In February 2004, while Republican colleagues warned of the systemic risks posed by Fannie Mae and Freddie Mac, Mr. Dodd pronounced the mortgage market "one of the great success stories of all time." A year later, the Connecticut Democrat voted against a reform that would have limited the size of Fan and Fred's mortgage portfolios. Now that Fan and Fred have collapsed at a cost to taxpayers that could run to $200 billion or more, Mr. Dodd is also under fire for accepting sweetheart loans from Countrywide Financial, the subprime mortgage factory.
At today's hearing, his mission is to weave a tale that somehow manages to avoid mentioning his own role in this debacle. That won't be easy, but Mr. Dodd has shrewdly selected a series of witnesses who, like him, contributed to the mess, and have every incentive to point fingers elsewhere.
Take Jim Rokakis, treasurer of Cuyahoga County, Ohio, who blames the mortgage industry for destroying Cleveland's economy. In an astounding 2007 Washington Post op-ed, Mr. Rokakis blamed mortgage lenders not only for bad mortgages but also for the shooting death of a 12-year-old Clevelander caught in a crossfire among drug dealers. He assigned no blame to borrowers. Also astounding and to their credit, various Post readers challenged Mr. Rokakis in a subsequent online chat.
One reader observed: "A very brave article indeed, Mr. Rokakis -- A politician overseeing a dysfunctional 'community' rife with crime, incivility, violence and a lack of economic dynamism . . . finds a way to blame the moneylenders! In all of history, no politician has ever thought of that before." Mr. Rokakis responded: "I did not have enough room to fully discuss the issue of who is to blame in this article. Of course borrowers also share the blame."
Speaking of blame, another scheduled witness is Eugene Ludwig, who was Bill Clinton's Comptroller of the Currency in the 1990s. In 2000, Haverford College's magazine reported that "Ludwig remains proudest . . . of his efforts to compel bank compliance with fair-lending laws and his revitalization of the Community Reinvestment Act (CRA), a 1977 law requiring banks to invest in poorer neighborhoods and improve lending and service to low- and moderate-income borrowers. Although branded an 'activist' for his vigorous support of the act . . . he points to the cold, hard facts to justify his tactics. After just one Justice Department referral in the OCC's previous 129 years, Ludwig's tenure witnessed 27 fair-lending cases, resulting in tens of millions of dollars in fines against violators." Will he testify today that noneconomic loans were entirely the fault of bankers?
Also scheduled to appear is Marc Morial from the National Urban League, an organization that to this day is still lobbying against down-payment requirements for borrowers receiving federally insured mortgage loans. But, hey, the greedy bankers did it.
The witness we'd like to see Mr. Dodd call is former Countrywide Financial loan officer Robert Feinberg. Last week Mr. Feinberg told us that Mr. Dodd knowingly saved thousands of dollars refinancing two properties, thanks to his status as a "friend" of former Countrywide CEO Angelo Mozilo. Or perhaps he could subpoena House counterpart Barney Frank to explain what he meant when he said in 2003 that he wanted to "roll the dice" with Fannie and Freddie's mortgage businesses. (Continued)
'Senator Government'
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Whether or not last night's much-improved debate performance helps John McCain rally in the polls, at least voters finally got a clearer sense of the policy differences. For our money, the best line of the night was Mr. McCain's Freudian slip of referring to Barack Obama as "Senator Government." Neither candidate is offering policies that meet the serious economic moment. But Mr. McCain would let Americans keep more of their own income to ride out the downturn, while Mr. Obama is revealing that his default agenda is to spend money and expand the government.
Cribbing from Hillary Clinton's playbook, Mr. Obama called this week for a "90 day foreclosure moratorium for homeowners that are acting in good faith," whatever that last phrase means. When Mrs. Clinton proposed a foreclosure moratorium during the Democratic primaries, Mr. Obama had said it would lead to more expensive mortgages going forward. He was right then.
The Treasury's Hope Now program and the Federal Housing Administration are already helping to refinance homes for millions of homeowners. Anyone who isn't able to qualify for one of those voluntary programs and who still can't afford to pay a mortgage isn't likely to be any better fixed in a mere 90 days. Mr. Obama also overlooks that the banks that service the mortgages don't typically own them. They're owned by far-flung investors via a mortgage-backed security. (Coninued)