Updated: 4:26 p.m.
House Republican leaders on Tuesday called on the Justice Department to appoint a special counsel to investigate Fannie Mae and Freddie Mac executives as part of its ongoing probe into the mortgage industry.
Todays financial crisis was triggered by a Washington culture that allowed executives at Fannie Mae, Freddie Mac and elsewhere to run amok throwing into peril not just the mortgage industry, but our nations economy. It is critical that those at the root of this crisis are investigated and held accountable, Minority Leader John Boehner (R-Ohio) said in a letter to Attorney General Michael Mukasey.
Congressional Republicans, along with GOP presidential hopeful John McCain (Ariz.), have been eager to pin blame on the two government-sponsored entities for sparking the financial meltdown, as well as House and Senate Democrats for failing to reform them to prevent the crisis.
Boehners letter argues that Republicans have warned for years about needed reforms at Fannie Mae and Freddie Mac but their efforts were thwarted by Democratic lawmakers with deep political ties to the groups.
Specifically, the Republicans letter asks whether the Justice Departments probe includes a look at sweetheart loans to Fannie Mae officials, accounting and executive compensation fraud at Fannie Mae, corrupt promotions within Fannie Mae, and the role of the Community Reinvestment Act in the financial sector meltdown.
Republicans also called on Mukasey to seriously consider the formation of an Enron-like task force or the appointment of a special counsel to spearhead the investigation.
Mukasey earlier this year rejected such a proposal, but given the more urgent need to restore public confidence in financial markets, we hope that you will reconsider your initial decision, the Republicans argued.
The letter is signed by Boehner, Judiciary Committee ranking member Lamar Smith (Texas), Oversight and Government Reform ranking member Tom Davis (Va.), Financial Services ranking member Spencer Bachus (Ala.), Transportation and Infrastructure ranking member John Mica (Fla.) and other GOP Members.
Meanwhile, Oversight and Government Reform Chairman Henry Waxman (D-Calif.) has announced plans to hold hearings on Fannie and Freddie on Nov. 20, during the scheduled lame-duck session following the Nov. 4 elections.
The hearing will examine the financial collapse of Fannie Mae and Freddie Mac, their takeover by the federal government, and their role in the ongoing financial crisis, according to the committees press release.
Financial Services Chairman Barney Frank (D-Mass.) said the letter boils down to Republicans demanding a criminal investigation of their failure to legislate.
Frank argued that Republicans were in charge of Congress from 1995 to 2006, and had ample opportunity to reform Fannie and Freddie. He added that it wasnt until Democrats took over in 2007 that a bill was adopted that made changes.
Claims that Democrats thwarted this legislation are false since no regulation came to the Senate floor during the years of Republican rule and only one bill passed the Republican House and that bill had majority Democratic support, Frank said. Their demand for a criminal investigation appears to be the political equivalent of the note left to the police by serial offenders: stop me before I do not legislate again.