By The Nader-Gonzalez Campaign
Eight years ago, consumer advocate Ralph Nader correctly predicted that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) were on track to follow the savings and loan industry of the 1980s and 90s into a big financial heap of trouble. Nobody listened, and taxpayers are now at risk of losing tens of billions of dollars. Wall Street is being shaken to its foundation. American International Group Inc., the biggest U.S. insurer by assets, is now teetering on the brink of ruin after suffering losses of $18 billion in the past three quarters, largely due to its sub prime mortgage exposure.
“Nader Rips Mae and Mac,” declared the Milwaukee Sentinel Journal on June 16, 2000. “Ralph Nader, warning of a potential taxpayer bailout similar to the savings and loan crisis, urged lawmakers to cut government benefits to mortgage-market giants Fannie Mae and Freddie Mac – which he called ‘poster children for corporate welfare.'”
This year Nader, who is also running for president as an independent, is getting credit for his prescience.
“Give one presidential candidate credit for identifying the problem and getting the policy right – and doing so before the twin government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac went into the tank in mid-July,” wrote Lou Dubose in The Washington Spectator on Aug. 1. Dubose went on to quote Nader’s June 15, 2000 Congressional testimony about HR 3703, a bill that would have reigned in some of the most dangerous tendencies of GSE’s, had it passed.
In a letter to SEC Chairman Christopher Cox in 2006, Nader also criticized the exorbitant salary of GSE executives Jamie Gorelick, Daniel Mudd, Robert Levin and Timothy Howard, and noted that their financial incentives were in direct conflict with consumer financial security because of the grave moral hazard created by accounting manipulations they sanctioned that benefited their personal wealth, with no penalty for being caught.
“As you continue to investigate the Fannie Mae accounting debacle, we are writing to urge you to seek civil sanctions, including disgorgement, from senior executives who profited directly from the misconduct at Fannie Mae, and that you urge the Department of Justice to give careful consideration to criminal prosecution of these individuals,” wrote Nader.
Candidate Nader has called for an immediate halt to the increase in the national debt, an end to corporate subsidies and unconditional taxpayer bailouts of corporations, and a start to the aggressive prosecution of corporate criminals.
In his prepared remarks for New York Times editors in its Washington Bureau, Nader stated: “Given the contrast between the ‘free market’ ideology of the Republicans and the corporate or state socialism that is their increasing practice, the time is ripe for full Congressional hearings next year on the organized power, greed and lack of regulation that is shaking the foundations of Wall Street.”
Nader added, “What we need to do now is find a just way to deal with the millions of homeowners facing foreclosure and make sure that this level of financial market manipulation does not happen again.”
He elaborated a 10-point plan to cool off the financial markets meltdown:
1. No bailouts without conditions and reciprocity in the form of stock warrants.
2. No more lobbying for any company that is bailed out.
3. No golden parachutes and get out of jail free cards for guilty executives.
4. No bailouts without public hearings.
5. Reduce the moral hazard in U.S. mortgage markets by introducing covered bonds for the majority of mortgage products as they do in Western Europe. That gives institutions that finance mortgages an incentive to be prudent, because they cannot just unload them and wipe their hands clean of the liability, but are instead on the hook if the homeowner defaults.
6. Maintain neighborhood stability and housing security by passing a law with a sunset clause allowing below median-value homeowners facing foreclosure the right to rent-to-own their homes at fair market value rates.
7. Avoid future housing bubbles by removing implicit government guarantees for new mortgages that exceed thresholds of greater than 15-20 times the annual fair market rent value of the home.
8. Make the Federal Reserve a Cabinet Position, so it is accountable to Congress, as well as making sure all Federal Reserve Bank presidents are appointed by the President and answerable to congress.
9. Reduce conflicts of interest by taking away power for auditor and rating agency selection from companies and placing it in the hands of the SEC to be administered on random assignment.
10. Implement a securities speculation tax, starting with derivatives to deter casino-style capitalism.
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Resources:
* RN’s response to bailout on Vote Nader Web site.
* Politico: Nader on bank woes: “I predicted this”
* Washington Spectator: Ralph Nader was right
* Ralph Nader’s 2006 letter to SEC Chairman Christopher Cox
* Ralph Nader’s 2000 testimony on H.R. 3703 to the U.S. House of Representatives Subcommittee on Capital Markets, Securities, and Government Sponsored Enterprises
* 2000 American Enterprise Institute book about Fannie & Freddie Mac in which Ralph Nader wrote a chapter – Serving Two Masters, Yet Out of Control – Fannie Mae and Freddie Mac
* Ralph Nader’s chapter: “How Fannie and Freddie Influence the Political Process.” (starts on pg. 110)
* Milwaukee Journal Sentinel: Nader rips Mae and Mac (from June 2000): Ralph Nader, warning of a potential taxpayer bailout similar to the savings and loan crisis, urged lawmakers to cut government benefits to mortgage-market giants Fannie Mae and Freddie Mac – which he called “poster children for corporate welfare.” But some lawmakers said that acting hastily could raise the cost of buying a home by increasing borrowing costs for Fannie Mae and Freddie Mac, which are called government-sponsored enterprises.
Posted on September 17, 2008