Inaction by Congress created Freddie/Fannie fiasco

A key feature of the housing bill that President Bush just signed into law was the federal bailout of Fannie Mae and Freddie Mac.

These are the two taxpayer-backed, "Government Sponsored Enterprises" that own or guarantee almost half of all mortgages in the country.

Of the many words written about this bailout, those in a New York Times op-ed by William Poole, former head of the Federal Reserve Bank of St. Louis, contain one of the most relevant and powerful messages:

"Critics of the congressional housing package complain that we are now committing taxpayers to huge new outlays to rescue Fannie Mae and Freddie Mac. That view is wrong: Congressional inaction over the past 15 years had already committed taxpayers to the bailout."

Paul Gigot of the Wall Street Journal reviewed in his paper the coverage that it had been giving since 2001 to the rot inside these two entities.

Gigot also points out that, despite the rationale that we allegedly need these taxpayer-backed enterprises in order for those of modest incomes to get mortgages, in 2002, Fannie Mae "was able to pay no fewer than 21 of its executives a million dollars," and in 2003, its CEO, Franklin Raines, who was ousted for financial shenanigans at the firm, was paid $20 million. And, he left with a $25 million retirement package.

Consider, for starters, what all this tells us today about the man who promises to clean up Washington, Sen. "Change We Can Believe In" Barack Obama.

Raines is reported to be currently serving as an informal adviser to the Obama campaign on housing and mortgage issues.

Raines' predecessor, James Johnson, also the beneficiary of tens of millions in compensation running this sweet deal, where company executives share the risks with taxpayers but not the profits, was Obama's choice to head his vice president vetting team. After howling from the press, Johnson stepped aside.

During the time when the Wall Street Journal, among others, was writing about the improprieties at Fannie Mae and Freddie Mac, both entities paid out a reported $170 million to lobbyists to keep Congress uninterested. And they succeeded.

None of this seems to present a problem for Obama. The man who campaigned through the primaries about slaying lobbyist dragons in Washington appears quite at home with those who benefited from these lobbying efforts.