Rep. Barney Frank finally took some flak yesterday for pushing Fannie Mae and Freddie Mac to make $1 trillion in bad loans and setting off the current financial crisis.
Frank’s response: The Republicans should have stopped him, so it’s their fault.
At a congressional hearing, Rep. Scott Garrett, a Republican member of the House Financial Services Committee, told Frank, the Democratic chairman, that Frank and other Democrats bear responsibility for the credit disaster.
Loose Democrats. Garrett said the Republicans proposed legislation to subject Fannie Mae and Freddie Mac to sensible regulations against risky lending, but the Democrats blocked every move:
“Each and every time the chairman and everyone on the Democrat side of the aisle voted against these proposals. Whether it was an amendment to raise the capital levels, reduce the retained portfolios, lower the conforming loan limits or anything else, the other side of the aisle voted time and time again for what? Less regulation over these two companies.”
Frank responded by pretending he hadn’t spent more than 15 years pressing Fannie Mae and Freddie Mac to make high-risk home loans to low-income buyers, and pretending he had voted for stricter regulations when his vote counted. He cited his one cover-up vote in 2007, when Fannie and Freddie already had made most of its toxic loans and its corruption had been exposed.
“In fact, the Republican Party was in control from 1997 to 2005, and didn’t do anything. Yes, it’s too bad that we didn’t do anything about subprime lending,” Frank said. “I wish the bill that the Congress passed on Fannie and Freddie in 2007 in this committee and 2008 had been passed earlier. And I wish I could eat more and not gain weight....
“The number of occasions on which either Newt Gingrich or Tom DeLay consulted me about the specifics of legislation are far fewer than the gentleman from New Jersey seems to think.”
Criminal manipulation. Frank has been in Congress since 1981 and on the Banking or Financial Services committee for most of the years since his first election. With that seniority, he had an obligation to guide his colleagues toward policies that strengthen our financial institutions.
Instead, he used Fannie Mae and Freddie Mac as a Democratic slush fund to push bad loans on low-income voters in Democratic districts. And when a few Democratic congressional votes in 2003 or 2005 could have spared us today’s financial meltdown, he made sure the Democrats voted for criminal recklessness.
For doing more than anyone else to create the worst financial crisis since the Depression, Barney Frank should be in jail. Instead, he makes jokes about how he’s grown fat stealing from the rest of us. What a pig.
Update: Barney Frank issued another statement after yesterday's hearing. The statement again faults the Republicans for failing to get enough votes to stop him. But again he dodges his central culpability by failing to explain why, from 1991 through 2006, he never rounded up one Democratic vote to force Fannie Mae and Freddie Mac to comply with normal banking practices.
“Rep. Scott Garrett alleged today at the House Financial Services Committee hearing that Democrats had blocked amendments in 2005 to toughen the regulations of Fannie Mae and Freddie Mac. The record refutes this. Neither in committee nor on the floor was any amendment defeated which received a majority of Republican votes. The Republican leadership only allowed two amendments to address the regulatory structure of the GSEs, and neither amendment received a majority of Republican votes and was defeated by substantial majorities. Mr. Garrett himself offered two amendments, the first was defeated by 358-57, including a majority of Republicans and the second amendment was withdrawn.”
So why didn't Frank offer amendments of his own to regulate Fannie Mae and Freddie Mac in 1991 or 1998 or 2003 or 2005? Because he was opposed to any law that would cut off steering high-risk home loans to low-income buyers. Frank never explains this, because he can't bring himself to admit he did it, and that his actions destroyed Fannie and Freddie.
As far back as 1991, when the House was in Democratic hands, The Boston Globe reported how Barney Frank was urging looser standards on Fannie Mae loans. This was in spite of Fannie Mae's objections that the low standards would increase the default rate.
Former President Clinton remembers how the Democrats abused Fannie and Freddie in the 1990s until 2007. On Sept. 25 of this year, Clinton told ABC News:
"I think the responsibility 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."
In 2003, when President Bush proposed legislation to end Fannie and Freddie's hazardous lending, Frank was vocal against the idea. From The New York Times, Sept. 11, 2003:
"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."
And then Sen. John McCain and others came up with legislation to regulate Fannie and Freddie in 2005 and 2006. Frank opposed it and made sure all other Democrats within shouting distance opposed it. And the house of cards came tumbling down.
True, the Republicans share the blame for not catching on sooner to what the Democrats were up to, and for not pushing harder for sound regulations. But Barney Frank bears more responsibility for the collapse of Fannie Mae and Freddie Mac than anyone else.
Barney Frank caused a $1 trillion catastrophe, and he's out there whistling his way to his next meal.
See also: Barney Frank re-elected!