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.