Yesterday, before the Financial Crisis Inquiry Commission, former Federal Reserve Chairman Alan Greenspan testified that Congress failed to rein in GSE giants, Fannie Mae and Freddie Mac. Rep. Ed Royce (R-CA), a senior member of the House Financial Services Committee, issued the following statement in response:
"Yesterday, Chairman Greenspan rightly pointed out the epic failure by Congress to rein in the excessive risk-taking at Fannie and Freddie.
"For years the Fed warned about the systemic threat posed by the GSE's. In 2005, I offered an amendment on the House floor that would have allowed the regulators to wind down their portfolios.
"Unfortunately, some Members of Congress, including then FSC Ranking Member and now Chairman Barney Frank, chose to block my amendment and roll the dice on safety and soundness all in the name of promoting affordable housing. That grave error led to the collapse of our housing market and (at least) $127 billion in taxpayer losses.
"The Members that chose to roll the dice on Fannie and Freddie now want to roll the dice with our entire financial system.
"The Dodd-Frank regulatory reform bills institutionalize the too-big-to-fail doctrine and create dozens of GSE-like institutions. Congress should stop the gambling and drop this approach which has so clearly failed us once before."