This is a rush transcript from "Hannity," July 14, 2011. This copy may not be in its final form and may be updated.
(BEGIN VIDEO CLIP FROM NOV. 5, 1994)
BILL CLINTON, 42ND PRESIDENT OF THE UNITED STATES: I am directing HUD Secretary Cisneros to develop into operation with the most significant members of the housing industry and government at all levels, a plan to boost homeownership to an all-time high in the United States before the century is out.
(END VIDEO CLIP)
SEAN HANNITY, HOST: That was former President Bill Clinton launching the homeowners hit program that many say spark the 2008 financial meltdown. Now, "Reckless Endangerment" is the brand new book by New York Times reporter Gretchen Morgenson. And she's going to join us in just a moment.
Now it pinpoints the Democratic policies and the politicians that brought in the ballot. Now, Morgenson chronicles how Clinton's homeowners hip initiative encouraged mortgage giants Fannie Mae and Freddie Mac to make risky loans to people who could not repay them.
Now, to facilitate these loans, Fannie and Freddie, well, they needed help from lawmakers who allowed them to toss out mortgage requirements, you know, like a good credit history, for example. So, former Fannie Mae Chairman Jim Johnson, Franklin Raines both major Democratic contributors, called on their friends in Congress. On their urging, lawmakers like former Democratic Senator Chris Dodd, and Democratic Congressman Barney Frank, Maxine Waters and Greg Meeks served as Fannie and Freddie's champions in Congress. When others raised eyebrows, they responded forcefully. For example, remember this.
(BEGIN VIDEO CLIPS FROM OCT. 6, 2004)
REP. GREGORY MEEKS, D-N.Y.: Let me just let you in on a surprise, some people don't want you in business. They don't like the success that you've accomplished by putting people with decent roofs, and homes and roofs over their heads. Some people just don't like that.
REP. BARNEY FRANK, D-MASS: I don't see anything in your report that raises that (INAUDIBLE) this problem.
REP. MAXINE WATERS, D-CALIF.: 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. LACY CLAY, D-MO.: This hearing is about the political lynching of Franklin Raines.
(END VIDEO CLIPS)
HANNITY: Now, Democratic economists serving in the Clinton and Obama administrations did much of the same as deputy secretary of the treasury in the 1990s. Larry Summers, he ordered the rewriting of a report which found that Fannie and Freddie should be privatized and should stop receiving your hard-earned tax dollars.
Now, Treasury Secretary tax-cheat Tim Geithner and former OMB Director Peter Orszag, well, they don't emerge from Gretchen Morgenson's book looking much better. And she joins me now, by the way, this book is phenomenal. I really, I want to say that up front. There's so much information in here. We can never -- we could do a whole hour special. And you have a co-author Joshua Rosner.
GRETCHEN MORGENSON, AUTHOR, "RECKLESS ENDANGERMENT": Rosner, yes. Thanks, Sean.
HANNITY: Freddie and Fannie, Franklin Raines. The community reinvestment act. All of these things together. Am I right in saying that government forced banks and financial institutions to lessen these lending requirements, so that people could get mortgages knowing that the people would never be able to repay these loans, is that true?
MORGENSON: The clip that you showed Sean, outside of the show is absolutely what we are talking about here. Clinton said, let's get everybody together, industry, regulators, the government, everybody was onboard for this. And so, yes it was all about encouraging, expanding homeownership. This meant to people who previously had not been able to afford a home. Minorities, lower income people. Immigrants. Yes it was absolutely necessary to expand to those people because we had a flat line on homeownership up until now.
HANNITY: Tell us about Jimmy Johnson, especially go into great detail about Franklin Raines. And then later, I think it was Jamie Gurlich (ph), $100 million he made.
MORGENSON: That's the report, absolutely. Now, he's important to know, Sean. Because he's sort of escaped under the radar. And as the crisis developed in 2008, this person was nowhere to be seen. Jim Johnson ran Fannie Mae with an iron fist, extremely shrewd political animal. Turned the company into a political machine from 1991 to 1999. Very crucial period in Fannie Mae's history because that's when they really ballooned the balance sheet, started to lead the way down in degrading the due diligence that normally gets done when you make a home loan. And he made a tremendous amount of money for himself. He also was very shrewd about buying off the academic community. About making sure he could co-opt his regulator. And that regulator would be a 98 pound weakling. This is a very shrewd guy.
HANNITY: You even described how they took it from HUD and moved it to congressional oversight in a way. But you also talk about the incestuous relationship. Like you described an instance with Barney Frank got a job at I think was Fannie for a friend. And then he's, you know, look at his role in all of this or Chris Dodd's role in all of this. And friends of Angelo at Countrywide getting all these sweetheart, you know, loans for themselves. Explain the connection between Congress and these failing institutions.
MORGENSON: It was of crucial importance that Fannie Mae be allowed to keep its very lucrative government purposes. We were basically -- taxpayers were backing it. If that went away, then the whole golden goose was cooked. So, it was crucial for Congress to be co-opted to be taken over, to be bought and paid for. And so, that's what Jim Johnson did. Franklin Raines continued down that path.
So you had basically any time anyone criticized homeownership. Any time anybody said, whoa, wait a minute what if these are people who can't repay these poisonous loans, right? These toxic loans, you would be ridiculed, you would be steamrolled. They wrapped themselves in the American flag of homeownership and dispelled all critics.
HANNITY: You are talking about hundreds of billions of dollars in corruption. Why haven't more people done the investigative work that you have? This is a web -- look, tell me if I'm wrong if this happened in the private sector, would people go to jail?
MORGENSON: You know, the question of why no one has gone to jail in the financial crisis is one that we've been reporting on and that I think is a conundrum for a lot of people, but this is especially damaging because the taxpayers are on the hook now for $150 billion and the very people that we were supposed to be helping, got hurt the worst by this incredible, you know, partnership quote unquote.
HANNITY: It also helped jumpstart this slow down in the economy. I mean, I got to tell you. A very informative. A web -- if you want to know about government corruption, well chronicled. A lot of people in Washington today were around then including the two that I mentioned and more, many others. Anyway, great job, Gretchen appreciate you being with us.
MORGENSON: Thank you, Sean.
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