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“Fannie Mae – The New Kryptonite…??”

By Sherman Ragland | September 30, 2008

As we get closer to the November election, it is clear that Republicans have decided to use ties to Fannie Mae as the new “Kryptonite”.   As an example, this is the headline from a NATIONAL PUBLICATION for LOAN OFFICERS:

“Kagen returned Fannie Mae’s donation
Sep 28, 2008 – McClatchy Tribune Business News
Author(s): Diana Marrero

Sep. 28–WASHINGTON — As mortgage giant Fannie Mae continues to make headlines, Wisconsin Republicans are attempting to link Rep. Steve Kagen to the troubled lending company, accusing him of covering up a campaign contribution from the firm’s political action committee.

But Kagen’s campaign says it immediately returned the $1,000 contribution, eliminating the need to report the donation. Candidates don’t have to report contributions if they immediately return them, according to the Federal Election Commission. “It was an unsolicited donation,” spokesman Jake Rubin said in response to questions about why Kagen returned the money. Kagen is in a re-election fight with Republican John Gard, whom he defeated in 2006. Fannie Mae’s donation came on the same day the House gave final approval to a major housing bill that helped mortgage lenders Fannie Mae and Freddie Mac.

While it makes for very interesting POLITICS, the two questions I have to ask are:

A) is it True  – Is Fannie Mae to Blame for the Mortgage Meltdown, and

B) Is it SMART to make Fannie Mae, the New “Willie Horton”?

Is it True – Is Fannie Mae to BLAME for the current Mortgage Mess and the $700 Billion Bail Out Packge – NO WAY!  Anyone who takes the time to build the timelines knows this.  But it is a long held belief in politics that if you say something long enough, everyone will ultimately believe it to be true – especially when it isn’t.

The facts don’t favor this approach to making Fannie the “Bad Guy” in all this.  Why?  Fannie Mae and Freddie Mac were never “hot and heavy” into Sub-prime, and SUB-PRIME is the real culprit.  SUB-PRIME is the unique creation of WALL Street and specifically the Wall Street Firms who have already cost the Federal Government $150+ Billion, even before you add in the new $700 Billion being discussed.  Bear Sterns, Lehman Brothers, UBS and Merrill Lynch are the Proud Parents of Sub-Prime, not Fannie, or Freddie.  Fannie and Freddie did not even start touching anything close to sub-prime until recently when Congress began to put pressure on them to do more in the area of affordable housing.

Now granted, Fannie and Freddie have had more than there share of accounting problems and questionable transactions.  So no one, including me, is saying Fannie and Freddie are “squeekie clean”.  BUT creating SUB-PRIME Toxins currently invading and wreaking havoc on the global financial system – NO this is not thie legacy of Fannie and Freddie.  Or at least it should not be, but again, you tell a lie long enough – you rewrite history, in real time.

So, if it is not true, then is it smart to hoist all the blame on Fannie and Freddie and anyone who helped enable them before the Feds took them over?

I don’t think so, but then again, what do I know…

I don’t think it is smart for one party to make it a campaign issue becuase Fannie and Freddie were quite happy to throw money at both the Democrats and the Republicans in order to “BUY INFLUENCE” on Capitol Hill.  So why are the Republicans pushing this issue so hard?  Seems that Senator Obama is a big recipient of money from, NOT Fannie and Freddie (as in through lobbiest, etc) but from Fannie employees.  HUH?  Obama does not take money from Federal contractors, lobbiests, or PACs (political action committees exist to simply collect money that comes from a company but is first laundered through an entity in order to either hide where the money is coming from, or get around campaign contribution laws).  But the employees of Fannie Mae did decided to chip in $25 to $150 bucks each and they raised over $150,000 for Obama.  So now, the Republicans “smell blood in the water”

So, if you actually track this stuff ( I know it is a sick hobby) you will see that the Republicans began to SPIN Fannie as their #1 campaign issue on September 15th, when the FEDS took over BOTH Fannie and Freddie after it became clear that Freddie Mac was insolvent and the takeover would cost the US taxpayers as much as $300 Billion – Again, the $700 Billion currently being discussed has nothing to do with Fannie or Freddie, but has EVERYTHING to do with the actions of Bear Sterns, Lehman Brothers, UBS and Merrill Lynch.  The $700 Billion is ALL about getting Sub-prime loans “off the street”.

So, why do I care so much – I see the HUGE disconnect in attempting to tie Fannie to the $700 Billion Bail out, or say that Fannie and Freddie brought down the financial markets – it simply isn’t true – and the folks who are spinnig this know it.  And quite frankly, it ticks me off that what is a known lie can so quickly be spun as the truth because of the relatively low level of financial intelligence on main street and the mass media which is allowing this to happen.  We are watching history being re-written – In real time.

BUT – even if the folks behind this re-writing of American Financial History Win, they just might Lose.

Why?  Becuase setting up Fannie as the “TAR BABY” creates some very unique problems for the Republicans.

While I have to admit even I want some one or some thing to blame for all this.  And I have to admit that Fannie as the “Whipping Boy” makes for some very powerful headlines and themes for local elections, the Republicans have a BIG problem with Fannie as the “Great Satan” bringing down America because of Fannie’s close ties to …. John McCain.

It is well documented that McCain over the years has benefited from Fannie Lobbying money and both his Campaign Manager and Chief Strategist were paid lobbiest for BOTH Fannie and Freddie.  His Chief Strategist’s firm still getting $15,000 a month up until 30 days ago, it seems as reported in the New York Times.

So, while the truth is Fannie and Freddie are not to blame for the current mess, many Republicans, it appears, have decided to use this as their #1 weapon in the November Election…

… Problem is they now have to say “Fannie is THE problem with America, but disregard the fact that the guy at the top of our ticket has benefitted for years from their PAC and lobbying money”  …Makes for a very strange political statement, and strategy, indeed.

But then again, its politics and this is a political season – any (strange) thing can happen.

p/s Can anyone say, “KEATING FIVE?”

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