have strongly influenced the 1992 legislation….”
(Plenty of Blame to Go Around for Fannie, Freddie. The Wall Street Journal. 15 July 2008).
To view entire article by John D. McKinnon and James R. Hagerty of The Wall Street Journal entitled Plenty of Blame to Go Around for Fannie, Freddie, click here.
On July 13, 2008, The New York Times also highlighted the importance of the 1992 law and reported the following regarding Fannie Mae and Freddie Mac being protected by powerful special interests in Washington:
??The dominant role Fannie and Freddie play today is no accident. The companies, Wall Street firms, mortgage bankers, real estate agents and Washington lawmakers have built up an unusual and mutually beneficial co-dependency, helped along by robust lobbying efforts and campaign contributions.
In Washington, Fannie and Freddie?s sprawling lobbying machine hired family and friends of politicians in their efforts to quickly sideline any regulations that might slow their growth or invite greater oversight of their business practices. Indeed, their rapid expansion was, at least in part, the result of such artful lobbying over the years.
And as Fannie and Freddie grew, so did the fortunes of Wall Street, which reaped rich fees from issuing debt for the two companies, as well as the mortgage and housing industries, which banked billions of dollars as the housing market boomed.
Even after accounting scandals arose at the two companies a few years ago, attempts to push through stronger oversight were stymied because few politicians, particularly Democrats, wanted to be perceived as hindering the American dream of homeownership for the masses?.?
(Protected by Washington, Fannie and Freddie Grew. The New York Times. 13 July 2008).
?Fifteen years ago, Frank Lautenberg had the opportunity to take a stand against bad legislation that was likely to lead to a huge taxpayer bailout of Fannie Mae and Freddie Mac. He failed,” said Kristen Hainen, Communications Director for the Zimmer for Senate campaign. ?Then, for more than 15 years, Frank Lautenberg sat idly by as Washington refused to take any action to keep these companies from spinning dangerously out of control. In 1992, Dick Zimmer stood up for the taxpayers and did what was right by refusing to support legislation that indeed turned out to be harmful to the housing market and disastrous for New Jersey taxpayers. As U.S. Senator, he will continue to put the interest of New Jersey taxpayers first.?