Pelosi: Don’t Blame Dems!

Following a weekend of breathtaking turmoil in the financial industry, our leader of the House of Representatives emerged as a beacon of hope and inspiration, offering solace to millions of Americans concerned about their savings and retirements plans, reassuring jittery Wall Street investors, and pledging to put partisanship aside and cooperate with the President to quickly solve the crisis.

Oh, wait… That didn’t happen.

Instead, the reaction from House Speaker Nancy Pelosi (D-CA) was swift and sharp: “Don’t blame ME!!!”

It reminds me of a child who gets caught standing in the midst of a puddle of milk, holding an upside-down cup in one hand, and vehemently protesting “It’s not my fault!” 

From The Hill:

House Speaker Nancy Pelosi, when asked Tuesday whether Democrats bear some of the responsibility regarding the current crisis on Wall Street, had a one-word answer: “No.”

Pelosi (D-Calif.) ripped President Bush’s “mismanagement” of the economy and a lack of regulation that led to the current situation.

“I think the American people have had it with this situation where the middle-income people in our country are not protected from the ramifications of the risk-taking and the greed of these financial institutions,” Pelosi told MSNBC.

When asked whether the Democrats “deserve some responsibility” regarding the economic crisis, Pelosi responded: “No.”

Now that’s true grit. Real leadership.

It’s unconscionable that Pelosi can stand today and declare that Democrats have none – zilch – nada – zero responsibility for the current crises, when five years ago the Democrats blocked Bush Administration proposals designed to prevent what happened this weekend. Perhaps Pelosi could use a little reminder:

From the New York Times (9/11/2003):

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. 

Sounds like a reasonable plan. Freddie Mac and Fannie Mae were operating with little oversight, their debt portfolio was ballooning out of control, they were not not adequately managing their risk, and they were cooking the books to mislead investors. The Bush Administration proposed a plan that would provide more oversight and accountability for the agencies. Even Freddie Mac called Bush’s plan a “responsible proposal.”

So what happened to the plan? It was killed by Congressional Democrats. The NYT article continues:

Significant details must still be worked out before Congress can approve a bill. 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.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

In 2003, Democrats said not to worry. There weren’t any problems with Fannie Mae and Freddie Mac. Everybody was just exaggerating. And those fraudulent books? Let’s not put too much pressure on these agencies.

In 2003, Democrats were committed to providing “low-income and affordable housing” (i.e. sub-prime) loans to people who could not afford them. Never mind the risk. Never mind that the agencies didn’t have adequate capital reserves. Democrats fought against tighter regulation and oversight because it would weaken their commitment to issuing sub-prime mortgages.

So quit playing the blame game, Madame Speaker. Me thinks you doth protest too much.