Friday, October 22, 2010
Is Barney Frank? - Parts 1 & 2.
Is Barney Frank? - Parts 1 & 2.
By Thomas Sowell
You would be hard pressed to find a politician who is less frank than Congressman Barney Frank. Even in an occupation where truth and candor are often lacking, Congressman Frank is in a class by himself when it comes to rewriting history in creative ways. Moreover, he has a lot of history to rewrite in his re-election campaign this year.
No one contributed more to the policies behind the housing boom and bust, which led to the economic disaster we are now in, than Congressman Barney Frank.
His powerful position on the House of Representatives' Committee on Financial Services gave him leverage to force through legislation and policies which pressured banks and other lenders to grant mortgage loans to people who would not qualify under the standards which had long prevailed, and had long made mortgage loans among the safest investments around.
All this was done in the name of promoting more home-ownership among people who had neither the income nor the credit history that would meet traditional mortgage lending standards.
To those who warned of the risks in the new policies, Congressman Frank replied in 2003 that critics "exaggerate a threat of safety" and "conjure up the possibility of serious financial losses to the Treasury, which I do not see." Far from being reluctant to promote risky practices, Barney Frank said, "I want to roll the dice a little bit more in this situation."
With the federal regulators leaning on banks to make more loans to people who did not meet traditional qualifications -- the "underserved population" in political Newspeak -- and quotas being given to Fannie Mae and Freddie Mac to buy more of these riskier mortgages from the original lenders, critics pointed out the dangers in these pressures to meet arbitrary home ownership goals. But Barney Frank counter-attacked against these critics.
In 2004 he said: "I believe that we, as the Federal Government, have probably done too little rather than too much to push them to meet the goals of affordable housing." He went further: "I would like to get Fannie and Freddie more deeply into helping low-income housing."
Fannie Mae and Freddie Mac were crucial to these schemes to force lenders to lend to those whom politicians wanted them to lend to, rather than to those who were most likely to pay them back. So it is no surprise that Barney Frank was very protective towards these two government-sponsored enterprises that were buying up mortgages that banks were willing to make under political pressure, but were often unwilling to keep.
The risks which banks were passing on to Fannie Mae and Freddie Mac were ultimately risks to the taxpayers. Although there was no formal guarantee to these enterprises, everybody knew that the federal government would always bail them out, if necessary, to keep them from failing. Everybody except Barney Frank.
"There is no guarantee," according Congressman Frank in 2003, "there is no explicit guarantee, there is no implicit guarantee, there is no wink-and-nod guarantee." Barney Frank is a master of rhetoric, who does not let the facts cramp his style.
Fast forward now to 2008, after the risky mortgages had led to huge numbers of defaults, dragging down Fannie Mae, Freddie Mac and the financial markets in general -- and with them the whole economy.
Barney Frank was all over the media, pointing the finger of blame at everybody else. When financial analyst Maria Bartiromo asked Congressman Frank who was responsible for the financial crisis, he said, "right-wing Republicans." It so happens that conservatives were the loudest critics who had warned for years against the policies that Barney Frank pushed, but why let facts get in the way?
Ms. Bartiromo did not just accept whatever Barney Frank said. She said: "With all due respect, congressman, I saw videotapes of you saying in the past: 'Oh, let's open up the lending. The housing market is fine.'" His reply? "No, you didn't see any such tapes."
"I did. I saw them on TV," she said. But Barney Frank did not budge. He understood that a good offense is the best defense. He also understands that rewriting history this election year is his best bet for keeping his long political career alive.
Is Barney Frank?: Part II
By Thomas Sowell
Among long-time politicians who are being seriously challenged for the first time this election year, Congressman Barney Frank of Massachusetts best epitomizes the cynical ruthlessness which hides behind their lofty rhetoric.
Having been a key figure in promoting the risky mortgage lending practices imposed by the federal government on lenders, and on Fannie Mae and Freddie Mac to buy these risky mortgages from the lenders, Barney Frank blamed the resulting collapse of financial markets and the economy on everybody except Barney Frank.
In February 2009, as chairman of the House Financial Services Committee, Congressman Frank summoned the heads of some of the biggest banks in the country before his committee. In the words of the Los Angeles Times, these bankers "endured hours of hectoring" by "indignant lawmakers" on that committee.
These bankers were in no position to talk back to members of this committee, much less point out how committee members -- including Chairman Barney Frank -- had themselves promoted laws and policies responsible for the current economic disaster.
This is a committee with the power to promote legislation detrimental to this heavily regulated industry. That in turn gives the committee the power to force others to sit there and take it, when they are demonized on nationwide TV.
Congressman Barney Frank has never hesitated to use his power ruthlessly. On one occasion, he threatened bankers with summoning them before his committee and forcing them to reveal their home addresses -- which would of course put their spouses and children at the mercy of any kooks that might come along.
Meanwhile, Congressman Frank could piously invoke "social justice" in defense of similarly ruthless community activist groups like ACORN or National People's Action, which had in fact besieged the homes not only of bankers but also of public officials who dared to oppose their agendas. In Barney Frank's words, these groups were simply people who "cared about equity" and who were just "trying very hard to preserve some equity and some social justice."
But the harassment and shakedown activities of such groups were perhaps best captured by the words of a leader of one of these groups, who addressed her followers by saying: "We want it. They've got it. Let's go get it."
These were not just idle words. The dirty little secret that few in the media seem to want to discuss is that community activists, including Jesse Jackson, have over the years extracted literally billions of dollars from financial institutions, as the price of peace and of not challenging these institutions in hearings before federal regulators, as these groups are empowered to do under the Community Reinvestment Act.
Much of this money has been extracted in the form of risky mortgage loans of the sort that have been at the center of the housing boom and bust, and its repercussions in financial markets and in the economy as a whole.
Among others who have been at the heart of the risky lending behind the financial meltdown are Fannie Mae and Freddie Mac, whom Congressman Barney Frank has also championed and protected. When federal regulators uncovered irregularities in Fannie Mae's accounting, and in 2004 issued what Barron's magazine called "a blistering 211-page report," Barney Frank lashed out -- not at Fannie Mae, but at the regulators who uncovered Fannie Mae's misdeeds. He said "a leadership change" in the regulatory agency was "overdue."
Politicians who say we need more regulation almost never mean regulation in the sense of impartially enforcing explicit rules, such as the accounting rules that Fannie Mae was violating to cover up its own risks. They mean regulation with arbitrary powers, such as those under the Community Reinvestment Act, which enable regulators to carry out the agendas that politicians give them.
When Congressman Jim Leach tried to get stronger regulation of Fannie Mae and Freddie Mac back in 1992, and when President George W. Bush did so in 2004, Barney Frank opposed them.
A reining in of Fannie Mae and Freddie Mac would be a reining in of Barney Frank's power. But he can't stop the voters from reining in his power, unless he can once more get by this election year with pious rhetoric to conceal his cynical actions.
To read another article by Thomas Sowell, click here.
Posted by Brett at 11:15 AM