Who Caused the Financial Meltdown (Part 3)?

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In 2003, the Republicans and the Bush administration proposed much tighter regulation of Fannie Mae and Freddie Mac warning of “systemic risk”.

This article is Part 3 of a three part series:  Here is Part 1 and Part 2 can be viewed here.

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.

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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.

financial_slopeCould 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.

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9 Responses to "Who Caused the Financial Meltdown (Part 3)?"

  1. k@rlo   December 17, 2008 at 9:01 am

    The fascist bush nazis are responsible.

  2. fiscallyresponsible   December 17, 2008 at 10:51 am

    Finally, someone with well done research pinpointing the actual source of the problem. No one does this. Even Obama just kept blathering about deregulation, but no one would show us what deregulation led to the problem.

    It seems, although not one liberal is clear, that they believe deregulation led to the financial instruments that caused the problem.

    But predatory lending practices and the affordable housing laws have been around for decades. The only difference is the leverage of derivatives based on these bad loans.

    And you cannot leverage a loan if it doesn’t exist. Leverage of good loans would never have resulted in any problem.

    Great article. DUGG IT!

  3. smashingpumpkins   December 18, 2008 at 10:00 pm

    Thank you. Huffington Post has been lying repeatedl to make their point. Big Foot is more legimate than the reports on the Huffington Post.

    I totally respect your stand against their scam.

  4. WMD   December 18, 2008 at 10:05 pm

    After insisting there was “no reccession”, “it was all mental”, “economy is in good shape” it was all a liberal “media conspiracy” and that the sub prime was only 6% of all loans total anyway.

    Sub prime mess is more of less the straw which broke the elephants back. The US economy was in a serious mess and now were goning to pay for all that easy credit, huge debt which helped prop up the house of card.

  5. Steve from Maryland   December 19, 2008 at 12:26 am

    Ridiculous. Fannie and Freddie did very little of the sub-prime lending. Tighter regulation of these would not have prevented the meltdown. The sub-prime lending was done overwhelmingly by UNREGULATED companies, non-bank banks. The 2000 Commodities Futures Modernization Act created the market for the insane derivitives.

    Fannie, Freddie, ACORN, the CRA…these are all irrelevant, and were convenient whipping boys for Republican candidates, who had to give an explanation other than the deregulation they were responsible for. An illuminating description from the wheeler-dealer trenches where all the thinly-disguised fraud went on:

  6. Michael   December 23, 2008 at 2:08 pm

    This is such a lie and homophobic propaganda. Hating gay people won’t help the economy. Such ignorance is blinding.

  7. Bill Terry   December 24, 2008 at 1:04 pm

    Who had congressional majority in 2003? It wasn’t the democrats. Doesn’t matter what Barney Frank said, the committee votes favored the republicans.

  8. Rex Bradley   December 27, 2008 at 1:12 pm

    I would love a crack in the “levy”. You should know the “levee” from Katrina or “Byebye American Pie”

  9. roy   December 27, 2008 at 1:13 pm

    The point Obama have always stated he’s not going to see this Administration as “Red & Blue”… He’s gonna piss a lot of people off.. because he’s not playing politics as usual.. The only people that seems to be happy with Obama is the Centrists.

    Hard core leftist like Barney(Rubble) Frank is constantly “disappointed” with Obama because Obama doesn’t mess with them like those types of Democrats was expecting…

    Instead of looking at Rick Warren’s gay stance, he picked Rick Warren’s stance on other very important issues… that says to the right, Even though we may disagrees on some things, Obama seems to see past those things and work on the things that both parties may agree on

    That is why you don’t see Obama defending his party as much as the hardcore would like… But somehow i think Obama is not trying to repeat history… just my two cents


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