In 2003, the Republicans and the Bush administration proposed much tighter regulation of Fannie Mae and Freddie Mac warning of “systemic risk”.
Barney Frank, our beloved representative from the state of Massachusetts, championed a crusade against the tighter regulation. He stated,
These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.
Barney (Rubble) Frank was the ranking Democrat on the Financial Services Committee. This article from the New York Times presents the facts.
What? The Bush administration sought more regulation and it was Barney Frank, a liberal Democrat, who led the crusade against it? Oh say it ain’t so Barney, not a Massachusetts Democrat! It couldn’t be traced to a state Representative that was re-elected after abusing boys in a prostitution scandal! Only in Massachusetts could such a man avoid imprisonment, let alone get re-elected!
Barney (Rubble) Frank just this year recommended investing in Fannie Mae and Freddie Mac going forward,
I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.
They’re in a housing market. I do think their prospects going forward are very solid. And in fact, we’re going to do some things that are going to improve them.
Going forward the industry and the stocks collapsed under Frank’s supervision.
Another great quote from Frank from 2003 before voting against regulating Fannie and Freddie:
I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury.
I must say we have an interesting example of self-fulfilling prophecy. Some of the critics of Fannie Mae and Freddie Mac say that the problem is that the Federal Government is obligated to bail out people who might lose money in connection with them. I do not believe that we have any such obligation.
Could Frank have been any more wrong? Frank blames the private sector for the meltdown. Fact is, he fought legislation that would have regulated them five years ago.
There is no doubt that the banks, and eventually other mortgage lenders, would have never awarded these kinds of loans had they not been forced to comply with liberal laws and pressures in the name of “affordable housing”. It was government regulation, not the lack of it, which led to this disaster. The legislation also encouraged the practice of predatory lending to those that could not afford to pay.
That regulation was endorsed by the Democrats, and later action by the Democrats in Congress prevented stronger oversight sought by the Bush administration,. The smoking gun is in Barney Frank’s hand, not the President’s. Barney cost the American People at least $700 billion.