On The O'Reilly Factor, Karl Rove falsely claimed that Rep. Barney Frank "was one of the more prominent opponents of [housing] reform in 2004 and 2005." In fact, Frank supported efforts to enhance regulatory oversight on mortgage brokers Fannie Mae and Freddie Mac in 2005, and he has long championed policies that emphasize low-income home rentals as opposed to homeownership.
During the February 18 edition of Fox News' The O'Reilly Factor, Fox News contributor Karl Rove falsely asserted that Rep. Barney Frank (D-MA) "was one of the more prominent opponents of [housing] reform in 2004 and 2005." In fact, Frank supported efforts to enhance regulatory oversight on mortgage brokers Fannie Mae and Freddie Mac in 2005, and he has long championed policies that emphasize low-income home rentals as opposed to homeownership.
As Media Matters for America has documented, Frank has supported efforts to strengthen regulatory oversight on Fannie and Freddie. In 2005, Frank, then the ranking Democrat on the House Financial Services Committee, worked with then-committee chairman Michael Oxley (R-OH) on the Federal Housing Finance Reform Act of 2005, which would have established the Federal Housing Finance Agency (FHFA) to replace the Office of Federal Housing Enterprise Oversight (OFHEO) as overseer of the activities of Fannie Mae and Freddie Mac. After voting for the bill in committee, Frank voted against final passage of the bill on the House floor, stating that he was doing so because an amendment to the bill on the House floor imposed restrictions on the kinds of nonprofit organizations that could receive funding under the bill.
Moreover, it was only after Democrats took control of Congress that it passed legislation strengthening oversight over Fannie and Freddie. In early 2007, as the new chairman of the House Financial Services Committee, Frank sponsored H.R. 1427, a bill to create the FHFA, granting that agency "general supervisory and regulatory authority over" Fannie Mae and Freddie Mac, and directing it to reform the companies' business practices and regulate their exposure to credit and market risk. The FHFA was eventually created after Congress incorporated provisions that House Speaker Nancy Pelosi (D-CA) said were "similar" to those of H.R. 1427 into the Housing and Economic Recovery Act of 2008, which the president signed into law on July 30, 2008.
Moreover, as The New York Times reported in a December 20, 2008, article, the mortgage crisis "is partly one of Mr. Bush's own making, according to a review of his tenure that included interviews with dozens of current and former administration officials." The Times reported that Bush "insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending":
But for much of Mr. Bush's tenure, government statistics show, incomes for most families remained relatively stagnant while housing prices skyrocketed. That put homeownership increasingly out of reach for first-time buyers like Mr. West.
So Mr. Bush had to, in his words, "use the mighty muscle of the federal government" to meet his goal. He proposed affordable housing tax incentives. He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.
Concerned that down payments were a barrier, Mr. Bush persuaded Congress to spend up to $200 million a year to help first-time buyers with down payments and closing costs.
And he pushed to allow first-time buyers to qualify for federally insured mortgages with no money down. Republican Congressional leaders and some housing advocates balked, arguing that homeowners with no stake in their investments would be more prone to walk away, as Mr. West did. Many economic experts, including some in the White House, now share that view.
In a profile of Frank for the January 12 edition of The New Yorker, staff writer Jeffrey Toobin quoted Frank making the same point about the Bush administration:
Frank went on, "In 2004, it was Bush who started to push Fannie and Freddie into subprime mortgages, because they were boasting about how they were expanding homeownership for low-income people. And I said at the time, 'Hey -- (a) this is going to jeopardize their profitability, but (b) it's going to put people in homes they can't afford, and they're gonna lose them.' " (In a recent op-ed piece in the Wall Street Journal, Lawrence B. Lindsey, a former economic adviser to President Bush, wrote that Frank "is the only politician I know who has argued that we needed tighter rules that intentionally produce fewer homeowners and more renters.") Frank recalled with disdain a Bush Administration proposal to allow time limits on rental vouchers for poor people. "They said, 'Well, don't you agree that we should limit the amount of time people have a voucher?' I said, 'Yes, if you limit the amount of time they can be poor -- "I'm sorry, you can only be poor for four years." ' "
Indeed, as Lindsey noted, Frank has long stressed the need for a government focus on affordable rental housing over home ownership. As Media Matters noted, during a February 13, 2002, hearing on the Housing and Urban Development budget for fiscal year 2003 (accessed from the Nexis database), Frank stated:
FRANK: [H]ome ownership is a very good thing, and I want us to encourage it. It is a grave error to make that the central focus of housing policy from the standpoint of the government. Of course, we do have a significant aid to home ownership in the tax code. The ownership of housing is very much advantaged by taxes, by the tax code. You get a significant advantage. There was an article by Ken Hardie (ph) in The Washington Post documenting to what extent that exists. And I am in favor of trying to help lower income people get the advantages of home ownership, although as we should note, if you are taking the standard deduction, the tax advantages of home ownership are not nearly so great for you.
But almost by definition, the large majority of poor people are in rental housing, and we will never alleviate the terrible housing crisis that affects so many people in this country if we do not do a much better job of building decent, affordable rental housing.
FRANK: So home ownership is a useful thing and I want to work with it, but until we begin to take some of the resources of this very wealthy country and dedicate them to adequate production of rental housing as part of an overall mix, we are going to continue to condemn hard- working people to homelessness in some cases, because there are working people who cannot afford anyplace at all, and even more to inadequate housing and to a situation where they have to pay far too much of their income for the housing they have, and have too little left.
From the February 18 edition of Fox News' The O'Reilly Factor:
O'REILLY: Joining us now from Washington with reaction, Fox News analyst Karl Rove. Before we get to the specifics on the auto company and the mortgages, you left the Bush administration 15 months after the -- before the president did. While you were there at the end, was there any inkling, did you have any idea that the underpinnings of the economy were eroding so seriously?
ROVE: Yeah. Well, there was concern about it, particularly in the housing area. We were briefed as far back as 2001 about the problems with Fannie and Freddie. In fact, we moved aggressively in 2004 to regulate Fannie and Freddie -- actually got a bill through the Senate Banking and Finance Committee only to have it filibustered by Chris Dodd.
But I will say this: The -- Fannie and Freddie in particularly accelerated their imprudent behavior after they -- we attempted to regulate them. They bought almost as much mortgage debt from 2005 till 2008 as they bought from -- in the first 30-some odd years that they were in existence, from 1938 to the year 2000. And it was really a -- they went on a binge.
O'REILLY: How responsible is Barney Frank for that?
ROVE: I think those in Congress who attacked the reforms -- and Barney Frank was one of the more prominent opponents of reform in 2004 and 2005. In fact, 2003, when we sent our first members of the Cabinet up to talk about this on Capitol Hill, Barney Frank had a news -- had a hearing in which they basically beat up everybody we sent up there in pretty vociferous language. This is the famous hearing where one of the Democrat members literally says that he is pissed off that the administration's even raising this issue.
O'REILLY: All right. How responsible is President Bush for not making this a central issue?