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Friday, January 16, 2009

Was Barney Frank Responsible For Financial Collapse?

This must watch video shows that president Bush, his Treasury secretary John Snow and former Federal Reserve chairman Allan Greenspan all warned the government sponsored enterprises (GSEs) were getting too big and needed better regulation. I remember this well and how congressman Barney Frank led the effort to block regulation.

In September 2003, Frank, then the ranking Democrat on the Republican-led Financial Services Committee, opposed Bush administration proposals for transferring oversight of Fannie Mae and Freddie Mac by creating an independent agency to supervise the GSEs. His reasons were more regulations would make it harder to buy homes for those who could not afford to pay back the loans, the poor.

Wikipedia writes:
"The administration's proposal, which was endorsed in large part ... by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies ... [it] does not alter the implicit guarantee that Washington will bail the companies out ... Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws." The proposal would have moved oversight from Congress and the Department of Housing and Urban Development to the new agency. Frank stated in 2003, "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."[36] Frank stated that the bill would potentially "[weaken] the bargaining power of poorer families and their ability to get affordable housing".[36]
After the Democrats took control of the house, in 2007 Frank was rewarded with the chairman of the House Financial Services Committee which oversees housing and banking industries. Talk about letting the fox oversee the hen house. Less than a year later, the banking industry was in a shambles.

[36]Sephen Labaton (Published: September 11, 2003). "New Agency Proposed to Oversee Freddie Mac and Fannie Mae - New York Times".
September 11, 2003: "The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
Who do you blame for the financial collapse? At the heart of the mess, greedy for fees loan agents made loans to people who lied about their ability to repay the loans. This did not have to happen.

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