Courage and Consequence: on Budget & Economy

Paul O`Neill: Jan. 2000: business leaders say we're headed into recession

O'Neill skipped the meeting with business leaders--which was a bad sign. Bush heard news behind closed doors was sobering and valuable. Business leaders from all parts of the country and all parts of the economy said sales were dropping and profits weakening. The country was headed into a recession & the Treasury secretary designate had missed an important session on what to do about it.

Barney Frank: 2003: Fannie Mae & Freddie Mac are "fundamentally sound"

The leading reform opponents were Rep. Barney Frank (D, MA) and Sen. Chris Dodd (D, CT). Frank first dismissed our fiscal warnings, suggesting administration officials would "exaggerate a threat of safety and goodness [to] conjure up the possibility of serious financial losses to the Treasury, which I do not see" and called Fannie and Freddie "fundamentally sound financially." Later, Frank went so far as to argue that this "is an artificial issue created by the administration. I don't think we are in any remote danger here." Even as Fannie and Freddie collapsed and helped drive the financial crisis of 2008, Frank labeled Bush's call for reform "inane."

Once the president helped spark a crisis, Frank voted in 2008 for the Bush administration's reform bill. It was blatant hypocrisy.

Charles Schumer: 2003: no need to curtail Fannie Mae & Freddie Mac mission

Democrats were blissfully dismissive. Sen. Chuck Schumer (D, NY) opined, "We are using the recent safety and soundness concerns as a straw man to curtail Fannie and Freddie's mission." He later said, "I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring.

When Freddie Mac and Fannie Mae collapsed at the end of 2008, after housing values had dropped 12.8% since 2006, they were the accelerant that turned a minor economic downturn into a worldwide calamity.

Chris Dodd: 2003: Threatened filibuster on Fannie & Freddie regulation

The leading reform opponents were Rep. Barney Frank (D, MA) and Sen. Chris Dodd (D, CT). Dodd said in 2004 that these companies were "one of the great success stories of all time." As Fannie and Freddie spiraled downward, Dodd suggested Bush "immediately reconsider his "ill-advised" call for reform.

Once the president helped spark a crisis Frank and Dodd voted in 2008 for the Bush administration's reform bill, which they had opposed in 2005. It was perhaps the most blatant case of hypocrisy I have witnessed in Washington, where hypocrisy is common.

George W. Bush: 2001: Warned of problems with Fannie Mae & Freddie Mac

Our bill would have subjected Fannie Mae and Freddie Mac to the kinds of federal regulation that banks, credit unions, and savings loans have to comply with. No Democrat supported it. The economic danger didn't faze Fannie or Freddie's congressional allies, who ranted at Bush officials who testified on the need for reform.

When Freddie Mac and Fannie Mae collapsed at the end of 2008, after housing values had dropped 12.8% since 2006, they were the accelerant that turned a minor economic downturn into a worldwide calamity.

Rahm Emanuel: Served on Freddie Mac board prior to 2005 economic meltdown

In January 2003 our concern grew when Freddie Mac announced it had to restate its earnings for the past three years because of accounting problems. On its board during part of this period was Rep. Rahm Emanuel (D, IL), who later became President Obama's chief of staff. In September, Freddie Mac acknowledged that SEC investigators uncovered billions in earnings manipulations, overstating its earnings by $9 billion.