Representative Barney Frank, now Chairman of the House Financial Services Committee, claims that he did not impede requests by Bill Clinton, John McCain and others to provide more forceful regulation of the Government Sponsored Enterprises like Fannie Mae and Freddie Mac.
From the Boston Globe …
“Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.”
“The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and ‘redlining’ because urban blacks were being denied mortgages at a higher rate than suburban whites.”
“The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to ‘meet the credit needs’ of ‘low-income, minority, and distressed neighborhoods.’" Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more ‘flexible’ criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.”
“All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. ‘Lack of credit history should not be seen as a negative factor,’ the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as "valid income sources" to qualify for a mortgage. Failure to comply could mean a lawsuit.”
When the coming wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians, and regulators plans to take the credit?"
“Frank doesn't. But his fingerprints are all over this fiasco. Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that ‘these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis.’ When the White House warned of ‘systemic risk for our financial system’ unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.”
“Now that the bubble has burst and the ‘systemic risk’ is apparent to all, Frank blithely declares: ‘The private sector got us into this mess.’ Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.”
Screwing the pooch …
Special privileges for lovers …
“Back in 1985, Frank had engaged the services of a male escort named Stephen Gobie, who had advertised his "hot bottom" in a personal ad. Over the next two years, while Frank was trying to decide whether to come out, he and Gobie carried on a clandestine affair, during which time Frank hired Gobie as a driver despite knowing Gobie was on probation for drug possession and for possession of child pornography. Frank used his House privileges to fix Gobie's parking tickets. He wrote a memo trying to clear Gobie from probation that was disingenuous at best and an outright deception at worst. Gobie repaid Frank by running a prostitution service out of Frank's Capitol Hill apartment. When Frank discovered this, he fired Gobie and ended their relationship. Then, in 1989, just two years after Frank's announcement that he was gay, Gobie told his story to the conservative Washington Times.”
“There was an immediate public outcry. Frank confirmed the basic details of his relationship with Gobie and the financial and other favors he'd done, but he angrily denied he'd been aware that Gobie had gone into business for himself in Frank's apartment. Even so, it was an astonishing act of indiscreet self-indulgence, especially for the stiff-necked ethics scold who'd shown no pity for the various Abscam defendants. Even Frank's closest Massachusetts friends were shaken. And The Boston Globe called for Frank to resign, so as to spare the voters the pain of having to confront his sex life in the voting booth.”
“Instead, Frank admitted what he'd done, denied what he hadn't, and took his case to the House ethics committee, which recommended a reprimand by the full House, a lesser penalty than the censure that had been requested in a motion by a notorious back-bench bomb thrower named Newt Gingrich. The punishment was handed down in 1990.”
Fannie Mae: democrat piggy bank?
“Prominent Democrats ran Fannie Mae, the same government-sponsored enterprise (GSE) that donated campaign cash to top Democrats. And one of Fannie Mae’s main defenders in the House – Rep. Barney Frank, D-Mass., a recipient of more than $40,000 in campaign donations from Fannie since 1989 – was once romantically involved with a Fannie Mae executive.” <Source>
Who was Herb Moses?
“While the relationship reportedly ended 10 years ago, Frank was serving on the House Banking Committee the entire 10 years they were together. The committee is the primary House body which along with the Office of Federal Housing Enterprise Oversight (OFHEO) has jurisdiction over the government-sponsored enterprises.”
“He has served on the committee since becoming a congressman in 1981 and became the ranking Democrat on the committee in 2003. He became chairman of the committee, now called the House Financial Services Committee, in 2007.”
“Moses was the assistant director for product initiatives at Fannie Mae and had been at the forefront of relaxing lending restrictions at the company for rural customers, according to the Feb. 23, 1998, issue of National Mortgage News (NMN).”
“ ‘Herb Moses, who helped develop many of Fannie Mae’s affordable housing and home improvement lending programs, has left the mortgage industry,’ Darryl Hicks wrote for NMN. ‘Mr. Moses - whose last day was Feb. 13 - spent the past seven years at Fannie Mae, most recently as director of housing initiatives. Over the course of time, he played an instrumental role in developing the company’s Title One and 203(k) home improvement lending programs.’”
Cheap shot …
Published stories about a potential conflict of interest have continue to swirl in the media because of his sexual involvement with a then-current Fannie Mae employee who was charged with such duties as expanding Fannie Mae’s affordable housing programs, increasing their lending caps and reducing their core capital requirements. While there was ample blame to go around, we believe that Barney Frank’s concentrating the blame on mortgage brokers, mortgage bankers and lenders was a cheap shot.
Almost as cheap a shot as blaming others for his regulatory interference is our assertion that: while we do not know if Barney Frank did impede requests to impose stricter regulations on the GSEs or if his relationship with the Fannie Mae employee could be considered undue influence, we do know that Barney Frank is not above getting a little fanny action. Which is our cheap shot in return!
Did Barney Frank get a little piece of Fanny?
What can YOU do?
Tell your legislators to stop concentrating on who was to blame and let’s get on with fixing the problem in a manner that will not bankrupt both borrowers and the American taxpayer. Let’s reset the borrower’s mortgage rate and extend the maturity to produce lower monthly payments.
There will be plenty of time to punish the wrongdoers after the FBI finishes their investigation. Hopefully, members of Congress and the Administration will not strike a deal to forgive the lot of them.
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"The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius