I am shocked to learn that Barney Frank’s former partner, Herb Moses, was Fannie Mae’s assistant director of product initiatives. “According to the Feb. 23, 1998, issue of National Mortgage News, Herb Moses helped develop many of Fannie Mae’s affordable housing and home improvement lending programs” (cite here.)
Bill Sammon has this interesting article which states “Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie.”
Can you imagine if Secretary Paulson’s wife was a partner on Wall Street in a firm that designed and sold mortgage-backed derivatives? He’d be run out of town. Conflict of interest! Wall Street bailout!
If this is the same Herb Moses, Representative Frank needs to explain what influence he had over his partner at the time, and what hand he might have had suggesting new mortgage products for moderate- and low-income borrowers. These products, among other worst practices, including the $11 billion criminal accounting scandal at Fannie, are the foundation upon which our current financial mess is built.
Barney Frank, first as chairman then as ranking member of the House Banking Committee, hijacked Fannie Mae to use for social policy — issuing loans to moderate- and low-income people at the expense of upholding sound underwriting. The result is FHMA’s (and FHLMC’s) complicity in flooding the market with sub-prime and Alt-A junk.
The crime is not the social policy, it’s the use of Fannie and Freddie, whose financial soundness is guaranteed by the US Government, as platforms to further that policy in conflict with their financial soundness. Talk about moral hazard.
Did Barney Frank defend and shield Fannie from it’s regulator, Office of Federal Housing Enterprise Oversight? What was Frank’s position when Fannie’s accounting scandals became known? I’d like to know.
…it has been widely written about on the rightwing blogs (ad was widely reported by MSM when Frank and Moses were a couple…TEN YEARS AGO).
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p>It really is pathetic and intellectually lazy how the rightwing must demonize one person as a way of explaining complex issues. Ya, it is the fault of one Congressman who was the Chairman of the House Banking Committee for the last 18 monhts for the financial crisis. Never mind who controlled the Executive Branch for the last 8 years, never mind what party controlled Congress for 12 of the last 14 years…it’s all Barney Frank’s fault…because he is a liberal that conseratives love to hate.
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p>I especially loved your question, “Can you imagine if Secretary Paulson’s wife was a partner on Wall Street in a firm that designed and sold mortgage-backed derivatives?”
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p>Well that certainly was not the case…IT WAS PAULSON HIMSELF THAT WAS THE CEO OF A WALL STREET FIRM THAT DESIGNED AND SOLD MORTGAGE BACKED SECURITIES.
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p>That you for the entertainment.
Fault, with respect this current credit contraction, is nearly irrelevant, because it’s so widespread. For each partisan on the right claiming it was Frank, there’s at least one on the left claiming it was Bush.
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p>Blame, starting at the bottom:
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p>-Borrowing America, who rejected caution and borrowed in excess, and bought homes, cars and stuff in excess to what they could afford;
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p>-Brokers who marketed exotic products and enticed people to enter into loans they couldn’t afford;
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p>-Officers and Directors of mortgage companies who allowed brokers to offer such products;
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p>-Regulators who allowed sub-prime lending to continue in the face of weakening bank balance sheets. (note the date on the article)
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p>-Conflicts of interest in the Rating agencies, and the SECs failure to address the issue.
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p>-Conflicts of interests by Democratic and Republicans closely tied to Mae/Mac.
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p>Fault’s easy to establish. The question now really ought to be now what, because if you take each candidate at face value, they have no intention of promising less, even considing that Congress just spent its allowance for the next decade. I guess we can still call them Congress, but they just gave up all their power. Irony, that Congressional Democrats, bitching and moaning about the Imperial Presidency, just gave up nearly all the true power it possesses, to the Executive branch, and they don’t even know who the Secretary of Treasury will be!
I agree. The claim that this mess is exclusively Barney Frank’s fault, however, is laughable, and suggests that, once again, the Republican goal here (I’m not saying your goal personally, just making a point about the GOP and their backers, just to be clear) is not constructive discussion but petty politics. That’s a big part of the reason they have done such a poor job of governing the country for the past eight years, including having sole overall responsibility for our financial system for six of those years.
Gary, I’m surprised!
This shouldn’t be a matter of personal virtue. Brokers, officers, and directors do what they’re paid to do. It’s up to those writing and enforcing regulations to make sure that none of these people are paid to do socially harmful stuff. The jihad against “greed” — or against enticing — is a dead end.
… blocking off harmful options in the system, especially those for which there are preexisting incentives. The art of writing such regulations well is to anticipate the unintended consequences.
Who said anything about greed. Greed’s just like air and water; it’s there and you can’t do anything about it. Try to regulate it, and people just find away around it: “The art of writing such regulations well is to anticipate the unintended consequences.” That is probably a significant difference between conservative and liberal: I’ve seen too many regulations and believe that unintended consequences are unavoidable.
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p>Example. Sarbenes-Oxley, the regulation with various bells and whistles to make Boards more accountable. Where was the Lehman board, the Ameriquest Board, the Mac/Mae boards?
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p>I’m blaming the participants in the US system that favors consuming at all costs, starting with us, the consumers. Government tax system that subsidizes houses and consumption and disfavors savings, and a Clinton-come-Bush policy that concluded everyone should own a house. I can think of no worse idea than someone who is low-income saddled with a house.
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p>You can pick and choose who to blame, but ultimately housing prices hadn’t dropped in 2 centuries. It’s pretty easy to see why — Everyone — the consumer, government, amd banks didn’t expect them dropping 15 percent in one year.
“‘The art of writing such regulations well is to anticipate the unintended consequences.’ That is probably a significant difference between conservative and liberal”
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p>The art of gutting or reforming regulations is to anticipate unintended consequences and my impression is that conservatives tend not to do their due diligence toward that end.
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p>Also, I’m not sure I agree with the statement I quoted above as a characterization of ‘liberal’. Explain to a liberal where the pitfalls are in a regulatory course of action (as opposed to engaging in a general rant against government) and he or she is likely to listen. Your average liberal understands that the devil is in the details. When conservatives argue against a particular regulatory framework they often talk (beat you over the head actually) about over-arching principals of small government, not details. A refusal to discuss those details is often seen as a style over substance,… rhetoric over reason. If, in the process of trying to fix a problem (the usual framework for writing, reforming, or gutting a regulation) one side decides to dispense with the substantive details and embrace general rhetoric, its hardly surprising that any useful input they could have contributed concerning the ‘unintended consequences’ doesn’t get considered.
Here
Greed is like the wind that one must take into consideration when navigating a policy course. It must similarly be considered when designing the machinery of regulation. I don’t think anyone argues that greed could or should be ‘eliminated’. While it is useless to talk about eliminating greed ‘in general’, it isn’t useless to talk about it in a particular context of a specific regulatory rule. The point is to design rules that take the greed incentive and use it to help you in the policy directions you desire to go while minimizing the damage it can do in other policy directions.
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p>I guess I can sympathize about rhetoric against greed that fails to take into account the uselessness of attacking ‘greed’ in general because I get really tired of people attacking ‘regulation’ in general.