A March 6 Investor's Business Daily editorial headlined “Let the Inquisition Start with Frank” stated that Rep. Barney Frank (D-MA), “perhaps more than any single individual in private or public life, is responsible for both the housing market mess and subsequent bank disaster.” As evidence, the editorial stated, “Starting in the early 1990s, he (and other Democrats) stood athwart efforts by regulators, Congress and the White House to get the runaway housing market under control.” It specified that "[i]n 2002, Frank nixed reforms" of Fannie Mae and Freddie Mac and that in 2003, “led by Frank, Democrats stood as a bloc against any changes” that President Bush proposed making to Fannie and Freddie. But in 2002 and 2003, Frank and the Democrats had no power to “nix[] reforms” -- Republicans controlled the House of Representatives and could have passed legislation regarding Fannie Mae and Freddie Mac in the House without any Democratic support. Yet during President Bush's tenure, Congress did not pass oversight legislation for Fannie and Freddie until after Democrats gained a majority in both houses of Congress in 2007.

In early 2007, as the new chairman of the House Financial Services Committee, Frank sponsored H.R. 1427, a bill to create the Federal Housing Finance Agency (FHFA), granting that agency “general supervisory and regulatory authority over” Fannie and Freddie 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 Bush signed into law on July 30, 2008.

Furthermore, before taking over the Financial Services Committee chairmanship, Frank worked with committee chairman Rep. Michael Oxley (R-OH) on the Federal Housing Finance Reform Act of 2005, which would have established the FHFA to replace the Office of Federal Housing Enterprise Oversight (OFHEO) as overseer of the activities of Fannie and Freddie. 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 added to the bill on the House floor imposed restrictions on the kinds of nonprofit organizations that could receive funding under the bill.

Additionally, contrary to the editorial's suggestion that Fannie Mae and Freddie Mac “lay behind the crisis,” and thus that Frank's purported opposition to reforming them make him “responsible for both the housing market mess and subsequent bank disaster,” economist Dean Baker has stated:

Fannie and Freddie got into subprime junk and helped fuel the housing bubble, but they were trailing the irrational exuberance of the private sector. They lost market share in the years 2002-2007, as the volume of private issue mortgage backed securities exploded. In short, while Fannie and Freddie were completely irresponsible in their lending practices, the claim that they were responsible for the financial disaster is absurd on its face -- kind of like the claim that the earth is flat.

Indeed, in a 2006 Securities and Exchange Commission filing (available here) covering its activities in 2004, Fannie Mae stated: “We did not participate in large amounts of these non-traditional mortgages in 2004 and 2005.” In the report, Fannie Mae also noted the growth of subprime lending and reported, “These trends and our decision not to participate in large amounts of these non-traditional mortgages contributed to a significant loss in our share of new single-family mortgage-related securities issuances to private-label issuers during this period.”

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.

From IBD's March 6 editorial:

Even by the extraordinarily loose standards of Congress, it takes some chutzpah for someone such as Frank to suggest that he'll seek prosecutions for those behind the housing and financial crunch and for what he called “a strongly empowered systemic risk regulator.”

For Frank, perhaps more than any single individual in private or public life, is responsible for both the housing market mess and subsequent bank disaster. And no, this isn't partisan hyperbole or historical exaggeration.

But first, a little trip down memory lane.

It was Fannie Mae and Freddie Mac, the two so-called Government Sponsored Enterprises (GSEs), that lay behind the crisis. After regulatory changes made to the Community Reinvestment Act by President Clinton in 1995, Fannie and Freddie went into hyper-drive, channeling literally trillions of dollars into the housing markets, using leverage and implicit taxpayers' guarantees.

[...]

Still, from the early 1990s on, many people both inside and outside Washington were alarmed by what they saw at Fannie and Freddie.

Not Barney Frank: Starting in the early 1990s, he (and other Democrats) stood athwart efforts by regulators, Congress and the White House to get the runaway housing market under control.

He opposed reform as early as 1992. And, in response to another attempt bring Fannie-Freddie to heel in 2000, Frank responded it wasn't needed because there was “no federal liability there whatsoever.”

In 2002, Frank nixed reforms again. See a pattern here?

Even after federal regulators discovered in 2003 that Fannie and Freddie executives had overstated earnings by as much as $10.6 billion in order to boost bonuses, Frank didn't miss a beat.

President Bush pushed for what the New York Times then called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”

If it had passed, the housing crisis likely would have never boiled over, at least not the extent it did, taking the economy with it. Instead, led by Frank, Democrats stood as a bloc against any changes.