Rep. Artur Davis Admits Democrats Were 'Too Slow' to Recognize Fannie, Freddie Recklessness

This is a rush transcript from "Hannity & Colmes," September 30, 2008. This copy may not be in its final form and may be updated.

ALAN COLMES, CO-HOST: The political fallout continues and now it includes this program. The following video of a House hearing in 2004 is circulating around the Internet, and we played it for you on "Hannity & Colmes" last night:


REP. MAXINE WATERS, D-CALIF.: There were nearly a dozen hearings where frankly we were trying to fix something that wasn't broke. Mr. Chairman, we do not have a crisis at Freddie Mac and in particular at Fannie Mae under the outstanding leadership of Mr. Frank Raines.

REP. GREGORY MEEKS, D-N.Y.: There's been nothing that was indicated that's wrong with Fannie Mae. Freddie Mac has come up on its own, and the question that questions the competence that your agency has with reference to deciding and regulating these GSEs, and so I wish I could sit here and say that I'm not upset with you, but I am very upset because what you do is you may be giving a reason to as Mr. Gonzales said, to give someone a heart surgery when they don't need it.

REP. BARNEY FRANK, D-MASS.: But I have seen nothing in here that suggests the safety and soundness as an issue, and it serves us badly to use safety and soundness as kind of a general shibboleth when it does not seem to be an issue.


COLMES: In response to that ...

SEAN HANNITY, CO-HOST: Sorry we were laughing. Barney Frank dead wrong, Maxine Waters, dead wrong. Go ahead.

Video: Watch Sean and Alan's interview

COLMES: Democrats defending Fannie Mae and Freddie Mac, Artur Davis of Alabama issued the following statement to "Hannity & Colmes":

"Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong. By the way, I wish my Republican colleagues would admit that they missed the early warning signs, that Wall Street deregulation was overheating the securities market and promoting dangerously lax lending practices. When it comes to the debacle in our capital markets, there is much blame to go around for both sides."

Congressman Davis wasn't actually in the video we played last night although there's video of him at the hearing saying people shouldn't rush to judgment about the problems of Fannie and Freddie, but it does take a significant amount of intellectual honesty to admit he and his colleagues made a mistake.

More on the political fallout, mess we're involved in is former Bush adviser Mary Matalin. Mary, welcome back.

MARY MATALIN, REPUBLICAN STRATEGIST: Hello, Alan. How are you tonight?

COLMES: You would agree there is enough blame to go around. Each party, there are people playing politics with this and John McCain says I'm not going to blame Obama, and then he blames Obama, but the fact is there is vulnerability on both sides, correct?

MATALIN: Well, at the heart of this political crisis is that there's no confidence in Republicans or Democrats or the system, and people are — I think that congressman whom I don't know, but I agree with you on that point, the first step to rehabbing and reconnoitering or reconciliation between the voters and their Congress is for people — like that to say look, we were wrong then, and we all have to step up to the plate here.

Yes, there's plenty to go around, but to wholesale throw out the free market system and say capitalism is falling apart and it didn't work in the first place and we need more regulation, that's not the answer, and the people don't have confidence in their Congress, then they can have confidence that the system works because people stopped, Democrats and Republicans, from passing what is a bad bill.

COLMES: Ideologically it has been Republicans who have fought for deregulation Fannie and Freddie aside, and Democrats have wanted regulation, but the deregulation and lack of oversight which have really led to the problems of these private banking companies which are now falling by the wayside.

MATALIN: With all regulations, it's like all tax cuts are not created equally. The kind of regulations that we put in place in the process of corporate governance after the Enron meltdown had a very chilling effect on business. I presume Steve Winn, who is the best businessman in the world ...

COLMES: He is joining us. He will be with us later.

MATALIN: ... will talk about that. Talk to business about overregulation. You have to have the right kind of regulation and the right kind of oversight. I understand the SEC may be lifting some of the mark-to-market accounting practices. That has helped freeze these assets or contributed to that freeze. So there's a lot of things - but you have to have people who know what they're doing and not kick it around like a political football.

COLMES: I get the sense — I don't know that anybody knows where to go to get the answers. Do we trust.

HANNITY: I've got them.

COLMES: I'm not looking at Hannity. I'm looking at Mary Matalin. The idea that these people got us into this mess, a pox on all of their houses, why should we trust any of them to help get us out of it?

MATALIN: Because we have common sense, and we can apply some of our common sense. People understand this and they sit down and they think about it, they understand that you shouldn't buy anything, you shouldn't live beyond your means, you shouldn't buy anything that you can't afford, that lending practices that allow that and extract moral hazard and accountability and transparency. People can understand that because they live that in their regular lives. We can sort this through.

HANNITY: Mary, by the way, always good to see you. With all due respect to Alan, we just have a disagreement, it's not deregulation. Big government liberalism and redistribution of the wealth, it all started in 1977 with the Community Reinvestment Act forcing these banks, if they wanted to stay in business and they wanted to be profitable to grant these risky loans. It was — they upped the ante back in 1995, and the lack of regulatory oversight that we just saw with the Democrats, that was a 2004 hearing, that existed because they were kicking back money to these politicians. Some Republicans, too, but the number one recipient was Dodd, the number two recipient was Obama.

MATALIN: And let's just say, that it was well intended that we want more people to have home ownership. There is a good for the state that comes from that stability, but not the way in which they were issues those loans, and indeed not the way they were covering up the fraud that was going on in Fannie and Freddie, and they were falsifying records for the purposes of getting their own bonuses and stealing from Freddie and Fannie. That's why people are — 70, 80 percent have no confidence in either side to be able to fix this.

HANNITY: I agree with you, and I want free market solutions, we've got to strengthen the dollar, we've got to create investment opportunities. I'd eliminate the corporate income tax. Just get rid of it. Let's bring business to America. Say you come here, you are going to make money, you're going to keep the money, I'd cut the capital gains tax. The opposite of which direction Barack Obama wants to go in.

Do you wish that we were hearing more of these solutions to the Republicans' plan?

MATALIN: Yes, my presumption is that by the next debate, by the next presidential debate, because it will be the presidential candidate that will be setting the policy, that John McCain, who started — at least gave the beginning of an answer to what he would do in response to having — what is at least going to be a short term cost to the taxpayers is that he'd freeze spending, and then the next step is to lower taxes because it creates jobs and it creates wealth back, revenues back to the government, starting with taxes, and do capital gains and expand it. Every time.

We have to keep teaching history over and over. Going back to Jack Kennedy, every time we cut taxes, we ...

HANNITY: We raise revenues. We raise revenues.

All right. Here's my next question. Politically unfortunately in spite of that tape the Obamamania media because journalism is dead will not show the American people — the Republicans on that same video are seen saying whoa, we've got a problem with Freddie and Fannie, whoa, we better fix this, these risky loans, these auditing process is awful, the American taxpayers are going to be on the hook, and the next segment I'll give the comments of John McCain. Why is it perceived at least to this point, Barack Obama, if you need me, call me, the Democrats are benefiting, quote, politically from this?

MATALIN: It's not over. It takes a while for information to get out there for people to absorb it. When people start looking into this, and you've been doing a lot of good work it on, George Bush in every single year of his presidency has raised this issue, John McCain's cosponsored at least two pieces of legislation to have greater oversight and regulation on these bodies in particular and further than that. So it's a process of getting the information out, so keep doing it.

HANNITY: That's my job, Mary, and with your help we get to do that. Thank you for being with us.

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