Cain: Fannie Mae and Freddie Mac Responsible for Mortgage Crisis, Not Free Market
(CNSNews.com) – GOP presidential hopeful Herman Cain said Monday that government intervention into the housing market -- not the free market -- was the primary cause of the housing crisis.
“Government didn’t miss the boat, government created the boat. Government put the holes in the boat,” Cain said in an appearance at the National Press Club in Washington, D.C.
Cain was asked by the president of the Press Club how the government could have “missed the boat” on the housing bubble.
Cain said mortgage giants Fannie Mae and Freddie Mac were the primary agencies responsible for the mortgage meltdown – and the current economic downturn.
“If you go back to the financial meltdown of 2008, it all precipitated because of the practices of Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac is the root of why we have holes in the boat,” Cain said.
Cain blamed the government-sponsored enterprises’ practice of bundling mortgages and making it too easy for banks to sell “bad mortgages that were bundled.” He also said that Fannie and Freddie did not receive adequate oversight during the years leading up to the burst of the housing bubble.
Cain also claimed that when faced with evidence that Fannie Mae and Freddie Mac were – in his words -- “cooking the books,” Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.) – then-chairmen of the Senate Banking Committee and the House Financial Services Committee -- “did not do their jobs” in regulating the mortgage giants, Cain said.
Wall Street was only partially to blame for the crisis, according to Cain.
“Yes, Wall Street has some blame in this, but not total blame,” Cain said. “The derivatives market was not properly defined in terms of what businesses can do.”
He added that he supports repeal of the Dodd-Frank bill passed in reaction to the financial crisis.
The Bush administration did have some culpability in the crisis, but according to Cain they tried to pass legislation to address the problems, but lacked the votes to do anything about it.
“The Bush administration tried to get legislation passed, but because he [Bush] did not have a Republican majority or a supermajority, the legislation was blocked several times. I think the legislation, if I recall correctly, was introduced by Sen. John Sununu (R-N.H.).”
On fixing the housing crisis, Cain said that he would enact policies such as his 9-9-9 tax plan, to encourage economic growth. People with jobs would have money to possibly buy distressed homes.
“It all gets back to economic growth,” he said.
Cain's 9-9-9 plan consists of a 9 percent flat tax on business, a 9 percent flat tax on individuals and a 9 percent national sales tax -- in exchange for doing away with the income tax.