Propaganda Debunking

The starting date that the article identifies was January 3, 2007 when the Democrats took over Congress - which the article goes on to claim was 15 months before the meltdown. However, it is very important to remember that between January, 2001 to January 2003, the Republican Party controlled the House of Representatives (where budgets originate) and between January, 2003 to January 2007, the Republican party controlled both the House of Representatives and the Senate. The article then claims that Bush warned Congress 17 times and implies that the Democrats failed to heed this warning.

As the Article suggests:
"Don't just skim over this, it's not very long, read it slowly and let it sink in. If in doubt, check it out!!!"

Here is a list of Bush's warnings:

** 2001 **

April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

** 2002**

May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

** 2003**

January: Freddie Mac announces it has to restate financial results for the previous three years.

February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that "although investors perceive an implicit Federal guarantee of [GSE] obligations," "the government has provided no explicit legal backing for them." As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. ("Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO," OFHEO Report, 2/4/03)

September: Fannie Mae discloses SEC investigation and acknowledges OFHEO's review found earnings manipulations.

September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.

October: Fannie Mae discloses $1.2 billion accounting error.

November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

** 2004**

February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)

February: CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)

June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

** 2005**

April: Treasury Secretary John Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system." (Secretary John W. Snow, "Testimony Before The U.S. House Financial Services Committee," 4/13/05)

Do you see what happened?/b]
Bush was "warning" a Congress that the Republican Party controlled.
Who failed to listen?
It was the members of Bush's own Party - the Republicans.
Who allowed the bubble to inflate - the Republicans.

Next, the Article gives the impression that the Democrats had 15 months after they began to control both houses of Congress fix the problem. Sooooo... Let's see what happened in 2007

** 2007**

July: Two Bear Stearns hedge funds invested in mortgage securities collapse.

First, the crash began only 7 months after the Democrats took control.
Second, the reason Bear Stearns failed was due to their investment in toxic mortgages which in most cases were originated long before January 3, 2007.

It was not until after the crash had started that Bush communicated a warning to a Democratically controlled Congress:

August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, The White House, 8/9/07)

However, by August 2007, it was too late. A house of cards had been built in an environment of Republican led deregulation and Bear Stearns marked the beginning of its inevitable and devastating collapse.

As a side note, the reforms that Bush asked for were eventually embodied in comprehensive financial reform legislation that President Obama and Democrats in Congress were, over significant Republican opposition, able to get through Congress.
What is galling is that Romney and the Republicans now propose to largely undo this legislation.
Really think about this.
1. Republican deregulation policies contributed to the financial disaster.
2. The article (which I found out was actually a Republican chain letter) blames the Democrats for this lack of regulation.
3. Republicans now oppose the regulations that would keep history from repeating itself.