Fox News' Sammon ignores contrary evidence in suggesting that Rep. Frank allowed personal relationship to affect his oversight of Fannie Mae

››› ››› RAPHAEL SCHWEBER-KOREN

On The O'Reilly Factor and in a FoxNews.com article, Bill Sammon suggested that Rep. Barney Frank allowed his relationship in the 1990s with Herb Moses, a Fannie Mae official at the time, to improperly influence his conduct as a member of the House Financial Services Committee. However, in his article, Sammon cited only an anonymous Republican congressional staffer and a member of the conservative Media Research Center. Sammon also misrepresented Frank's record by reporting that Frank "spent years blocking GOP lawmakers from imposing tougher regulations" on Fannie Mae and Freddie Mac without noting that during the period in question, Frank supported legislation to increase regulation of Fannie Mae and create a government regulatory agency that would oversee some aspects of the company.

On the October 6 edition of Fox News' The O'Reilly Factor, deputy Washington managing editor Bill Sammon suggested that Rep. Barney Frank (D-MA) allowed his relationship in the 1990s with Herb Moses, a Fannie Mae official at the time, to improperly influence his conduct as a member of the House Financial Services Committee, which was responsible for oversight of Fannie Mae. Sammon was echoing and amplifying claims he had made in an October 3 article on FoxNews.com, in which he asserted that "[u]nqualified 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." In his article, however, Sammon cited only two sources: an anonymous Republican congressional staffer and Dan Gainor, who, Sammon did not note, is part of the conservative Media Research Center. Moreover, Sammon misrepresented Frank's record by reporting in his article that Frank "spent years blocking GOP lawmakers from imposing tougher regulations" on Fannie Mae and Freddie Mac. While Sammon pointed to an example of Frank opposing a regulation on Fannie Mae, Sammon did not note in his article or on The O'Reilly Factor that Frank supported bills to increase regulation of Fannie Mae and create a government regulatory agency that would supervise and have authority over some aspects of the company.

In his FoxNews.com article, Sammon wrote: "Both Frank and Moses assured the Wall Street Journal in 1992 that they took pains to avoid any conflicts of interest. Critics, however, remain skeptical." Sammon offered two "critics": Gainor, identified as "vice president of the Business & Media Institute" and "a T. Boone Pickens Fellow," and an unnamed "top GOP House aide" who "agreed" with Gainor. In fact, the Business and Media Institute is a division of the conservative Media Research Center, and the full name of Gainor's fellowship is the "The Boone Pickens Free Market Fellow for the Media Research Center." Additionally, Sammon did not explain why he granted anonymity to a Republican aide to criticize Frank, a Democrat. Moreover, while Sammon reported that these critics were "skeptical" of Frank and Moses' statement that "they took pains to avoid any conflicts of interest," Sammon did not quote either source citing any instance of alleged impropriety on Frank's part.

Beyond these "critics," Sammon wrote in his article that "[a]lthough Frank now blames Republicans for the failure of Fannie and Freddie, he spent years blocking GOP lawmakers from imposing tougher regulations on the mortgage giants." Sammon continued: "In 1991, the year Moses was hired by Fannie, the Boston Globe reported that Frank pushed the agency to loosen regulations on mortgages for two- and three-family homes, even though they were defaulting at twice and five times the rate of single homes, respectively." Sammon made the link more explicitly during his appearance on The O'Reilly Factor:

BILL O'REILLY (host): Did Frank basically do anything wrong? Could -- is there a conflict of interest or can -- is there a trail back that says, "Barney Frank did this wrong"? [...] But did he do anything wrong?

SAMMON: I don't think he did anything technically illegal. You can quarrel with his judgment in blocking people from imposing regulations on Fannie and Freddie. For example, there was one example where they wanted to put in a regulation that would tighten up mortgage rules, and Barney Frank was arguing that they ought to be loosened for, for example, two-family homes and three-family homes, which had --

However, Sammon provided no explanation for how Frank's "push[ing]" Fannie Mae to do something it was reportedly resisting demonstrated favoritism toward Fannie Mae or bore any relation to his relationship to Moses. Indeed, the November 22, 1991, Globe article that Sammon cited does not mention Moses at all. Nor did Sammon note that the Globe reported that Frank was not the only public official asking Fannie Mae to cover two- and three-family loans. In the second paragraph of the article, the Globe reported that "representatives of [then-Boston] Mayor [Raymond] Flynn and [then] Rep. Joseph P. Kennedy 2d (D-Mass.)" were involved in negotiations with Fannie over covering such loans, while mentioning Frank later in the article as also having been involved in discussions.

From the Globe article (retrieved from the Nexis database):

The federally chartered mortgage company Fannie Mae yesterday agreed to modify its rules restricting purchases of two-family and three-decker homes -- rules that housing advocates contend unfairly exclude low- and moderate-income families from buying homes in Boston.

After a nearly three-hour meeting with members of the Home Buyers' Union, a local advocacy group, and representatives of Mayor Flynn and Rep. Joseph P. Kennedy 2d (D-Mass.), Fannie Mae officials agreed to substantially alter rules to allow what one termed "hundreds if not thousands" of buyers a chance to own two-family homes and three-deckers.

The two sides failed to agree on exact percentages of debt that buyers will be allowed to carry, but Fannie Mae officials agreed to return to the bargaining table in two weeks, according to members of the union.

Earlier yesterday the officials, trailed by housing advocates and representatives of elected officials, toured a two-family home on Dorchester's Downer Avenue.

The multi-billion dollar Federal National Mortgage Association buys mortgages made by area banks so as to free up capital to allow banks to make more loans. But in recent years, Fannie Mae has not fully counted rental income from multi-family homes against the buyers' debt burden -- thereby refusing to purchase mortgages made to all but high-income buyers.

Fannie Mae national spokesman David Jeffers said yesterday that the mortgage company restricted purchases of mortgages on multi-family homes after it saw many such mortgages go into default during the real estate slowdown.

He said the default rate on mortgages on two-family homes is twice that of single-family homes, and the rate for three-deckers is five times the rate for single-family dwellings.

But Jeffers said that after discussions with area homeowners, housing advocates, Kennedy and Rep. Barney Frank (D-Mass.), Fannie Mae officials agreed to purchase the mortgages made under the state's "soft second" program, the primary source of mortgages for first-time homebuyers of low and moderate means.

Moreover, Sammon did not mention in either his FoxNews.com article or during his O'Reilly Factor appearance that earlier in 1991, Frank voted in favor of legislation that increased government regulation and oversight of Fannie Mae and Freddie Mac. On September 30, 1991, Frank voted for a bill to create a new regulatory agency to oversee Fannie and Freddie, which were government-sponsored enterprises until they were taken over by the federal government on September 8, 2008. According to the bill's Congressional Research Service summary, the bill "[r]equire[d] the [agency's] Director to establish by regulation a risk-based capital test for the enterprises," "[r]equire[d] the Director to establish risk-based capital levels for each enterprise according to statutory guidelines," "[e]stablishe[d] minimum capital levels, critical capital levels, and enforcement levels," and "[s]et[] forth mandatory supervisory actions for the enterprises at various capital levels, including mandatory conservatorship." According to an August 5, 1991, column by the Boston Globe ombudsman, Moses was already working for Fannie Mae in August 1991. In October 1992, Frank voted for the Housing and Community Development Act of 1992, which created the Office of Federal Housing Enterprise Oversight (OFHEO). According to the Congressional Research Service summary of the bill, OFHEO was tasked with "ensur[ing] that Fannie Mae and Freddie Mac (the enterprises) and their affiliates are adequately capitalized and operating safely." As with the bill Frank voted for in September 1991, the new law gave OFHEO authority to set, monitor, and enforce risk-based capital requirements for Fannie and Freddie.

In addition, on The O'Reilly Factor, Sammon suggested that Frank hadn't "declare[d] the possibility of a conflict of interest." "That didn't happen," Sammon said. But in his FoxNews.com article, Sammon wrote that "[b]oth Frank and Moses assured the Wall Street Journal in 1992 that they took pains to avoid any conflicts of interest."

From the October 3 FoxNews.com article titled "Lawmaker accused of Fannie Mae Conflict of Interest":

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.

Both Frank and Moses assured the Wall Street Journal in 1992 that they took pains to avoid any conflicts of interest. Critics, however, remain skeptical.

"It's absolutely a conflict," said Dan Gainor, vice president of the Business & Media Institute. "He was voting on Fannie Mae at a time when he was involved with a Fannie Mae executive. How is that not germane?

"If this had been his ex-wife and he was Republican, I would bet every penny I have -- or at least what's not in the stock market -- that this would be considered germane," added Gainor, a T. Boone Pickens Fellow. "But everybody wants to avoid it because he's gay. It's the quintessential double standard."

A top GOP House aide agreed.

"C'mon, he writes housing and banking laws and his boyfriend is a top exec at a firm that stands to gain from those laws?" the aide told FOX News. "No media ever takes note? Imagine what would happen if Frank's political affiliation was R instead of D? Imagine what the media would say if [GOP former] Chairman [Mike] Oxley's wife or [GOP presidential nominee John] McCain's wife was a top exec at Fannie for a decade while they wrote the nation's housing and banking laws."

[...]

Although Frank now blames Republicans for the failure of Fannie and Freddie, he spent years blocking GOP lawmakers from imposing tougher regulations on the mortgage giants. In 1991, the year Moses was hired by Fannie, the Boston Globe reported that Frank pushed the agency to loosen regulations on mortgages for two- and three-family homes, even though they were defaulting at twice and five times the rate of single homes, respectively.

Three years later, President Clinton's Department of Housing and Urban Development tried to impose a new regulation on Fannie, but was thwarted by Frank. Clinton now blames such Democrats for planting the seeds of today's economic crisis.

"I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was president, to put some standards and tighten up a little on Fannie Mae and Freddie Mac," Clinton said recently.

From the October 6 edition of Fox News' The O'Reilly Factor:

O'REILLY: Now, not only did the congressman have oversight on Fannie Mae for the past two years, but back in the 1990s, he had an affair with a guy named Herb Moses, an executive at Fannie Mae at the time Frank was on the House Banking Committee.

Joining us now from D.C., Fox News Washington deputy editor Bill Sammon. So, why should we care, 10 years ago -- that's when -- and I guess it was a long-term relationship between these two men. Why should we care about that?

SAMMON: Well, because that's when the seeds of today's crisis were sown, Bill. I mean, Barney Frank on your show talked about how he supported, you know, reform legislation 2007-2008. It was too late by then. I mean, by -- you know, by the time the legislation that kicked in July 30th of this year was passed, Fannie and Freddie stocks had dropped 80 percent so far this year. So, the housing market was already in a meltdown.

We're talking in my story about -- and what you're referring to with Barney Frank and his relationship with Herb Moses -- that happened during the 1990s when Republicans and even some cases President Clinton was trying to put regulations on Fannie and Freddie. Barney Frank was backing off these efforts.

Meanwhile, his partner was an executive in Fannie Mae, and he was charged with make-- with basically loosening mortgage regulations.

O'REILLY: OK. Now, Frank at the time was on the committee but not the chair. And, you know, he had a voice, but he's a voice of many. When he gets to be the chair in 2007, he says -- Frank says, "Hey, I tried to get something done. I put this oversight thing in. It finally got passed, but it just took so long that it didn't have any effect. So, don't blame me. I didn't do anything wrong." And you say?

SAMMON: Well, I say, again, a little too little, too late. And again, imagine if the shoe were on the other foot. Imagine if a Republican, say, Larry Craig, had a gay partner on the -- a federal -- on the agency that he was charged with regulating. Even if he only had a voice, even if he wasn't the chairman, wouldn't it behoove that member to recuse themselves or at least declare the possibility of a conflict of interest?

This didn't happen. Barney Frank continued to have this relationship and continued to work on this committee. At the time, it was called the Banking Committee. And the press didn't raise an eyebrow. If you switch that around and put in a Republican -- even if it wasn't a gay relationship. So let's say a Republican had a mistress or a wife or a girlfriend on an agency that Republican was supposed to be regulating. The press would go ballistic.

But because it's Barney Frank and because it's a Democrat and because it's the whole gay thing, they have not touched it because they consider it radioactive.

O'REILLY: Did Frank basically do anything wrong? Could -- is there a conflict of interest or can -- is there a trail back that says, "Barney Frank did this wrong"? Now, I hold him accountable because he won't admit that he did a poor job in overseeing. And then, in July -- and we played this bite -- in July, he basically put a happy face on it. "Oh, I mean, it's not the best investment, but it's solid, and we're going forward" -- blah blah blah. Bull. But did he do anything wrong?

SAMMON: I don't think he did anything technically illegal. You can quarrel with his judgment in blocking people from imposing regulations on Fannie and Freddie. For example, there was one example where they wanted to put in a regulation that would tighten up mortgage rules, and Barney Frank was arguing that they ought to be loosened for, for example, two-family homes and three-family homes, which had --

O'REILLY: Yeah, he wanted more money to go to poor and lower-middle-class people, so we know that was -- he admitted that. All right.

Posted In
Economy, Housing
Network/Outlet
Fox News Channel, FoxNews.com
Person
Bill Sammon
Show/Publication
The O'Reilly Factor
Stories/Interests
Attacks on Progressives, Propaganda/Noise Machine
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