The Ghost of Freddie Mac

Remember in 2008 after the financial crisis hit and it was considered raaaaaaycist to criticize Freddie Mac’s part in it? You may recall this from Dakinat’s coverage of it at The Confluence in the fall of 2008. Remember how fast the prog factions supporting Obama tried to smack her down, saying that The Confluence was stoking racism?

Well, now that Freddie Mac can be used against white, conservative politicians (Gingrich, and increasingly Romney), it’s no longer racist. It went through the Democratic laundry machine and came out sparkling clean. Not a hint of racist smell at all! Let’s take a walk down Memory Lane and recall the details, so the about-face is all that much more dramatic, shall we?

It all started with Dakinat’s post called Back to the Roots of the Problem. The post was originally published at The Confluence, but has since been flushed down the memory hole there. Luckily, Dakinat preserved a copy at her own blog, Sky Dancing. Thanks in no small part to her, the narrative of Freddie Mac’s reckless practices began to make its way into the news cycle, at which point Barney Frank was appointed the dog to bark this idea out of the yard. Racism was his bark of choice. Here’s coverage of his comments circa September of 2008:

Frank said Monday that Republican criticism of Democrats over the nation’s housing crisis is a veiled attacked on the poor that’s racially motivated….

“They get to take things out on poor people,” Frank said to a mortgage foreclosure symposium in Boston. “Let’s be honest: The fact that some of the poor people are black doesn’t hurt them either, from their standpoint. This is an effort, I believe, to appeal to a kind of anger in people.”

Frank’s comments are in response to widespread criticism of Fannie Mae and Freddie Mac, the two government-backed mortgage-bundling giants that played fast and loose with both risk and their bookkeeping.

The debate got so heated that even our friends at Hot Air were reporting on this at the time:

Barney Frank’s latest defense of Congress over the financial meltdown could be predicted based on the success of Barack Obama’s campaign in using the same defense.  According to Rep. Frank, any attempt to pin the blame for the collapse of Fannie Mae and Freddie Mac on the activities of both, as well as Congressional policy that fueled it, is now officially racist.  Frank says conservatives want to blame minorities for the collapse:

Frank charged that conservatives aim to shift blame for the market meltdown away from Wall Street and toward minority-lending laws like the federal Community Reinvestment Act.

“The bizarre notion that the Community Reinvestment Act . . . somehow is the cause of the whole problem, (conservatives) don’t mind that,” the lawmaker said. “They’re aware that the affordable-housing goals of Fannie Mae and Freddie Mac (and) the Community Reinvestment Act (aim to help) poor people. And let’s be honest, the fact that some poor people are black doesn’t hurt either from their standpoint.”

Let’s keep score.  Criticizing Obama means we’re racists.  Criticizing Congress means we’re racists.  Getting angry at Congress for pushing Fannie Mae and Freddie Mac into buying bad loans and infecting the entire financial system with essentially fraudulent paper — at a cost of up to $700 billion in taxpayer money and potentially trillions in lost investments — means we’re racists.

That’s the back story. Clearly criticizing Freddie Mac and Fannie Mae was just racist code for not wanting poor black people to have homes (end snark).

Now we’re three years into Obama’s presidency and my how things have changed. Here’s Pro Publica, in a joint effort with progressive media mainstay NPR reporting on the fact that Freddie Mac has a serious conflict of interest that is leading to–wait for it–cash-strapped poor people paying far more for their mortgages than those outside the Freddie/ Fannie portal. And they are actually waging bets that they can make this work (through their own policies, of course!), betting once again AGAINST the interests of everyday Americans:

 Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates.

Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.

The report is rather damning:

“We were actually shocked they did this,” says Scott Simon, who as the head of the giant bond fund PIMCO’s mortgage-backed securities team is one of the world’s biggest mortgage bond traders. “It seemed so out of line with their mission.”

The trades “put them squarely against the homeowner,” he says.

Those homeowners have a lot at stake, too. Many of them could cut their interest payments by thousands of dollars a year.

Go, read the whole thing. Freddie Mac (and Fannie Mae) has been an immoral disaster for a long time, and now this tax-payer owned organization is in charge of making sure struggling families can’t refinance their mortgage so that Freddie’s bets pay off.

Now THAT’S racism, considering the volume of people of color a) struggling financially, and b) in the Freddie Mac holding pen. But that’s not how this story is designed to play out. It’s designed to play out as a way to label the likes of Gingrich and Romney as racists, even though the Freddie Mac machine was built by Democrats to serve Democratic constituencies and to enrich the pockets of friends of Democrats. They own this albatross, but they will hang it around the GOP’s neck.