Moore falsely accused Frank of "involvement in giving a blank check to Fannie and Freddie"
SUMMARY: The Wall Street Journal's Stephen Moore falsely accused Rep. Barney Frank of "involvement in giving a blank check to Fannie and Freddie," echoing the oft-repeated myth that Frank fought efforts to strengthen congressional oversight over Fannie Mae and Freddie Mac.
On the May 13 edition of CNBC's Street Signs, Wall Street Journal senior economics writer and editorial board member Stephen Moore claimed that Rep. Barney Frank (D-MA) supported taxing employee bonuses of troubled financial institutions "as a way of deflecting criticism" because "he was coming under a lot of heat for his involvement in giving a blank check to Fannie and Freddie." Anchor Erin Burnett interjected: "That's a fair point." Moore's claim echoes a broader conservative myth that Frank is responsible for the subprime mortgage crisis because he fought efforts to strengthen congressional oversight over Fannie Mae and Freddie Mac. In fact, Frank has supported legislation to strengthen oversight over Fannie and Freddie, both as ranking member on the House Financial Services Committee and as chairman.
As Media Matters for America has documented, Frank has supported efforts to strengthen oversight of Fannie and Freddie, including:
- In 2005, Frank, then the ranking Democrat on the House Financial Services Committee, worked with committee chairman Rep. 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.
- In early 2007, as 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. Among other things, Frank's legislation, titled the "Federal Housing Finance Reform Act of 2007," directed the FHFA director to "ensure" that Fannie Mae and Freddie Mac "operate[] in a safe and sound manner, including maintenance of adequate capital and internal controls" and to establish standards for "management of credit and counterparty risk" and "management of 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.
As Media Matters has also noted, Democrats did not gain a majority of both houses of Congress during the Bush administration until 2007. Only then did Congress pass oversight legislation over Fannie Mae and Freddie Mac.
From the May 13 edition of CNBC's Street Signs:
BURNETT: David, can I ask you a question, though, on what he did last time --
DAVID MIN (Center for American Progress financial markets policy expert): Sure.
BURNETT: -- the 90 percent retroactive tax.
MIN: Sure.
BURNETT: Do you believe that Barney Frank wanted that to pass? Or do you think Barney Frank made a big populist statement knowing full well it would never pass, not wanting it to pass, and just wanting to make his point?
MIN: Well, I think one of the advantages of being Barney Frank is that nobody can quite read you. So, I'm not going to attempt to get at his motivations. I think that it would certainly be something that was consistent with what a lot of people in the Congress were saying as far as trying to recapture some of these bonuses that I think a lot of people thought were unfairly meted out based on taxpayer money.
BURNETT: Now, Stephen --
MOORE: Now let me answer.
BURNETT: Yeah, go ahead, Stephen.
MOORE: Let me answer that question, because --
BURNETT: Yep.
MOORE: -- remember, I mean, Barney Frank was one of the guys who was right at the center of the financial crisis. I think he had -- a lot of the blame of this [unintelligible] lays in his part. Remember, he was the guy who said, "Roll the dice" --
BURNETT: And Steve, everyone said he was --
MOORE: -- "on Fannie and Freddie."
BURNETT: -- so reasonable.
MOORE: And so the point is --
BURNETT: Hank Paulson said it.
MOORE: -- I think these Democrats --
BURNETT: Yeah.
MOORE: -- are trying to redirect the populist storm against members of Congress like Chris Dodd and Barney Frank towards executives. And so, I'm not so sure he didn't want that to pass as a way of deflecting criticism.
BURNETT: That's a pretty incredible statement you just said.
MOORE: Well, I mean, you can look at the record. I mean, the guy -- he was coming under a lot of heat for his involvement in giving a blank check to Fannie and Freddie, which now require --
BURNETT: That's a fair point.
MOORE: -- $400 billion of taxpayer bailout money.
BURNETT: Right.
MIN: Yeah, I'm not one for conspiracy theories myself. I think that one's a little far-fetched, particularly given that most of the claims around CRA and Fannie and Freddie -- I mean, if you looked at the facts -- and I don't want to get into this debate yet again -- but I think the major issue obviously with the credit crisis was the deregulation, the lack of regulation of primary banks -- and this started with the private sector.
Fannie got pulled into it. Yes, they were overleveraged. They needed more capital. But they weren't the ones out there making subprime and Alt-A loans. That was purely the private sector.
MOORE: That was Fannie and Freddie. But, you know --
BURNETT: They just got in there and started buying them.
Everyone knows this Club for Growth hack has no credibility and his views are shared by about 25% of the population in the U.S.
Yet he is given airtime on ANY and ALL financial networks.
He has become a complete political hack. Do not take this guy seriously. Or as seriously as you would his Club for Growth!
Why do cons always level criticism of libs that end up pointing right back at them?!
It was government action that is the root cause of the housing/banking/wall street collapse. Had Frank and the Democrats left the banks alone, this wouldn't have happened.
So don't be a fool. Banks were making a KILLING and THAT'S why they were lending money to anyone who gave them a phone call.
I never said banks didn't make a killing so that is a straw man argument.
If you read my note for understanding, you'll see my point is that the government, including Barney and the Dems, through Fannie and Freddie and their efforts to make sub prime loans were the starting point for the market collapse.
You want to know what the "starting point" was? OIL AND GAS PRICES. Let me explain.
High oil/gas prices (in the $3+ and esp $4+ per ga range) did two things: 1) Bit into peoples budgets. 2) Raised the cost of EVERYTHING. (Because EVERYTHING is shipped, and everything comes in PLASTIC. So EVERYTHING'S price is highly correlated to the price of OIL.)
About the same time, the Fed was noticing inflation kicking up. (See point 2 above.) So they budge up interest rate like 1/4 of a %. The resulting rate increase suppressed stock values and slowed the lending market (a little) but did nothing to fight inflation, due to point 2 above.
NOW... with costs increasing (due to oil $) and consumer spedning down (die to gas $) a few companies started to cut back. Now you had a few people losing their jobs, and thus defaulting on tehir mortgage. Add to that the people that were now defaulting on their mortgage beacue of the higher interests rates (as compared to the absurd lows they re-fied at) and you have a few more forclosures.
Between the uptick in forclosures, the higher interest rates and the decrease in consumer spending, which was quickly leading to an outright recession, you had a perfect storm for housing to take a hit. Especially considering how they system was inflating home prices in teh first place by relaxing lending standards as much as they did. (And if you think the gov't did that, you tell me HOW. WHAT LAW did this?)
Then when housing took a hit, you've got a whole glut of people that now can't re-fi because they're house equity is suddelny upside-down. And THEY can't afford the new interest rates, so they defualt. Ad to this the grwoing job losses due to the recession and you've got a rapidly snowball growing.
THAT snowball started to cost banks, which in turn tightened credit, which in turn led to more consumer and business ledninf problem, thus worsenign the recesion, thus causing MORE foreclosures.... you get the idea.
All of this can and would have happendd without CRA or any "forced action" by the gov't becaus ethe banks did what they did becasue they were aking money. The profits weren't coming in despite the practice, they were what was DRIVING IT. But $4 a gallon gas kicked our economy in the shins and THAT'S what really triggered all hell breaking loose.
That's MY take on it anyway. No liberalism required.
Now which one is easier to remember? Which can better fit a blog page using large font and monosyllabic words? Which can Hannity recite completely in between commercials?
I think it's pretty clear we don't need no elitist liberally educated analysis obscuring something that can be explained in a single attention span.
;) LOL.
Testimony
Chairman Ben S. Bernanke
Subprime mortgage lending and mitigating foreclosures
Before the Committee on Financial Services, U.S. House of Representatives
September 20, 2007
...Most recently, as I am sure Committee members are well aware, subprime mortgage losses that triggered uncertainty about structured products more generally have reverberated in broader financial markets, raising concern about the consequences for economic activity.
http://www.federalreserve.gov/newsevents/testimony/bernanke20070920a.htm
Everyone agrees that defaults from too many risky mortgages triggered the crisis, but the increase in bad loans was driven by the money being made off of the structured products. Bernanke says,
The starting point was Bear Stearns, not Fannie and Freddie.
We also should not forget that Frank voted against the bill cited because it was not the same bill he voted for in committee. A manager's amendment had altered it in a way that would restrict the ability of non-profit groups, particularly faith-based groups, to secure funding for low-income housing. He decided he could not accept that change.
According to a 2003 NY Times article, “New Agency Proposed to Oversee Freddie Mac and Fannie Mae”, the “Bush administration … recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
MONEY QUOTE: Oct. 7, 2003. NY Times
”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Got anything original to say while you're at it?
How about telling us what Barney Frank actually DID to cause the crisis? Instead of telling us what he said at the time?
Best I can recall, the Republicans were in charge in 2003, yet Barney Frank's words alone were enough to cause the mortgage crisis?
While you're looking to the NY Times for background, there's another article you may want to check out...
White House Philosophy Stoked Mortgage Bonfire
http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html?sec=&spon=&pagewanted=print
I want to know WHAT HE ACTUALLY DID that caused the crisis? I've been asking it every time it comes up at MMFA and no one who blames Frank can ever tell me.
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.
. . . 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.
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/28/franks_fingerprints_are_all_over_the_financial_fiasco/
"Frank said..."
"Frank insisted... "
"Frank was adamant..."
"Frank complained..."
"Frank blithely declares..."
"Frank is looking for a culprit to blame..."
So I ask again...
WHAT DID HE DO that caused the mortgage crisis?
On your second point, if you want Dems to stop crying that they need time to fix everything, I see a pretty obvious solution.
WHAT DID FRANK DO?????
Don't tell me what he said, I've see his words regurgitated a gazillion times now. Tell me what he did, as a member of the congressional minority, that caused the mortgage crisis?
What we actually have here is a long quote from a column by Jeff Jacoby. Quoting Jeff Jacoby on Barney Frank or public housing is like quoting Bernie Madoff on business ethics.
Repeating myself, as is apparently necessary in these cases: An analysis by the staff of the Board of Governors of the Federal Reserve System determined that "the crisis is rooted in the poor performance of mortgage loans made between 2004 and 2007."
I'm sure that after thinking about it, you will realize that 2003 came before 2004. At the time of the statement you cite, Fannie Mae and Freddie Mac were not facing any financial crisis.