The Henry Waxman Coverup

The two biggest players in the mortgage meltdown--Fannie Mae and Freddie Mac--are getting some preferred treatment from California Democratic Representative Henry Waxman. A report into the mortgage collapse lays a great deal of responsibility at the feet of Freddie and Fannie:

But previously undisclosed internal documents that are now in Mr. Waxman's possession and that we've seen tell a different story. Memos and emails at the highest levels of Fannie and Freddie management in 2004 and 2005 paint a picture of two companies that saw their market share eroded by such products as option-ARMs and interest-only mortgages. The two companies were prepared to walk ever further out on the risk curve to maintain their market position.

The companies understood the risks they were running. But squeezed between the need to meet affordable-housing goals set by HUD and the desire to sustain their growth and profits, they took the leap anyway. As a result, by the middle of this year, the two companies were responsible for some $1.6 trillion worth of subprime credit of one form or another. The answer to Mr. Waxman's question about their role in the crisis, in other words, is that they were central players, if not the central players, in the creation of the housing boom and the credit bust. Mr. Waxman released some of these documents Tuesday but kept others under wraps.

In early 2004, Freddie's executive team was engaged in a heated debate over whether to start acquiring "stated income, stated assets" mortgages. And in April of that year, David Andrukonis, the head of risk management, wrote to his colleagues, "This is not an affordable product, as I understand it, but a product necessary to recapture [market] share. . . . In 1990 we called this product 'dangerous' and eliminated it from the marketplace." Freddie went ahead anyway.

And what is Waxman doing to help this bunch of liberals run wild? The single weirdest-looking dude in Congress is keeping the documents from the public and protecting not only men like Franklin Raines but his fellow members of Congress like Barney Frank and Chris Dodd who are neck-deep in this. Congressional Democrats made it a goal to get people into housing not only because of their liberal ideology but because they knew it would help them politically through donations and in the case of Dodd, personally by getting reduced interest rate loans.