Until this last month, Fannie Mae and Freddie Mac may have been pictured by most Americans as two individuals which, in some ubiquitous way, were connected to the mortgage market. Now, we all find ourselves struggling to learn the complexities of GSEs, asking exactly who was really calling for more regulation, who was calling for less, and would have regulation averted the catastrophic meltdown that we just experienced.
Whose responsibility was it to foresee any potential problems in the banking industry? Upon whose desk does the $700 billion bucks stop?
Although it is certainly much more popular to point fingers at the CEOs of these GSE who were pocketing on the upwards of $200 million in compensation , one must remember, those individuals were doing exactly as they were commissioned by Congress to do…provide as many risky, sub-prime loans as they possibly could. And they were doing it too well.
The architect of the meltdown is Massachusetts own Barney Frank, ultra liberal democrat who set the stage for the meltdown, and as the Chairman of the House Financial Services Committee, even had the smarts to see the ship wreck he was creating, and publically discount the possibility that the unthinkable would happen. In his speech before Congress on the proposed regulation of Fannie Mae that would limit any type of financial crisis, Barney Frank said in 2003:
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… I do not think at this point there is a problem with a threat to the Treasury. … 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. ….The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disastrous scenarios. And even if there were a problem, the Federal Government doesn’t bail them out. Barney Frank obviously had been told many times that Fannie Mae and Freddie Mac were headed towards a precipice, and the fact that they increasingly investing in risky mortgages under the guise of providing “affordable housing” was being called into question by Republicans. Frank even floated the idea that the U.S. Treasury might be called upon to bailout these giants.
Amazingly enough, Barney Frank has the gall to say on the House Financial Services Committee Website that “After 12 years of Republican control, the Republicans failed to enact meaningful reform of Fannie Mae and Freddie Mac.” He neglects to say that one of the primary reason they couldn’t enact reform was because Barney Frank was blocking it!
Why did Barney Frank oppose any regulation then? When, five years ago, Alan Greenspan and many Republicans were warning about this exact scenario happening, why did Barney Frank so vigorously oppose and reform for Fannie Mae?
If it is apparent that numerous individuals saw this coming, and Barney Frank himself speculated that the Federal government was going to be asked to underwrite the shortfall, yet he acted to only hasten the debacle, one can only presume that there was an element of design in Barney Frank’s actions.
At the very least, even the most liberal, yet objective observer would say that the meltdown was an unintended consequence of Barney Frank’s agenda. Not unlike how the tradegy of 9-11 was an unintended consequence of Barney Franks “Frank Amendment” regarding immigration, as it was uncovered in the “Able Danger” documents.