Karl Rove’s Factually Challenged Housing Revisionism
1. “Fannie Mae and Freddie Mac were among the principal culprits of the housing crisis” Wrong. Fannie and Freddie were cogs in the giant mortgage machine, but they had nothing to do with the abdication of lending standards from 2002-07. That was a function of the Lend-to-Securitize business model of the sub-prime mortgage originators. THAT was the primary cause of the housing boom and bust, along with Ultra-low rates and a lack of Fed regulation of these sub-prime lenders.
2. “Fannie and Freddie were too large and overleveraged” True. This had been pointed out by many people, before Bush and afterwards, that Fannie was a problem. Chief amongst the Fannie critics was Fed Governor William Poole. He deserves credit for his many early warnings about Fannie Mae and the GSEs. He was ignored by Alan Greenspan. Also ignored was Fed Governor Edward Gramlich, whose early warnings about subprime and predatory lending and were both timely and prescient.
3. Democrats controlled the Congressional Debate on GSEs: Rove somehow fails to note the GOP controlled Congress from 1994-2006, including the first 6 years of the Bush Presidency. If the President wanted to rein in the GSEs, he needed only make it a major priority, and not a footnote in the 2001 budget.
