Published April 22, 2010
Republican Rep. Scott Garrett on Thursday accused the White House of ignoring mortgage giants Fannie Mae and Freddie Mac in its effort to reform the financial system, calling the "failure" to recognize their importance "irresponsible."
The New Jersey congressman specifically targeted White House senior adviser Valerie Jarrett for her comments to Fox News on Thursday in which she seemed to dismiss the entities as a major contributor to the financial crisis that exploded in 2008.
"Based on your remarks, it appears to me that you might not be fully informed of the facts surrounding these two entities, their government bailout and their continued excessive risk taking," Garrett said in a letter fired off to Jarrett.
Jarrett addressed Fannie and Freddie after she was asked why they weren't included in the financial regulation package being considered on Capitol Hill.
"I think what we're trying to do right now is to look at the excessive risks that were taken by a very few number of banks, and that's what we believe actually led to the financial meltdown," Jarrett said.
Jarrett clarified that she wasn't saying they had nothing to do with the collapse and that "we will obviously be looking at them," but that the "important pillars" the country needs are "transparency, rules of the road, protecting the consumer."
Rep. Garrett charged that her comments betrayed a lack of knowledge about the crisis.
"I don't see how you can possibly exclude Fannie Mae and Freddie Mac in your reform considerations. It is very easy to connect the dots on how the affordable housing goals of Fannie Mae and Freddie eventually led to the massive explosion of the subprime market and the housing collapse from which we are still recovering," he wrote. "Yet for some reason, both you and President Obama fail to see this as the underlying problem that needs to be promptly addressed."
Fannie Mae and Freddie Mac are what are known as government-sponsored entities, which bought mortgages from others and injected money into the housing market. In the 1990s, the Clinton administration gave them a new mission -- expand homeownership to those who had not been able to buy, which meant making loans to people with bad credit and with no money down. Fannie and Freddie were also pushed to buy more and more risky mortgages made by others, making it possible for banks to just keep offering them, then offload them on to Fannie and Freddie.
Fannie Mae and Freddie Mac were taken over by the federal government in 2008. The Congressional Budget Office estimated last August that the 10-year cost to taxpayers for Fannie and Freddie would be $389 billion. That's more than half the amount of the $700 billion Wall Street bailout fund.
As both parties negotiate toward a potential deal on the Wall Street bill, Republicans have drawn increased attention to the need to include Fannie and Freddie as part of the plan.
"I wonder why Fannie and Freddie aren't in this bill. I mean, actually, it all began with them," Sen. Orrin Hatch, R-Utah, said.
House Republican Leader John Boehner on Wednesday said those firms should be privatized to limit the risk to taxpayers.
Garrett called the current legislation a "band-aid treating a few of the symptoms of our recent economic crisis while failing to adequately address the underlying cause."