Saturday, February 27, 2010

What Does the Obama Job Chart Really Mean?


An old joke says that there are three kind of lies.

  1. Lies

  2. Damn lies

  3. Statistics
To that list, I would add data visualizations, especially when seemingly misused to purposely misinform the electorate.

By now, you've likely seen the chart, courtesy of Barak Obama's Organizing for America (OFA), showing the miraculous reduction in job losses after President Obama took office and the Congress passed the $787 billion Stimulus plan.


This visually-striking graphic is such fantastic news that Organizing for American even made a video highlighting the chart.




Something about this jobs chart bothers me. As of February, 2010, unemployment is still stubbornly high. So, how can it be that the Obama Administration seemingly eliminated unemployment? From the chart, it seems that the President halted and reversed unemployment to roughly the same level as December, 2007. I showed this chart to a number of engineering and accounting friends--people accustomed to working with charts and graphs--and they came to similar conclusions based solely on the chart. However, it is not true.

This chart seems designed to purposely deceive. How? The chart shows the monthly change in unemployment, not total unemployment. Of course, the original chart does not indicate this, but I've been able to reproduce the chart using source data from the Bureau of Labor Statistics.



How is this deceptive? Allow me to illustrate with an example. A man goes out on the town with his girlfriend to celebrate her birthday with dinner and a movie. Over the evening, he makes a number of purchases as shown in the table.

Graphically, the evening's spending per transaction looks like the following chart. At first glance, it appears that this lucky man had a great night on the town with his favorite girl and even turned a small profit. From the chart, one might assume that the man spent some money but then started making money after dinner and ended the evening with more money in his wallet than when he started!

How is this possible? It's not. It's a bit of graphical and presentation trickery. The chart shows the change in the data, not the present state.

The previous table and chart shows the amount of spending per transaction. However, the real effect on the man's wallet is the cumulative spending, as illustrated in the following table and chart.


While the spending per transaction, or the change in spending, is dramatic during the middle of the evening, it tapers off at the end. In fact, because the man found a $5 bill, the evening apparently ends on a high note! However, the cumulative, out-of-pocket expenses for the evening totals nearly $300. In one presentation of the data, the man apparently ends the evening with $5 in his wallet when in reality, he is down $300.

How does apply to Organizing for America's jobs chart?

The original chart shows the number of jobs gained or lost per month, or the monthly change in the jobs number. However, if the unemployment rate remains unchanged at 5%, 50%, or even 100%, the monthly change in unemployment is zero. Actual unemployment is not zero, just the monthly change in unemployment. See the difference? The following chart presents the cumulative job loss over the same time period, using the same data, and more clearly shows that unemployment increased over time and has not returned to December 2007 levels. While it is good news that monthly job losses have slowed (what the Organizing for America chart actually shows), the unemployment situation has not miraculously disappeared (what the Organizing for American chart seems to imply).


There are many ways to distort the visual presentation to reflect a particular political view. For example, here is the same data presented in yet a different manner. In this example, the chart compares cumulative unemployment during the final year of President George W. Bush's presidency and the first year of President Barak Obama's presidency. While the original graph seems to indicate that unemployment improved after President Obama took office, in reality the job market continued hemorrhaging!

Here is a chart of the showing the total number of officially unemployed based on Bureau of Labor Statistics data. The number is even greater than the cumulative chart before as there were over 7.5 million unemployed when the crisis deepened.



To put this into historical perspective, how does the current unemployment trough compare to those from prior recessions, measured in months from the beginning of the recession? The current trough is deeper and it appears will last longer than prior recessions.

The original Organizing for America chart appears to be purposely deceptive. It falsely appears to indicate that the Obama Administration has completely reversed unemployment when clearly, this is not the case. With the nation already split on so many issues, the electorate needs to operate from a truthful set of data without willful distortions. Sure, there can be multiple interpretations of the same data, but those interpretations should clearly indicate what data is presented.

See also ...

Provides previous examples how Organizing for America attempted to distort open and honest debate

Sources:

Bureau of Labor Statistics

Spreadsheets and Chart Data

  • All spreadsheets and charts used in this blog posting
    http://www.editgrid.com/user/soquel_by_the_creek/Obama_Admin_Job_Chart
  • BLS 1-month unemployment data
    1-Month Net Change
    Series Id: CES0000000001

    Seasonally Adjusted
    Super Sector: Total nonfarm
    Industry: Total nonfarm
    NAICS Code: -
    Data Type: ALL EMPLOYEES, THOUSANDS


    Year,Jan,Feb,Mar,Apr,May,Jun,Jul,Aug,Sep,Oct,Nov,Dec,Annual,
    2000,249,121,472,286,225,-46,163,3,122,-11,231,138,
    2001,-16,61,-30,-281,-44,-128,-125,-160,-244,-325,-292,-178,
    2002,-132,-147,-24,-85,-7,45,-97,-16,-55,126,8,-156,
    2003,83,-158,-212,-49,-6,-2,25,-42,103,203,18,124,
    2004,150,43,338,250,310,81,47,121,160,351,64,132,
    2005,136,240,142,360,169,246,369,195,63,84,334,158,
    2006,262,326,304,174,31,69,232,141,100,43,201,177,
    2007,194,104,239,92,149,55,-20,-71,52,86,128,70,
    2008,-10,-50,-33,-149,-231,-193,-210,-334,-458,-554,-728,-673,
    2009,-779,-726,-753,-582,-347,-504,-344,-211,-225,-224,64,-150(P),
    2010,-20(P), , , , , , , , , , , ,
  • BLS Unemployment Data
    Series Id: LNS13000000

    Seasonally Adjusted
    Series title: (Seas)
    Unemployment Level
    Labor force status: Unemployed
    Type of data: Number
    in thousands
    Age: 16 years and over


    Year,Jan,Feb,Mar,Apr,May,Jun,Jul,Aug,Sep,Oct,Nov,Dec,Annual,
    2000,5708,5858,5733,5481,5758,5651,5747,5853,5625,5534,5639,5634,
    2001,6023,6089,6141,6271,6226,6484,6583,7042,7142,7694,8003,8258,
    2002,8182,8215,8304,8599,8399,8393,8390,8304,8251,8307,8520,8640,
    2003,8520,8618,8588,8842,8957,9266,9011,8896,8921,8732,8576,8317,
    2004,8370,8167,8491,8170,8212,8286,8136,7990,7927,8061,7932,7934,
    2005,7784,7980,7737,7672,7651,7524,7406,7345,7553,7453,7566,7279,
    2006,7059,7185,7075,7122,6977,6998,7154,7097,6853,6728,6883,6784,
    2007,7085,6898,6725,6845,6765,6966,7113,7096,7200,7273,7284,7696,
    2008,7628,7435,7793,7631,8397,8560,8895,9509,9569,10172,10617,11400,
    2009,11919,12714,13310,13816,14518,14721,14534,14993,15159,15612,15340,15267,
    2010,14837, , , , , , , , , , , ,

Thursday, February 25, 2010

California Treasurer Lockyer Scolds Fellow Democrats on Unsustainable Pensions and Their Inability to Fix the Problem

I missed the following video when it first became available in October 2009. In it, often-outspoken California State Treasurer Bill Lockyer is addressing members of the California state Legislature. From his comments, one might naturally assume that this is yet another broadside attack against Democrats by a partisan Republican. However, Bill Lockyer is a career Democrat politician since 1973 and has also served as California's Attorney General and as President Pro Tempore of the California State Senate.


Finally, some real honesty in government. God bless you, Bill Lockyer!

Here are a few noteable quotables.

I'm sorry, but two-thirds of the bills that I see come out of the Assembly, if they never saw the light of day, God bless it.
...
Just stop it! I mean they're junk! And they're consuming all your staff time with junk!
...
Nancy Reagan's right. Just say no.
...
It's impossible for this Legislature to reform the pension system and if we don't, we bankrupt the state.
...
And I don't think anybody can do it here because of who elected you. You're just captive of the current environment. I don't see any way out. [QUESTION: Who is the "who elected you"? Is it public-employee unions like the SEIU, teacher's union, and the prison guard union?]
...
Democrats need to call out other Democrats on it. That's two-thirds of the problem (Democrats represent nearly two-thirds of the Legislature).
...
In an era when we aren't going to have tax increases, give it up. Figure out how to be more efficient about spending the money we've got.
...
And the Republicans can help you do that if they'll get off the philosophical "can't" about stuff and help you make things more efficient. They actually, culturally know more, and occupationally know more, about efficiencies than Democrats typically do.


Some other links.

Video: California treasurer tells legislature to get a clue
http://hotair.com/archives/2009/10/24/video-california-treasurer-tells-legislature-to-get-a-clue/

See also ...

Even Liberal Democrat Willie Brown Sees the Problem!
soquelbythecreek.blogspot.com/2010/03/even-liberal-democrat-willie-brown-sees.html

Is He Asking About Toyota or the U.S. Government?

Druing the recent Congressional hearings with Toyota executives about reported safety issues, Rep. Elijah Cummings asked the following questions. In light of corruption, overspending, budget deficits, poor management, etc., etc., couldn't these same questions be asked of the Unites States government itself? At least Toyota had an excellent reputation going into this fiasco.

Congressman Elijah Cummings (Democrat, Maryland):

Time after time, there are pronounements that problems are being addressed. Over and over again, they seem that they're not being addressed.
...
But that trust is hard to ... re-establish when they see over and over again these kinds of situations and they say, "Well, why should we believe that things are going to get better?"
...
How do you say to your customers (the electorate)--the people who take their hard-earned dollars, in a tough economic time--and spend them on a Toyota vehicle (send them to Washington as taxes), how do you say to them, "We can trust you" ... when it seems as if there as if there is no end to this series of ... promises that seem to fall short ...?


Perhaps if our elected officials could answer these questions, we, the electorate would have a better impression of Congress and have more trust in our leaders.

Tuesday, February 23, 2010

"The Rich Don't Pay Taxes" Lie: Purposely Deceptive, Or Backed Up by Data?

The Center on Budget and Public Priorities (CBPP) recently released a report entitled ...

Tax Rate for Richest 400 Taxpayers Plummeted in Recent Decades, Even as Their Pre-Tax Incomes Skyrocketed
www.cbpp.org/cms/index.cfm?fa=view&id=3090#_ftn1

From the title alone, one can guess the conclusion. If not, here is an excerpt.



The top 400 households paid 16.6 percent of their income in federal individual income taxes in 2007, down from 30 percent in 1995. This decline works out to a tax cut of $46 million per filer in 2007, or a total of $18 billion in tax cuts for these households per year.


From this report, certain politicians will continue their lies that "the rich don't pay their fair share of taxes."

Let's look at the data with a bit more intellectual honesty.
  • The Top 400 taxpayers represent less than 0.00035% of the total number of taxpayers for the years mentioned, or about three taxpayers out of a million. Other than through political contributions, this group has little power at the ballot box to prevent runaway government spending.
  • Indeed, according to the data, the effective tax rate for these Top 400 taxpayers has decreased from a high of 29.93% in 1995 to 16.62% in 2007. Much of this is due to the Bush tax cuts and the decreased tax rates on capital gains and qualified distributions. The effective tax rate on the bottom 50% of taxpayers also trended downward. The CBPP chart above appears more dramatic because the Y-axis origin visually starts at 15%, which happens to be above the average tax rate. The average tax rate does have a slight downward trend over this period.


  • However, the effective tax rate for all taxpayers in 2007 was 12.68%, or less than the 16.62% rate paid by the Top 400. However, as reported by CBPP, the Top 400 did indeed pay less as a percentage (but not in absolute dollars) than other groups within the top 10% of taxpayers, as shown in Tax Foundation report (see "Average Tax Rate" in Table 1 and all of Table 6).
  • The average federal income tax bill in 2007 was just over $7,900 per taxpayer. The average income tax for the Top 400 was over $57,311,000 ($57.3M) per taxpayer, or 7,200 TIMES the average. The average tax bill for the bottom 50% of taxpayers was just $460. At that price, I certainly hope that the "rich" receive a better government than the rest of us for all that money.
  • The Top 400 taxpayers as a group in 2007, all 400 of them, paid nearly $23 billion in taxes. Meanwhile, the bottom 50% of taxpayers, all 70,535,485 of them, paid $32 billion. Think of it, 0.0028% of taxpayers paid an amount approaching that of half of the taxpayer population. At the ballot box on spending issues, this is 400 votes versus 70+ million. Guess who wins.
Congress can raise taxes because it can persuade a sizeable fraction of the populace that somebody else will pay.
-- Milton Friedman
A government with a policy to rob Peter to pay Paul can be assured of the support of Paul.
-- George Bernard Shaw

  • While the effect tax rate for the Top 400 has dropped from a high of 29.93% to 16.62%, the total income tax for Top 400 has increased 214% measured in inflation-adjusted dollars (or 365% without adjusting for inflation). Image that! Lower taxes might actually result in higher revenues. Over that same time period, federal spending doubled (non-inflation adjusted).
  • The Top 400 have consistently paid more in taxes than their fraction of the total income. In 2007, the Top 400 earned 1.59% of all income but paid 2.05% of all taxes.
  • Despite representing less than 0.00035% of the taxpayer population and despite a descrease in their effective tax rate, the Top 400 pay an increasing percentage of the total tax bill, approaching the amount and percentage paid by the bottom 50%.

  • Mathemetically, the Top 400 group is different than the others. It is an extremely small population, less than 0.00035%, meaning that high incomes from a few individuals will greatly skew the data. Similarly, whereas other taxpayer groups, such as the bottom 50%, fit within a defined income range, the income limit for the Top 400 is infinite. Again, extremely large incomes or losses from a few individuals will affect the results for the Top 400.
Multi-billionaire friends Bill Gates and Warren Buffet walk into a bar. A man at the bar yells out, "Bartender, I'd like to buy everyone a round of drinks!" After pouring the drinks and collecting the money, the bartender asked the man why he was so generous. The man replied, "Didn't you know? Now that Bill Gates and Warren Buffet are here, our average income is over a million dollars!"
Reports like the one from CBPP may lead politicians astray. They may buy into one or more of the following fallacies.
Fallacy #1: Money is better spent and benefits the society more when spent by the government instead of by taxpayers.

This is perhaps the greatest fallacy of all. Certainly, multi-millionaires or multi-billionaires may squander some of their money on foolhardy exploits. However, the government has not proven to be a virtuous spender either. Do you remember the infamous Bridge to Nowhere or the John Murtha Airport? There are countless other examples. At least the Top 400 taxpayers demonstrated the ability to generate (or hold onto) great wealth. Do we honestly believe that their money in the hands of government will benefit society or the economy more than if it is kept in the hands of the taxpayer?

Fallacy #2: Increasing the top marginal tax rates will increase revenues.

Increasing the top marginal tax rate may indeed increase government tax revenues -- temporarily. All intelligent beings move away from pain. Increasing the pain of taxation will cause high wager earners to take appropriate actions. At the state level, this may mean estabilishing residency in lower-tax states or moving assets overseas to tax heavens. At a minimum, it means employing the best accountants and lawyers to avoid taxation, sometimes by engaging in economically-inefficient activities just to generate tax benefits. Remember, for the Top 400, each 0.1% difference in their tax rate represents over $57,300. Wouldn't you attempt to avoid taxes as much as legally possible?

Fallacy #3: We need a special tax on these Top 400 taxpayers.

We've already tried a similar strategy in the past with the Alternative Minimum Tax (AMT). The AMT was originally created by Congress to target 155 taxpayers (yes, only 155 taxpayers) that "paid less than their fair share" while fully complying with all U.S. tax laws. This ill-conceived piece of -- er, well, let's call it legislation -- was never indexed for inflation and has since affected millions of middle-class taxpayers. The Stimulus bill (ARRA) provided one year's relief for most but it expired at the end of 2009.

Some readers may think, "Well, he must be one of the Top 400 taxpayers." To that I say, "I WISH!!!" I am not a fan of the so-called "progressive" income tax as I believe it to be anti-democratic and encourage excess government spending. Our elections are based on the principle of "one person, one vote" and not "one dollar, one vote". Politicians have a built-in incentive to increase spending in order to win votes. Those that pay the most taxes to fund government spending have the least say at the ballot box.

See also ...

Is Warren Buffett Paying His "Fair Share"?

Who Pays Their "Fair Share" in California?


The Oppressive Progressive Income Tax: California Editionsoquelbythecreek.blogspot.com/2009/07/oppressive-progressive-income-tax.html

Not All Money Is Created Equal
www.politicalmathblog.com/?p=270

Taxation Charts
perotcharts.com/category/charts/taxation-charts

Tax Foundation Data
www.taxfoundation.org/taxdata

Source Data:
[1] "The 400 Individual Income Tax Returns Reporting the Highest Adjusted Gross Incomes Each Year, 1992-2007," Internal Revenue Service
www.irs.gov/pub/irs-soi/07intop400.pdf

[2] "Summary of Latest Federal Individual Income Tax Data," Tax Foundation. See Table 1 and Table 4.
www.taxfoundation.org/news/show/250.html

Spreadsheet:

http://www.editgrid.com/explore/user/soquel_by_the_creek/Top_400_Taxpayer_Comparison_Data

Saturday, February 20, 2010

John F. Kennedy's Words Applied to the Modern World

During a recent speech at the CPAC conference, conservative columnist George Will nicely applied President John F. Kennedy's wise words to our current situation and the future success of the United States.

The American people understand ... when Jack Kennedy said 'Ask not what your country can do for you but what you can do for your country.' One thing that you can do for your country is to reserve a spacious portion of your life for which your country is not not responsible!

Words by which we should all live! Learn how be free of government and government resources.

Here is a nine minute summary of George Will's speech.

Here is a link to the full 30 minute version via C-SPAN.

Thursday, February 4, 2010

Fannie, Freddie, and You as the Secret Santa

[Updated 20-SEPT-2010]
Perhaps you missed this big news during the holidays while you were enjoying time with friends and family but the United States government committed a huge sum of taxpayer money without Congressional approval. For some reason, it has not been widely reported in the media, which I personally find strange, interesting, and a tad bit frightening.

Quietly, late on Christmas Eve 2009, during the Christmas-New Years news lull, the Obama Administration pledged UNLIMITED taxpayer-financed assistance to bankrupt, government-run Fannie Mae and Freddie Mac. This allowed the Administration to exceed the $400 billion loss limit without seeking Congressional approval (which in itself may be un-Constitutional). Some people call this "nationalization," especially when referring to Banana Republics.

WASHINGTON POST (25-DEC-2009): U.S. promises unlimited financial assistance to Fannie Mae, Freddie Mac
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/24/AR2009122401588.html
We do not know the final tally for this madness. It will likely exceed the cost of the following programs, measured in inflation-adjusted "today" dollars.
So how did we get here? Here is some interesting historical basis, courtesy of the New York Times archives. Travel back to September 1999, nine years before the crisis. Remember, we and the government were flush with money. The Dot.Com bubble was in full swing and we were all going to get rich selling dog food over the Internet using our sock-puppet spokesmodel. Government was awash is tax dollars from low unemployment and capital gains on highly-appreciated bubble stocks. We were running a SURPLUS! The money would never end!

NEW YORK TIMES (29-SEPT-1999): Fannie Mae Eases Credit To Aid Mortgage Lendinghttp://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html
WASHINGTON, Sept. 29, 1999 -- In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
So far, well intentioned but not without economic risk, especially knowing what happened during the 1980's Savings and Loan Crisis (but apparently we do not learn from our mistakes). Read on ...
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
Nearly a decade before the disaster, the potential risk was there for everybody to see--everyone but Congress.

Now some will argue, "Well, that's just Fannie Mae. Lots of banks made bad loans." True, but you also need to understand how quasi-governmental Fannie Mae operates, as described in the article.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
And the banks did exactly what the government, via Fannie Mae, wanted. Banks offered more mortages to "people with less-than-stellar credit." Fannie Mae was a willing buyer for just about any loan, regardless of quality. The market reached its ultimate madness with 100% loan-to-value NINJA loans (No Income, No Job or Assets). I don't think the banks needed much pushing by outsiders, although that did occur in some cases. Banks and mortgage brokers made money on fees selling these loans to a quasi-governmental entity willing to buy this junk. Who turns down free money if the government thinks it's a good idea?

Along about 2003, five years before the meltdown, various Enron-like accounting irregularities were discovered at Fannie Mae and its cousin, Freddie Mac -- both under Congressional oversight. This prompted a Bush Administration call for better controls and oversight.

NEW YORK TIMES (10-SEPT-2003): New Agency Proposed to Oversee Freddie Mac and Fannie Maehttp://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html
WASHINGTON, Sept. 10, 2003 -- The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
...
The proposal is the opening act in one of the biggest and most significant lobbying battles of the congressional session.
...
"The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises," Mr. Oxley (of Sarbanes-Oxley fame) said at the hearing. "We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight," the independent agency that now regulates the companies.

"These irregularities, which have been going on for several years, should have been detected earlier by the regulator," he added.

The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.
And what was the debate in regard to the proposals? Here are some now-infamous quotes from Congressman Frank of Massachusetts, who continues to hold office.

House Financial Services Committee hearing, Sept. 10, 2003 (Congressman Barney Frank):
The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios ....
House Financial Services Committee hearing, Sept. 25, 2003 (Congressman Barney Frank):
I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing ....
I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.
It's always easier to gamble when it's other people's money. Oh, and it's always a good idea to disregard the advice of professional accountants.

My favorite quote, in hindsight, is from Senator Hagel (Nebraska), a critic of Fannie and Freddie. Was he talking about fat cat Wall Street bankers here? No, this was for then quasi-governmental entities under Congressional review, now fully owned by the government.
Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we
reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard.

In a June 28, 2004 letter, 58 members of Congress--many from the far-left Congressional Progressive Caucus--admonished President Bush ...
We have been concerned that the Administration's legislative proposal regarding the GSEs would weaken affordable housing perfomance by the GSEs, by emphasizing only safety and soundness. While the GSEs' affordable housing mission is not in any way incompatible with their safety and soundness, an exclusive focus on safety and soundness is likely to come, in practice, at the expense of affordable housing.
Sigh! In hindsight, there was apparently too much emphasis by some in Congress on borrowers that were incapable of repayment.

In 2005, three years before the crisis, Senator Hagel went on to author S.190: Federal Housing Enterprise Regulatory Reform Act of 2005 which sought to regulate the likes of Fannie Mae and Freddie Mac. Unfortunately, it apparently "died in committee."

In May 2006, two years before the Fannie's and Freddie's bankruptcy, seizure by the federal government, and ultimate bailout by the U.S. taxpayer, twenty Senators sent a letter to then-Majority Leader Bill Frist pledging their support to help bring S.190 to the Senate floor for a vote.
We are concerned that if effective regulatory reform legislation for the housing-finance government sponsored enterprises (GSEs) is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole. 
...
They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?
...
Congress has the opportunity to recommit itself to the housing mission of the GSEs while at the same time making sure the GSEs operate in a manner that does not expose our financial system, or taxpayers, to unnecessary risk.
...
More importantly, Congress must ensure that the American taxpayer is protected in the event either GSE should fail.
So what did Congress do? Apparently nothing. The bill was never voted upon, the legislation never took effect, and now we, the Taxpayers, are out a few hundred billion dollars. Oops!

SIDENOTE: In an ultimately ironic moment, Senate Majority Leader Frist, to who the letter was addressed said, "Congress should be forward thinking in policies we set, instead of waiting until catastrophe looms."

On July 14, 2008, two months before Fannie's and Freddie's crash, Congressman Frank then said:
I don't think that Fannie and Freddie are financially insolvent. I don't think they need large bailouts.
Two short months later, on 8-SEPT-2008, the United States government, under direction of Secretary of the Treasury, Henry Paulson, seized mortage giants Fannie Mae and Freddie Mac. At the time, the government pledged up to $200 billion in support. Now, that pledge is for UNLIMITED support.
Fortunately, at least a few Washington leaders are not asleep at the switch. Some of these were among the 20 that sent the May, 2006 letter. Despite the article's title, the list of concerned leaders includes right-wing Republican Senator Jim DeMint and left-wing Democrat Congressman Dennis Kucinich. You know something is up when both ends of the political spectrum cry "FOUL!"

Reuters (19-JAN-2009): Six Republican senators take aim at Fannie, Freddiehttp://news.yahoo.com/s/nm/20100119/pl_nm/us_usa_senators_fannie

Yet, I find it interesting that the media is not covering this story. Why not?

The Administration complains loudly about Wall Street bonuses to failed firms (rightly so) but fails to issue a peep about millions paid to government-run Fannie and Freddie executives. Why?

Congress created the Financial Crisis Inquiry Commission to discover the root causes of the crisis. Why doesn't the government investigate the government's role?

See also ...

Veronique de Rugy Explains Fannie and Freddie's Role in the Housing Crisis
A History of the Housing Crisis