Thursday, October 02, 2008

Barney Frank Exposed

America’s mostly Dem-dominated news organizations have done a very good job covering up Rep. Barney Frank’s consistent support for Freddie and Fannie’s high risk loan policies. They’ve also covered up his refusal to support reforms which could have prevented or at least lessened the current disaster which will stick taxpayers with a bill running into the hundreds of billions.

Because so much of media cover for him, Frank, one of those most responsible for the current financial mess, is able to stride from news conference to news conference saying such things as: “The private sector got us into this mess. The government has to get us out of it." Frank proclaims he's "working on a solution to the current problems."

Boston Globe columnist Jeff Jacoby will have none of Barney’s baloney. You’ll see that in his column which follows. It’s classic Jacoby: carefully researched, grounded in reason, tough-spoken but not overstated, and irrefutable.

Of everything I’ve read on the mortgage mess, Jacoby’s column is both the best exposure of Frank’s shameless falsehoods and posturing and the best news story or column account of how the current mortgage mess developed.

Read Jacoby’s column and let me know what you think. I’ll wait a few days and then send him a link to this post and your comments.

Here’s Jacoby - - -

“The private sector got us into this mess. The government has to get us out of it."

That's Barney Frank's story, and he's sticking to it. As the Massachusetts Democrat has explained it in recent days, the current financial crisis is the spawn of the free market run amok, with the political class guilty only of failing to rein the capitalists in. The Wall Street meltdown was caused by "bad decisions that were made by people in the private sector," Frank said; the country is in dire straits today "thanks to a conservative philosophy that says the market knows best."

And that philosophy goes "back to Ronald Reagan, when at his inauguration he said, 'Government is not the answer to our problems; government is the problem.' "

In fact, that isn't what Reagan said. His actual words were: "In this present crisis, government is not the solution to our problem; government is the problem." Were he president today, he would be saying much the same thing.

Because while the mortgage crisis convulsing Wall Street has its share of private-sector culprits -- many of whom have been learning lately just how pitiless the private sector’s discipline can be -- they weren't the ones who "got us into this mess."

Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods."

Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense.

"Lack of credit history should not be seen as a negative factor," the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as "valid income sources" to qualify for a mortgage. Failure to comply could mean a lawsuit.

As long as housing prices kept rising, the illusion that all this was good public policy could be sustained. But it didn't take a financial whiz to recognize that a day of reckoning would come. "What does it mean when Boston banks start making many more loans to minorities?" I asked in this space in 1995. "Most likely, that they are knowingly approving risky loans in order to get the feds and the activists off their backs . . . When the coming wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians, and regulators plans to take the credit?"

Frank doesn't. But his fingerprints are all over this fiasco. Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape.

Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis."

When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.

Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train.

If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.


Anonymous said...

House Democrats are concerned that it wasn't just Rep. Barney Frank who was having extracurricular relations with Fannie Mae and Freddie Mac executives, and that those relationships will come to light before the election a month from now.

According to a former Democrat staffer working for the House Committee on Financial Services, there were a number of stories involving Democrat members of the committee, as well as staffers for those Democrats, participating in retreats and getaway weekends paid for by Fan and Fred executives and lobbyists.

"Republicans were in the majority, and they weren't getting invited on these trips," says the former aide, who now works for an investment house in New York. "It's not that Republicans weren't enjoying themselves, but not the way my guys were. If I were a Democratic member in the mid to late 90s and dealt with financial services or housing issues, I'd be real nervous right now."

Frank has not hidden the fact that he was in a romantic relationship with a former executive for Fannie Mae. Frank now chairs the Financial Services Committee and was one of several longtime Democrat members who sought assurances from Speaker of the House Nancy Pelosi that no action would be taken on Fan or Fred investigations until after the election in November. "

Anonymous said...

The Anon @ 12.37 says Frank was in a "romantic relationship with a former executive for Fannie Mae." I hadn't heard that, but it doesn't surprise me at all. Frank is a moral and ethical sleazeball who would have been thrown out of congress if he had represented any distict in the nation outside of Massachusetts. Don't forget Gerry Studds, once a Bay State congressman, admitted to having carnal knowledge of underage male pages in the House of Representatives, yet his constituents reelected him twice. These jerks give homosexuality a bad name!
One can only hope and pray that the GOP is wise and gutsy enough to turn this whole situation around and sic it on the Democrats. The MSM continues to parrot the Democrat line that it's all Bush's fault and the free marketeers did it, etc, etc, wah, wah, wah. We can't depend on CBS, ABC, NBC, MSNBC, CNN or any of the rest of them to make this public, so it's got to be from RNC in the form of political ads. If we don't see them pretty soon, it'll be too late.
Tarheel Hawkeye

Anonymous said...

John, I think you might find this speech interesting:

I might want to live in Oklahoma.

Anonymous said...

Did Frank have a conflict of interest at Fannie Mae?posted at 8:30 pm on October 3, 2008 by Ed Morrissey
Send to a Friend | printer-friendly Now that Congress has passed the bailout emergency liquidity bill, we can expect that both Democrats and Republicans will attempt to define the catastrophic failures of Fannie Mae and Freddie Mac quickly and energetically. Democrats such as Barack Obama and Nancy Pelosi have already started calling it a failure of “deregulation” and greed, while Republicans have attacked Democrats like Chris Dodd and Barney Frank for blocking action to tighten regulatory control over the two giant lenders. Bill Sammon at Fox News reports on one potential argument for a conflict of interest that may have Frank on the defensive:
Unqualified home buyers were not the only ones who benefitted from Massachusetts Rep. Barney Frank’s efforts to deregulate Fannie Mae throughout the 1990s.
So did Frank’s partner, a Fannie Mae executive at the forefront of the agency’s push to relax lending restrictions.
Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank’s relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie. …
The two lived together in a Washington home until they broke up in 1998, a few months after Moses ended his seven-year tenure at Fannie Mae, where he was the assistant director of product initiatives. According to National Mortgage News, Moses “helped develop many of Fannie Mae’s affordable housing and home improvement lending programs.”
Critics say such programs led to the mortgage meltdown that prompted last month’s government takeover of Fannie Mae and its financial cousin, Freddie Mac. The giant firms are blamed for spreading bad mortgages throughout the private financial sector.
The big question here would be what Moses did as “assistant director for product initiatives”. “Product” in Fannie Mae parlance would be securities created by the lender that were sold to investors. While that position would not approve the purchase of bad loans, the creation of “product initiatives” would create pressure to purchase more and more loans to generate more and more sales of the securities. An assistant director would certainly have significant influence on the direction of Fannie Mae in this regard — especially one with a partner in Congress on the Financial Services Committee.