This editorial appears in today’s Wall Street Journal… (Take note of section we bolded at bottom…)

The Fannie Mae Republicans
Some born again reformers were once the company’s defenders.

A major task for the next Congress will be rewriting the laws governing Fannie Mae and Freddie Mac, and House Republicans have now won a seat at that table. Which makes it all the more important that their seat not be occupied by Members who were once powerful defenders of the toxic mortgage twins.

These days, everyone—even Barney Frank—claims to want to reform Fannie and Freddie. Most Republicans now sound like these columns did for more than a decade, assailing the companies for their systemic risk to the financial system after taxpayers have had to put up $150 billion, and counting, to maintain them as the walking dead.

But as the debate over the mortgage giants resumes, the real threshold for GOP leadership ought to be who was right when it counted—that is, who was willing to take on the companies, their Wall Street allies and the housing lobby before the meltdown. The destructive duo were long protected by a bipartisan phalanx of Members, and a core group of Republicans on the House Financial Services Committee were among the guardians. They include Gary Miller of California, Randy Neugebauer of Texas and Spencer Bachus of Alabama.

Mr. Bachus is worth special mention because he has the seniority to succeed Mr. Frank as Chairman of Financial Services. Yet when other Republicans, including the Bush Administration and Senator Richard Shelby, were trying to reform Fan and Fred during the last decade, Mr. Bachus was on the wrong side of the debate.

In 2005, other Republicans offered amendments on the House floor to rein in the companies’ mortgage-backed securities portfolios; eliminate their ability to borrow from the Treasury; kill an increase in the size of mortgage loans that the companies could guarantee; and strengthen their capital requirements. Mr. Bachus voted against every one. The bill that passed the House was so weak that the Bush Treasury and Senate Republicans rightly rejected it as worse than nothing.

In 2007, after Democrats had taken the House, Mr. Frank and Treasury Secretary Hank Paulson negotiated another weak reform. But even that was too much for Fannie and its Congressional front men. Mr. Neugebauer, a leading ally of Mr. Bachus, joined with Democrat Melissa Bean of Illinois to offer an amendment on the House floor that gutted the power of Fannie’s regulator to limit its risky mortgage portfolios. It passed 383 to 36, with Mr. Bachus voting with the majority, while even Mr. Frank voted "no" to honor his deal with Mr. Paulson.

In 2008, the OpenSecrets blog that follows campaign contributions reported that Mr. Bachus was the single largest House recipient of campaign cash from Fannie and Freddie from 1989-2008. Only Senators Chris Dodd, Barack Obama, John Kerry and Utah Republican Robert Bennett received more than Mr. Bachus’s $103,300.

Mr. Bachus now says he’s a born again reformer, and most of his subcommittee chairmen are supporting his attempt to become Financial Services Chairman. But two years ago Mr. Bachus had to cede more power to these subcommittee chairmen as the price of retaining his role as Ranking Member. Minority Leader John Boehner had nearly denied Mr. Bachus that role in the current Congress after Mr. Bachus had performed so poorly during the 2008 debate over TARP. Perhaps these subcommittee chiefs welcome a weak Chairman.

The problem is that Republicans will need a strong leader to have any chance to reform Fan and Fred in the right way. The Realtors and homebuilder lobbies are once again gearing up to keep them in business in some form. Mr. Frank is a formidable foe who dominated former Chairman Michael Oxley during the last GOP Congress.

The reform gambit will be to keep the companies alive to subsidize housing in some form, perhaps with business restrictions that can be removed in later years when memories fade. Especially with the likes of Messrs. Neugebauer and Miller working behind the scenes, why should anyone believe Mr. Bachus can or will carry the reform flag?

We think the best choice to run Financial Services is California Republican Ed Royce, who was right all along about Fannie and Freddie. On other financial issues, too, Republicans need a spokesman who is going to do more than take dictation from Wall Street in return for campaign cash. Mr. Royce is more likely than other Republicans to speak up for taxpayers and free markets, not merely for financial businesses that claim to represent markets but are really speaking for their own self-interest.

We understand we may be dooming Mr. Royce with this praise. But if Republicans want to do better in the 112th Congress than they did the last time they squandered their majority, they need leaders who are genuine reformers, not spokesmen for crony capitalism.

This entry was posted on Tuesday, November 16th, 2010 at 12:00 am and is filed under Blog Posts.