Congressman: Obama's faux bank populism ignores Fannie, Freddie 

Rep. Scott Garrett, R-N.J., is one of the few members from either party on the Financial Services committee who does not look like an idiot when questioning regulators and bankers on the most important issues of the financial industry. He is also loath to engage in partisan shouting contests. That's why I pay special attention at his harsh words for what he calls President Obama's "faux-populist" assault on banks.

In fact, Garrett accuses the president of political gimmickry, of simply reacting to the Massachusetts Senate election results with a new, substance-free initiative that is still vague in its details.

“This renewed focus on financial services reform by the Obama Administration is clearly a transparent attempt at faux-populism, in light of the outcome of the Massachusetts Senate race," he said in a statement this morning.

Among other things, Obama is going after the imaginary threat posed by investment banks that trade (under existing regulatory limits) from their depository accounts. This goes to the discussion of the Glass-Steagall Act's 1999 repeal, the bogeyman behind the argument that deregulation somehow caused the financial crisis.

Garrett attacks Obama for pursuing this phantom while ignoring the institutions central to the recent economic collapse: Fannie Mae and Freddie Mac, the nation's largest underwriters of bad mortgage-backed securities.

Garrett's words:

“At best, the evidence is mixed that banks that were also engaged in trading were the cause of this crisis.  In fact, stand-alone investment banks were two of the most notable failures of the recent crisis, while some of the larger banking institutions were able to provide a measure of stability to the system in the heat of the crisis by purchasing some of their weaker counterparts....

"What is indisputable is that Fannie Mae and Freddie Mac were central to the mortgage market meltdown, which ignited the economic crisis that has left millions of Americans unemployed and has yet to be resolved. It is laughable that Chairman Frank and the Obama Administration have ignored their parasitic effect on our economy, yet proclaim the desire for reform. Passing strong GSE reform legislation should be at the top of the agenda of the House Financial Services Committee this year, in order to stabilize the mortgage market and alleviate risk to the taxpayer.  Any financial regulatory reform that does not reform Fannie Mae and Freddie Mac is not true reform.”

What he leaves out is the Obama administration's Christmas Eve decision to write Fannie and Freddie a blank check, apparently as a reward for causing systemic failure, even as the two GSEs were giving bonuses to their top executives.

About The Author

David Freddoso

David Freddoso came to the Washington Examiner in June 2009, after serving for nearly two years as a Capitol Hill-based staff reporter for National Review Online. Before writing his New York Times bestselling book, The Case Against Barack Obama, he spent three years assisting Robert Novak, the legendary Washington... more
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