America Needs to Know

AMERICA NEEDS TO KNOW -- (House of Representatives - July 14, 2008)

The SPEAKER pro tempore. Under a previous order of the House, the gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.

Ms. KAPTUR. Mr. Speaker, last week's rattling of Fannie Mae and Freddie Mac and the failure of IndyMac Bank are the latest wreckage of our held-hostage economy enlarged to a trillion-dollar hole. When we think about what is happening, the seeds of the ruin were sown in the 1990s, and those who planted the seeds got rich while pushing America financially to the precipice.

The repeal of the Glass-Steagall Act by Congress in 1999 contributed to our financial system's vulnerability. For the first time in a half a century, the firewall between banking and commerce was breached. I voted against abandoning Glass-Steagall, but the act passed overwhelmingly in this chamber by a vote of 362-57 and over in the other body, 90-8.

As a result, the American taxpayers are now being asked to bail out Wall Street. The biggest high-risk investment banks and some uninsured government instrumentalities are going right to the American people, where they said they would never go. As these risky practices were standardized, the question is, what happened to the regulatory bodies charged with maintaining the safety and soundness of our financial system? Why didn't Fannie Mae and Freddie Mac exert due diligence and oversight? Where was Treasury's Office of Thrift Supervision?

What happened to HUD's appraisal and underwriting standards, when in 1993 and mortgage letter 93-2, and then in 1994, in HUD's mortgage letter 94-54, HUD gave authority to lenders like Countrywide to approve their own loans and select their own appraisers. Assuming many of these loans were moved to market through Freddie Mac and Fannie Mae, why did their regulatory standards fall short? Who served on their boards of directors and voted for these high-risk practices? How much were those boards and executives compensated during those years when these risky practices proliferated?

Evidence is beginning to surface that many of those board members personally benefited from their own decisions. Well, through which domestic and international institutions were the original mortgage securitizations first moved? Which persons and which firms did it, and which regulatory agencies sanctioned the process?

Why did Treasury's Office of Thrift Supervision fail to bat an eye when Superior Bank, one of the first institutions to embark on subprime lending, was earning 7 1/2 times the industry's average return on assets? Where was its Chicago Office of Thrift Supervision? When FDIC finally caught up and charged Superior in 2001, it was fined $450 million, the largest fine in U.S. history much.

But why haven't other hot-dog banks been brought to justice? This subprime crises happened because people at the highest levels wilted, they placed America in bondage for another generation. The gaming of our financial markets is not a new phenomenon, but each crisis seems to get bigger, and the big fish, the kingfish, aren't brought to justice.

All the men and women who served on the boards of Freddie Mac and Fannie Mae during the 1990s and voted for these high-risk practices should be investigated. They made millions off their stock options and industry connections. Are they to remain anonymous to the American people who are being asked to pick up their horse dung after the parade has gone through town? Who were they, and how did their votes, as board members, contribute to this unfolding American tragedy?

I am going to place in the Record tonight the list of all the board members at Freddie Mac from the early nineties until the early 2000s and will be placing the same names in the Record for Fannie Mae in future days.

Let me just say that the trillion-dollars debt that is being proposed to be financed through the sale of U.S. bonds, let me remind the American people, our coffers are empty as a country. Our country will borrow more money from foreign interests to close this gap, and our children will owe principal and interest to the bondholders, just as they paid nearly a quarter trillion dollars on the savings and loan crises from the 1980s.

Let me remind you the meaning of the word ``bondage,'' a state of being bound, captive, a serve, subjugated to a controlling person or force, subservient, dependent, a bond slave, a lackey.

What is happening to our country is truly very, very dangerous. This never should have happened, and every single person responsible at the highest levels in this government, who did not regulate, who did not have oversight, who did not properly manage their regulatory systems in order to guard against this kind of risk-prone behavior, should be investigated, and the American people should know whose bill they are paying for. What a tremendous tragedy for our country.

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