An editorial piece in today’s Wall Street Journal levels some blame for the Fannie Mae/Freddie Mac mess at Barney Frank for his resistance against meaningful reform.
Despite progressives’ belief that anything the WSJ writes if false, including today’s date, yesterday’s stock prices, and the weather, it’s worth reading (assuming it is available without subscription.)
I quote a portion of it here just in case …
Mr. Frank contends that he favored “very strong reform” of Fannie Mae and Freddie Mac, even before Democrats took over Congress after the 2006 elections. To adapt a famous phrase, this depends on what the meaning of “reform” is. Mr. Frank did support a bill that he and others on Capitol Hill described as reform. But on the threshold reform issue — limiting the size of the portfolios of mortgage-backed securities (MBS) that the two companies could hold — Mr. Frank was a stalwart opponent.
In fact, Mr. Frank was publicly arguing for an increase in the size of their combined $1.4 trillion portfolios right up to the day they were bailed out. Even now, after he’s been proven wrong about a taxpayer guarantee, he opposes Treasury’s planned reduction in the size of the portfolios starting in 2010, according to a quote attributed to him in this newspaper last week. “Good luck on that,” he reportedly said. Mr. Frank’s spokeswoman hung up the phone when we sought confirmation Tuesday.
The MBS portfolios have long been both the chief source of the systemic risk posed by the two mortgage giants and of the profits that so handsomely enriched shareholders and officers alike for decades. Without the extreme leverage inherent in those portfolios — which the companies borrowed heavily, at taxpayer-subsidized rates, to accumulate — their federal takeover might never have become necessary.
By the way, who are the top 3 leading recipients of political donations from Fannie and Freddie, 1989-2008? In descending order of largess: Chris Dodd $165,400, Barack Obama, $126,349, and John Kerry, $111,000. Considering Barry’s been in the Senate just 4 years, he must be the annual leader in receiving “hush money” from these GSE. Oversight? More like asleep at the switch.
Barney Frank received $42,350 … his hands are dirty too.
Don’t get me wrong, there are plenty of R’s on the list. But D’s lead the pack.
From The New York Times on September 11, 2003.
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p>You mean the Bush Administration wasn’t asleep at the wheel, and it wasn’t their policies that caused the housing meltdown. It was the Democrats acting on behalf of their donors. NO NO NO this can’t be true, because my leftist friends say it isn’t. NO NO NO this isn’t true.
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p>What I say, look the emperor has no clothes.
In the never never land of Republican talking points what is neglected is right in front of everyone’s face. The year of EaBo’s quote, 2003. Who had leadership of Financial Services Committee? Who had the most votes in the Financial Services Committee? What party had the votes in the House? What party had the votes in the Senate? What party had the Presidency? So if Republicans really wanted reform what wasn’t it done? Oh, no, wait. It was the ranking Democrat’s fault.
Bush administration regulators of whom they say:
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p>”Ms. Bair was an exception, especially for the deregulation-minded Bush administration. As a former assistant secretary of the Treasury in 2001 and 2002, she had worked with Mr. Gramlich to raise concerns about abusive lending practices. Indeed, she tried to hammer out an agreement with mortgage lenders and consumer groups over a tough set of “best practices” that would have covered subprime mortgages.
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p>But that effort largely stalled because of disagreement. Though some big lenders did endorse a broad code of conduct, she recalled, they soon began loosening standards as competition intensified.
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p>The drop in lending standards became unmistakable in 2004, as lenders approved a flood of shaky new products: “stated-income” loans, which do not require borrowers to document their incomes; “piggyback” loans, which allow people to buy a home without making a down payment; and “option ARMs,” which allowed people to make less than the minimum payment but added the unpaid amount to their total mortgage.
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p>Fed officials noticed the drop in standards as well. The Fed’s survey of bank lenders showed a steep plunge in standards that began in 2004 and continued until the housing boom fizzled in 2006.
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p>But the regulators found themselves hopelessly behind the fast-changing practices of lenders. In a bid to set new standards for exotic mortgages, the agencies waited until December 2005 to propose a “guidance” to banks and thrifts. They did not agree on the final standard until September 2006.”
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p>This squarely puts the blame on regulators who identified in 2004 that there were shaky products and took till near the end of the housing boom in 2006 to issue a standard to banks. Those 3 years seem to when many of these shaky loans were written. Dealing with that was primarily the responsibility of the regulators. (the House or Senate Committees were both Republican controlled – so any lack of oversight falls most on the Republicans.)
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p>http://www.nytimes.com/2007/12…
It was a vast conspiracy based on a bipartisan consensus
You might want to include Barney Frank’s response to the WSJ’s editorial. I’ll agree that there’s plenty of blame to go around, but the WSJ editorial is just a bit of a hack job-exactly what you see day after day on that page. With all due respect to BS’s original post, the WSJ has long been two newpapers in one–a very good reporter of business news, and an editorial paper that is well to the right of Attila the Hun. I hope it keeps that separation under its new Murdoch ownership.
… one often finds an editorial line that is directly at odds with the facts as reported in the news section.
But, it was initially the WSJ editorial page that brought down ENRON. Just an example. The WSJ enjoys some of the best credibility in the print world.
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p>FREDDIE and FANNIE were originally founded with a $2.5 billion Line of credit with the Fed. Even though the portfolio grew exponentially, the Line remained unchanged. It was Franke’s argument–maybe accurate, maybe not–that the line ought to be increased commensurate with the portfolio size/risk.
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p>Franke advocated for ‘affordable housing’ and says as much in his rebuttal, but affordable housing meant that the Agencies had to have limits raised in order to buy bigger mortgages. In short, he was lobbying for a bigger FREDDIE AND FANNIE, and not a reformed pair of agencies that would actuall curtail lending.
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p>He doesn’t address that policy difference in his rebuttal, and because he doesn’t WSJ says he not’s being truthful and didn’t publish it.
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p>Personally, that makes sense.
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p>Also, it’s their editorial page. If I wrote a Diary “B. Obama is an incompetent poopyhead” it probably wouldn’t be front-paged here.
Wow, Paul Gigot and John Fund cracked that case?? Well, no. It was the work of journalist Bethany McLean at Fortune; and indeed WSJ journalists Jonathan Weil,, Rebecca Smith and John Ernshwiller.
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p>The joke on Wall Street is that the op-ed guys don’t actually read the rest of their own (very fine) publication. The credibility enjoyed by the news side is decidedly not shared by the editorial page guys. Sorry.
Most of that money consists of individual contributions by people who work for those companies. When you donate money, you have to fill in your company. On reports, like those of open secrets, your contribution is aggregated with others from your company and the industry it is in.
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p>Here’s a link to Open Secret’s own report, that shows the situation far better. The vast majority of money going to Kerry and Obama was FROM INDIVIDUALS. Only $2000 and $6000 respectively was from the PAC. (As both have refused PAC money, I suspect that the small amounts were something like contributions to the convention.) At any rate, $2000 or $6000 is pretty insignificant.
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p>http://www.opensecrets.org/new…
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p>This took 2 minutes to find and changes the entire picture. Kerry and Obama are high because they both ran campaigns that got contributions from many many individuals – and no matter what industry or large company you look at they will be there.
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p>Now look at the ones with high PAC money – and you will see lots of Republicans.
Is Congressman Frank too close to financial interests? Yes, I think so, but that is not uncommon for Finance Cmte. Chairs .
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p>An amazing thing happened on Larry King the other night: Stephen Moore of the WSJ and Paul Krugman both agreed that if you want to point fingers, it should start at the Maestro, Alan Greenspan. Moore blamed him for inflating the housing bubble with loose monetary policy, and Krugman chided him for denying the existence of the housing bubble and for encouraging the spread of ARMs.
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p>The roots of Fannie/Freddie’s implosion and the housing crisis dates back far before the Democrats took power in 2006, so I would start looking elsewhere for blame.
We can include the President, Congress (now and then), the Bureaucrats and the financial marketplace management. Somehow, we as a country have to get our hands around this issue so noting like this can happen again. Free markets are a great thing but when they are backed by our government or their failure has such a significant effect on our economy, then the public’s interests must be trump “survival of he fittest”.
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p>As partisan as I can be I do wish we could STOP trying to point the finger at Frank, Bush, Obama, McCain… since we will all subjectively find fault with our “targets” of choice.
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p>This tirade and consequent bickering is a great example of how this country has been governed lately. STOP THE FIGHTING AND FIX THE PROBLEMS. I don’t care if a Democrat, a Republican or an Independent fixes the issue and gets credit for it… just fix it. We have a sufficient number of smart financial people at our fingertips and a great economy (even during the current downturn) so let’s use them and move on!!!!
“we” don’t amount to a hill of beans.
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p>The people we elect and their associated power brokers are the ones going to be making these decisions.
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p>So, the BEST thing we can do is shine the light in all the dark corners the politicians don’t want us to see so that our decisions can be as informed as possible.
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p>I care less what McCain or Obama is telling me than I do about what they are hearing from their friends, advisors, and associates.
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p>Power and Control does a round-up of the Obama camp. Who has a comparable for McCain?
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p>It’s a little difficult to fix a problem by disregarding partisanship, when, in fact, the partisans are the one who put the lipstick on the pig!!
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p>The problem IS NOT the financial situation. The financial crisis is a direct outcome of the Republican policies. The problem is the weird melange of Republican attitudes: the toxic cocktail of casual malevolence towards governance, a rage fetish, an incoherent victim complex, pellucid greed and a truly stunning inflexibility of mind. It is, in short, a problem of Republican dementia… If they weren’t so fucking incompetent, we’d be the fourth Reich right now.
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p>Now you tell me how we’re supposed to, with a straight face, endorse the prospect you put forth: that it doesn’t matter if a Democrat, a Republican or an Independent fixes the issue and gets credit for it… just fix it. ???
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p>Republicans can’t fix it. That’s an empirical impossibility. They SOUGHT this outcome: this is the direct and only outcome of their insane world view.
who do those eviction defenses think Barney Frank is the devil, working on the side of the banks. (no link, I’m friends with some of them). Perhaps they have such strong feelings about him because he’s a Democrat who ought to be on their side.