The link below contains a purported list of the top 25 in Congress who got contributions from the folks at Fannie and Freddie. Obama is listed third, after Dodd and Kerry, even though Obama is just a junior Senator. Obama is followed next by Clinton. Barney Frank and Nancy Pelosi are on the list as well.
http://www.investors.com/editorial/IBDArticles.asp?artsec=16&artnum=1&issue=20080918
Then there is the Senate Banking Committee Chairman Christopher J. Dodd who allegedly got special mortgage deals from Countrywide, who gave preferential rates to 'friends' of company's chairman.
http://www.msnbc.msn.com/id/25140560/
For an interesting article purporting to detail the House Financial Services Committee Chairs long history with Fannie Mae, See http://www.businessandmedia.org/printer/2008/20080924145932.aspx
"House Financial Services Committee Chair promoted GSEs while former 'spouse' was Fannie Mae executive."
The link below describes how some in Congress tried to use the original version of the bailout bill to divert money eventually recovered to groups like ACORN, a group Obama has a long association with. See:
http://online.wsj.com/article/SB122247015469280723.html?mod=googlenews_wsj
And then there is House Speaker Nancy Pelosi, who allegedly has directed nearly $100,000 from her political action committee to her husband's real estate and investment firm.
http://www.washtimes.com/news/2008/oct/01/pelosis-pac-pays-bills-for-spouses-firm.
JUDGMENT CALLS
Robert J. Samuelson
The Great Confidence Game
Every financial system depends on trust. We are in a full-blown crisis because investors and financial managers have lost that trust.
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It's doubtful that Princeton University economist Ben Bernanke and ex-Goldman SachsCEO Hank Paulson imagined what awaited them when they took charge of the Fed and the Treasury in 2006. Since then, they have put their agencies on a wartime footing, trying to avert the financial equivalent of an army's collapse. As in war, there have been repeated surprises. As in war, the responses have involved much improvisation—for instance, the $85 billion rescue of American International Group (AIG). But last week their hastily built defenses seemed threatened, and so Paulson proposed a radical solution of having the government buy vast amounts of distressed debt to shore up the financial system.
It's all about confidence, stupid. Every financial system depends on trust. People have to believe that the institutions they deal with (their "counterparties") will perform as expected. We are in a full-blown crisis because investors and financial managers—the people who run banks, investment banks, hedge funds, insurance companies—have lost that trust. Banks recoil from lending to each other; investors retreat. The ultimate horror is a financial panic; everyone wants to sell and no one wants to buy. Paulson's plan—still lacking essential details—aims to avoid that calamity.
As is well known, the crisis began with losses in the $1.3 trillion market for "subprime" mortgages, many of which were "securitized"—bundled into bonds and sold to investors. With all U.S. stocks and bonds worth about $50 trillion in 2007, the losses should have been manageable. They weren't, because no one knew how large the losses might become or which institutions held the suspect "subprime" securities. Moreover, many financial institutions were thinly capitalized. They depended on borrowed funds; losses could wipe out their modest capital.
So the crisis spread. AIG is a case in point. Although most of its businesses—insurance, aircraft leasing—were profitable, it had written "credit default swaps" (CDS) on some subprime mortgage securities. These contracts obligated AIG to cover other investors' losses. In 2008, AIG's mounting losses on its CDS contracts resulted in a downgrade last week of the company's credit rating and a need to post more collateral to its CDS "counterparties." AIG didn't have the cash.
Since August 2007, when the crisis first broke, the Fed has done three things to prevent eroding confidence from morphing into a self-fulfilling panic. The first was standard: cut interest rates. The overnight fed funds rate dropped from 5.25 percent to the present 2 percent. The aim was to promote lending and prop up the economy. By contrast, the second and third responses broke new ground.
If banks remained reluctant to make routine short-term loans—fearing the unknown risks—then the Fed would act aggressively as lender of last resort. Bernanke created several new "lending facilities" that allowed banks and investment banks (such as Goldman Sachs) to borrow from the Fed. They received cash and safe U.S. Treasury securities in return for sending "securitized" mortgages and other bonds to the Fed. In this manner, the Fed has lent more than $300 billion.
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