Congressman Canseco's Statement on Treasury Secretary Geithner's Op-Ed, "Financial Crisis Amnesia"

Washington, DC – Congressman Francisco “Quico” Canseco, a former small business owner and a member of the House Financial Services Committee, released the following statement:

 

“I certainly agree with Treasury Secretary Geithner’s main point in his op-ed in the Wall Street Journal entitled, “Financial Crisis Amnesia,” that there’s some amnesia going around about the financial crisis. However, the amnesia going around is not the type Mr. Geithner would have you believe. Mr. Geithner, the Obama Administration, and their cohorts in Congress have routinely placed the blame for the financial crisis solely at the feet of the private sector. This has provided them with a convenient scapegoat that allows new, growth-strangling regulations to be put in place that have more to do with placing a feather in the cap of some political careers than with protecting and strengthening our economy. 

 

“While the collapse of Bear Stearns, Lehman Brothers, and AIG are used as the bogeymen in their narrative of the financial crisis, the Obama Administration seldom talks about the collapse of Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSE’s) that collapsed a week before Lehman Brothers went bust in the September of 2008. The only reason that the Fannie and Freddie collapse didn’t spiral out of control was because they had a taxpayer guarantee behind their balance sheets – and to date, taxpayers have injected nearly $200 billion into the GSE’s to keep them afloat. For years, policymakers used Fannie and Freddie as off-balance sheet tools to promote government policies towards the housing market that led to our economic collapse in 2008. One might even call them a sinister “shadow” operation, such as the ones that Mr. Geithner lambasts in his op-ed. Fannie and Freddie were the original “subprime” lenders – as early as 2000, the GSE’s began acquiring loans that had zero percent down payments, long before the terms “subprime”, “Alt-A”, and “no-doc” entered our lexicon. It is by no means a coincidence that the common denominator in the collapse of Bear Stearns, Lehman Brothers, and AIG was residential mortgages and mortgage-backed securities in the United States. Fannie and Freddie created the firestorm that led to these companies loading up their balance sheet with exposure to low-quality loans. 

 

“Sadly, the Dodd-Frank reform law that Mr. Geithner showers with praise did nothing to reform the GSE’s. The only proposal the Obama Administration has offered for GSE reform were three vague “options” laid out early last year for someone else to choose from and figure out how to implement. Why has the Administration failed to lead on the GSE’s? My guess is that it requires tough decisions, and if we’ve learned anything about this Administration, they tend to shy away when such decisions need to be made. By contrast, several House Republicans have offered a legislative plan that winds down the GSE’s within five years in order to allow private capital into the housing market and severely reduce the government’s footprint there. This legislation would not only put our mortgage market back on sound footing, it would properly address the roots of the financial crisis to ensure such reckless policies don’t destroy our economy again. Even better, it would provide a cure for the amnesia that is afflicting so many in Washington,” Congressman Canseco concluded.

 

To schedule an interview please contact Valentina Weis at (202) 225-4511 or Valentina.Weis@mail.house.gov