|2:18 PM EDT||
Ed Royce, R-CA 40th
Mr. ROYCE. I thank the gentleman for yielding.
I don't know why it should be a surprise to the Left that this financial system collapsed. The reason I say that is because in 1992, the GSE Act passed this Congress, under a Democratic majority passed this Congress. And the GSE Act specifically was an attempt to get every American into a home.
I understand the thought behind it. But the irrationality behind it, in terms of creating these mandates on Fannie Mae and Freddie Mac, the GSEs, mandates that 50 percent of their portfolio of $1.7 trillion be in subprime and Alt-A loans.
What did they expect would happen? The leverage, the political pull that went into getting the down payments down from 20 percent to 3 percent to zero. And now we have the very result that the Federal Reserve warned us about when they came to Congress in 2003 and 2004 and 2005 and warned us that if we did not take corrective action, if we did not allow the regulators to have the ability to deregulate or to regulate and deleverage these portfolios, that we were going to create systemic risk and
the financial collapse could be a consequence of this.
And blocking repeatedly the efforts in the Senate, which the Democrats did, to address this issue. And then in 2007, finally in 2007 the Democratic majority here brought to the floor a bill which they say attempted to address this issue. But, again, in that legislation it tied the hands of the regulators so that they could not deleverage the portfolios, so that they could not put it into receivership, so that they couldn't regulate for systemic risk.
The other reason they brought the bill to the floor was because it had a $300 billion provision in it for affordable housing. That's why the bill got out of here; but it was opposed by the Treasury, and it was opposed by the Fed.
So the point I want to make is after all of that history, and after watching the collapse--which we were warned about by the regulators--and albeit, with good intentions because I know the thought was everybody would be able to have a house if you could get down to zero down payment loans and if you could force the GSEs to buy that junk that was sold by Countrywide, who do you think created the market? It was 70 percent of the market. It was because there was an intention here to circumvent the
rules of economics.
And now in this legislation, what is not addressed? This very duopoly Fannie Mae and Freddie Mac. When you say we address the problems, no we don't. We compound the problems in this legislation.