Skip to main content

The biggest bailout

07/31/2013 09:53AM, Published by ACL, Categories: In Print, Opinion



By Congressman Joe Pitts

It’s been over five years since the investment firm Bear Stearns spectacularly failed, foreshadowing the coming failure of multiple Wall Street firms in the fall of 2008. The epicenter of the financial collapse was an overinflated housing market. The biggest players in that market were two government-sponsored enterprises, Fannie Mae and Freddie Mac.

As Fannie and Freddie collapsed in the fall of 2008, the federal government began bailing them out. Public money spent on the two mortgage giants would total $189 billion, more than the next three bailout recipients combined. While some of that has been paid back, they still owe the taxpayer some $65 billion.

I voted against the Troubled Asset Relief Program, the legislation that created the bailout fund. At the time, I thought that there were better ways to alleviate the crisis that didn’t take advantage of taxpayers.

Fannie Mae was founded during the Great Depression as part of Roosevelt’s New Deal. When Fannie Mae was partially privatized, the government started Freddie Mac to provide competition. Starting under the Clinton administration, executive pay at these institutions became tied to earnings growth.

In the private sector, there is little problem with tying pay to growth of a company. Ultimately, the executive is beholden to shareholders. If a company fails, the damage is limited to those investors. With Fannie and Freddie, there was always an implicit guarantee that the federal government would step in if they failed. This allowed executives to take risks that those in the private sector may have avoided.

Fannie and Freddie also had a well-intentioned but dangerous goal to support affordable housing. The institutions were the largest purchasers of the risky mortgages that lost all value when the housing market collapsed. Some 70 percent of subprime and other low-quality mortgages were owned by Fannie and Freddie alone. They were taking these risks in large part to please Congressmen on Capitol Hill.

Fannie and Freddie’s defenders, like former Financial Services Committee Chairman Barney Frank (D-MA), insisted that they were never at risk of going under. At this same time, his longtime boyfriend was a top official at Fannie Mae. He also took over $40,000 in campaign contributions from the lenders during his time in Congress.

Frank was hardly the only enabler, even many Republicans took campaign donations from Fannie and Freddie and fought efforts to rein in their spending binge. In 2005, I voted for a series of amendments that would have reduced the risk to taxpayers. Each of these amendments was overwhelmingly defeated and we were labeled as pessimists for doubting the fiscal strength of Fannie and Freddie.

Just three years later, the worst-case scenarios all came true. Now, even Barney Frank has called for the two to be abolished.

This week, the House Financial Services Committee advanced legislation to do just that. The Protecting American Taxpayers and Homeowners Act, introduced by Rep. Scott Garrett (R-NJ), would end the taxpayer-funded bailout of Fannie and Freddie.

The bill calls for the two entities to cease operations within five years making sure that taxpayers are never again liable for the bad decisions of wealthy mortgage executives. The legislation also gives consumers more choice so that they can determine what kind of mortgage best suits their needs.

Opponents of reform have been making outlandish claims, even maintaining that the ending Fannie and Freddie could mean the end of 30-year fixed rate mortgages. The truth is that Fannie and Freddie aren’t lenders. They purchase and repackage loans. They don’t originate them.

The PATH Act would not end all government support of lending. The Federal Housing Authority would continue to back some loans for first time buyers and low income Americans, the kind of people who need help.

 

Fannie and Freddie executives made a lot of money in the good times. None of them were charged with crimes or personally liable for decisions that ultimately cost the taxpayers $189 billion. It’s time to put a stop to the biggest bailout of all time and make sure it never happens again. We can do that by ending Fannie and Freddie.


Like what you're reading? Subscribe to Chester County's free newsletter to catch every headline



fannie mae freddie mac fannie and freddie bailout congresman joe pitts


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Pajama Storytime

    06/01/2016
    06:30PM — 07:30PM

    Wednesdays at 6:30 PM - Join us for an evening of stories, songs, crafts, and fun to end your day...


  • Pro-Act's Family Education Program

    06/01/2016
    07:00PM — 09:00PM

    When someone is addicted to drugs & alcohol, the diease affects the entire family. Each month PR...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Drop in on Nature

    06/02/2016
    09:30AM — 12:00PM

    oin TLC for our Drop-In on Nature Playgroup! This program is designed for children 0-Kindergarten...


  • Clutterers Anonymous

    06/02/2016
    06:00PM — 07:00PM

    Clutterers Anonymous℠ (CLA℠) is a fellowship of men and women who share their experience, strengt...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Steamin' Days at Auburn Heights

    06/05/2016
    12:30PM — 04:30PM

    Join us on the first Sundays, June through November for Steamin’ Days at Auburn Heights, when the...


  • Birthday Bash at Auburn Heights

    06/05/2016
    12:30PM — 04:30PM

    In today’s disposable culture, it is not very common for anything to celebrate its 100th birthday...


  • Taste Kennett Food Tours

    06/05/2016
    01:00PM — 04:00PM

    Taste Kennett Food Tours, creators of memorable, unique and fun food experiences, offer three-hou...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Debtors Anonymous

    06/06/2016
    06:00PM — 07:00PM

    In D.A., our purpose is threefold: to stop incurring unsecured debt, to share our experience wit...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Pajama Storytime

    06/01/2016
    06:30PM — 07:30PM

    Wednesdays at 6:30 PM - Join us for an evening of stories, songs, crafts, and fun to end your day...


  • Pro-Act's Family Education Program

    06/01/2016
    07:00PM — 09:00PM

    When someone is addicted to drugs & alcohol, the diease affects the entire family. Each month PR...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Drop in on Nature

    06/02/2016
    09:30AM — 12:00PM

    oin TLC for our Drop-In on Nature Playgroup! This program is designed for children 0-Kindergarten...


  • Clutterers Anonymous

    06/02/2016
    06:00PM — 07:00PM

    Clutterers Anonymous℠ (CLA℠) is a fellowship of men and women who share their experience, strengt...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Kennett/Unionville Relay for Life

    06/03/2016
    06:00PM — 08:00AM

    At Relay For Life events, communities across the globe come together to honor cancer survivors, r...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • On June 4th, 2016, The Octorara School District will be hosting the 2nd Annual Octorara Angels Ra...


  • PurpleStride Delaware 2016 - 5K Run/Walk

    06/04/2016
    08:00AM — 12:00PM

    PurpleStride Delaware is back and better than ever! This year, our 5K run and family-friendly wal...


  • Chester County Blues Barbecue

    06/04/2016
    02:00PM — 07:00PM

    The 7th Annual Chester County Blues Barbecue once again comes to Wyndsor Farm in beautiful northe...


  • Herp Search

    06/04/2016
    05:00PM — 07:00PM

    Don’t miss this opportunity to explore the interesting world of the mysterious Reptiles and Amphi...


  • June Barn Dance

    06/04/2016
    08:00PM — 10:00PM

    Experience the culture in agriculture at Coverdale Farm Preserve's Saturday barn dance! Bluegrass...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Steamin' Days at Auburn Heights

    06/05/2016
    12:30PM — 04:30PM

    Join us on the first Sundays, June through November for Steamin’ Days at Auburn Heights, when the...


  • Birthday Bash at Auburn Heights

    06/05/2016
    12:30PM — 04:30PM

    In today’s disposable culture, it is not very common for anything to celebrate its 100th birthday...


  • Taste Kennett Food Tours

    06/05/2016
    01:00PM — 04:00PM

    Taste Kennett Food Tours, creators of memorable, unique and fun food experiences, offer three-hou...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Debtors Anonymous

    06/06/2016
    06:00PM — 07:00PM

    In D.A., our purpose is threefold: to stop incurring unsecured debt, to share our experience wit...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Selling American Innovation

    06/07/2016
    07:00PM — 08:00PM

    Join Tom Marshall, founder of Friends of Auburn Heights Preserve, as he shares stories from his l...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Pajama Storytime

    06/08/2016
    06:30PM — 07:30PM

    Wednesdays at 6:30 PM - Join us for an evening of stories, songs, crafts, and fun to end your day...


  • Pro-Act's Family Education Program

    06/08/2016
    07:00PM — 09:00PM

    When someone is addicted to drugs & alcohol, the diease affects the entire family. Each month PR...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Drop in on Nature

    06/09/2016
    09:30AM — 12:00PM

    oin TLC for our Drop-In on Nature Playgroup! This program is designed for children 0-Kindergarten...


  • Clutterers Anonymous

    06/09/2016
    06:00PM — 07:00PM

    Clutterers Anonymous℠ (CLA℠) is a fellowship of men and women who share their experience, strengt...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Race to Beat POTS 5K

    06/12/2016
    10:00AM — 11:30AM

    Kennett Square will be home to a walk and run to raise awareness for Postural Orthostatic Tachyca...


  • Taste Kennett Food Tours

    06/12/2016
    01:00PM — 04:00PM

    Taste Kennett Food Tours, creators of memorable, unique and fun food experiences, offer three-hou...


  • Join St. Anthony’s Church as we celebrate the art, culture, traditions and excitement of the Rena...


  • oin St. Anthony’s Church as we celebrate the art, culture, traditions and excitement of the Renai...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Debtors Anonymous

    06/13/2016
    06:00PM — 07:00PM

    In D.A., our purpose is threefold: to stop incurring unsecured debt, to share our experience wit...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Pajama Storytime

    06/15/2016
    06:30PM — 07:30PM

    Wednesdays at 6:30 PM - Join us for an evening of stories, songs, crafts, and fun to end your day...


  • Pro-Act's Family Education Program

    06/15/2016
    07:00PM — 09:00PM

    When someone is addicted to drugs & alcohol, the diease affects the entire family. Each month PR...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Drop in on Nature

    06/16/2016
    09:30AM — 12:00PM

    oin TLC for our Drop-In on Nature Playgroup! This program is designed for children 0-Kindergarten...


  • Clutterers Anonymous

    06/16/2016
    06:00PM — 07:00PM

    Clutterers Anonymous℠ (CLA℠) is a fellowship of men and women who share their experience, strengt...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Medicinal Plant Walk

    06/18/2016
    09:00AM — 12:00PM

    Saturday, June 18th, 2016 from 9:00AM-12:00PM Location: Bucktoe Creek Preserve (432 Sharp Road, ...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Taste Kennett Food Tours

    06/19/2016
    01:00PM — 04:00PM

    Taste Kennett Food Tours, creators of memorable, unique and fun food experiences, offer three-hou...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


  • Debtors Anonymous

    06/20/2016
    06:00PM — 07:00PM

    In D.A., our purpose is threefold: to stop incurring unsecured debt, to share our experience wit...


  • Summer Solstice

    06/20/2016
    06:30PM — 09:00PM

    Please join us in celebrating the longest day of the year and the beginning of summer! Let’s all ...


  • The Galer Estate family invites you to join our Wine Club, a community of members who enjoy fine ...


Chester County High School Sports