Pat Toomey has been vilified on the campaign trail by his Democrat opponent Joe Sestak as being a friend of Wall Street, for being a “lobbyist” for big money at the expense of the taxpayer. Today, Toomey turned the tables on Sestak, citing the congressman’s support of multi-billion dollar bailouts and resistance to reform for Fannie Mae and Freddie Mac, the two government-backed lenders at the heart of the collapse of the residential mortgage market.
In prepared remarks to press in Philadelphia, Toomey made his case against both Sestak and continued government backing of Fannie and Freddie, and spoke about his efforts in congress in 2000 and 2003 to head off the mortgage crisis, as well as Congressman Sestak’s 2007 and 2009 proposals to extend new bailout funds.
“When I was a freshman congressman ten years ago,” said Toomey, “I began to raise questions about Fannie Mae and Freddie Mac’s troubling structure, in which shareholders enjoyed all the upside and all the profits, and taxpayers stood to take all the risks and all the downside.”
“In a July 2000 hearing, I raised the following question [to Federal Reserve chairman Alan Greenspan]: ‘Is there any danger,’” asked Toomey, “‘that we create a dynamic where we create a greater incentive to grow and a lesser ability for the market to discipline that growth, and that in the event of hard times, taxpayers put at greater risk?’”
Toomey went on to cite his co-sponsoring of legislation (HR 3703 and HR 2575) that would have “drastically mitigated if not prevented the housing crisis.”
Among the requirements of the proposed legislation, which Toomey lamented “languished” as politicians “whistled past the graveyard,” would have been a repeal of Fannie and Freddie’s line of credit with the Treasury, a measure that would have signaled that the groups were not implicitly backed.
The legislation would also have required the institutions to build greater capital reserves, which Toomey explained would have “allowed them to survive credit loses.” It would have limited the size of mortgages that the groups would purchase, and would have required the transfer of regulatory authority to the “much stronger and more competent” U.S. Treasury from the Department of Housing and Urban Development.
At issue today, Toomey said, is Congressman Sestak’s record on the regulation of these same groups.
“Barney Frank, the first congressman to endorse Joe Sestak,” Toomey said, “famously declared, ‘I think this is a case where Fannie and Freddie are fundamentally sound, tht they are not in danger of going under.’”
Toomey pointed out that the groups have already received more than $148 billion in bailout funds as a result of the mortgage bubble they helped inflate, and “continue to lose money,” while Congress has “done nothing to reform” them.
Sestak, Toomey charged, voted against a “measure that would have imposed limits on the size of Fannie Mae and Freddie Mac’s loan portfolio in 2007.”
Sestak ”voted against a measure that would have allowed fannie and freddie to pour money into affordable housing funds only if … their regulator determined that it would not contribute,” explained Toomey, “to the enterprise’s financial instability.”
And Sestak “voted against the amendment that would have increased the minimum down payment required for an FHA loan from 3.5 to 5 percent.”
“But it gets worse,” Toomey intoned. “Joe Sestak even introduced his own mortgage bailout bill in 2009,” he said, that would have ”the government would bail out underwater mortgages” at a cost of $93 billion.
It’s “a fundamental question of fairness,” said Toomey, although his charge against Sestak is more devastating in that it tells the story of a congressman apparently at odds with oversight and accountability.