Barack Obama continues to give speeches which offer little to no details about what an Obama administration would do to prevent the current credit crisis from repeating itself in the future. Citing the “failed policies” of the Bush administration, Barack Obama blames the lack of oversight for the fall of Fannie Mae and Freddie Mac. While no one will argue that there was a failure, exactly whose failure it was remains a little hazy. Obama would like the American people to believe that President Bush is solely to blame, that he ignored calls from Democrats for tighter regulation of the two lenders. As it turns out, the exact opposite is true!

Ed Morrissey did some digging in the New York Times and found this article from five years ago:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

Five years ago the Bush administration acknowledged that oversight of the two lenders was broken, so what did he do about it? He asked Congress to create a new agency which would determine capital reserve requirements, and ensure the two companies managed their risks properly. As we know now, those calls for tighter regulation by the Bush administration went unanswered, and here is why:

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

This is yet another example of Democrats placing emotions before common sense. It makes them feel good to say they are acting on behalf of low income Americans, a claim which they make often, but they refuse to take the blame when their actions (or inaction) have negative consequences for those same people. The Clinton administration was another example of this:

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street’s most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

Democrats felt it was unfair that a low income worker with a poor credit history could not purchase a home, so they did something about it. They effectively forced mortgage lenders to lower their standards and give loans to people who would not have normally qualified. When those people could no longer pay their mortgages, Democrats were quick to blame “predatory lending” practices on the part of the mortgage company, while absolving themselves of any part in it.

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Barack Obama, Congress, Election 2008, Features, Politics, Taxes