According to Jeff Jacoby’s column, Barney Frank’s fingerprints are all over the Fannie Mae/Freddie Mac crisis. Here’s the money paragraph of the article:
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.
This wasn’t unforseeable:
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?”
A columnist could see this coming but Barney Frank wouldn’t admit what others could see:
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.
Times have changed and not for the better. What’s worse is that Frank now chairs the House Financial Services Committee, which has oversight responsibility of banks.
Predictably, Frank is denying he’s responsible for this mess. In fact, he’s telling people that it’s proof of the free market’s disfunction. That’s the audacity of an elitist socialist.
Jeff Jacoby isn’t the only columnist taking Rep. Frank to the proverbial woodshed. John Fund delivers this tonguelashing:
We will look back on the failure of Congress to reform the government-sponsored enterprises at the heart of the mortgage meltdown as one of the most expensive derelictions of its duty ever. Fannie Mae and Freddie Mac used their lobbying clout, political contributions and even charitable largesse to charm or bully anyone demanding reform in their lending practices.
…Rep. Barney Frank, who now vilifies Republican House members for questioning a policy of throwing another $700 billion on the bonfire, insisted to the New York Times during the 2003 accounting scandal: “These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Barney Frank knew that there were problems with Fannie and Freddie. His higher priority was to provide more “affordable housing.” Why was that his priority? Shouldn’t Frank have put a higher priority on stabilizing Fannie and Freddie? Certainly, there were ample red flags to warrant investigation. Actually, there was ample justification to warrant reforming everything.
That’s why it’s perfectly legitimate to call this Barney Frank’s quagmire.