by Kathleen McKinley | October 18, 2010 8:16 am
I’ve have had many discussions about the financial meltdown. I have tried to encourage my left leaning friends to see Congressman Barney Frank’s crucial role in the meltdown. Investors Business Daily has an excellent piece that breaks it down in simple form:
Boston entrepreneur and Marine Sean Bielat came out swinging in a pair of debates this week, blasting the 30-year congressman as “one of the leaders of the economic disaster” and pointing out that as a veteran of the House banking panel, Frank pushed Fannie Mae and Freddie Mac to load up on risky mortgages while fighting proposals to reform them.
Frank says that is simply not true. But…..
Frank’s famously fast tongue is also forked: As Fannie and Freddie took on billions in subprime debt, he insisted they were not facing “any kind of financial crisis,” and urged more affordable lending. “The more people exaggerate these problems, the more pressure there is on these companies (to reform), the less we will see in terms of affordable housing,” Frank said in 2003.
In a hearing held later that year, he seemed to acknowledge the risks. Only, he thought subsidizing low-income, first-time homebuyers was more important: “I do think I want to roll the dice a little bit more in this situation towards subsidizing housing.”
Here is one video of the hearing in 2003 where Frank and other Democrats insists that there is nothing wrong at all with Fannie Mae and Freddie Mac. This video shows Pelosi and Frank at their finest (in hypocrisy) in defending Fannie Mae and Freddie Mac.
I think YouTube must the Democrat’s worst enemy.
And he didn’t just push for it via Fannie and Freddie, but also through the Community Reinvestment Act, which mandates banks make riskier urban home loans. In fact, he backed President Clinton’s historic changes to the law, which forced banks for the first time to hit numerical targets for affordable mortgages. The tougher rules triggered an explosion in subprime lending.
The article explains that Bush “inherited the affordable housing targets set by Clinton, which mandated Fannie and Freddie devote fully half their business to affordable lending. When Bush nudged those goals higher in 2004, Frank raised no alarms. In fact, he said it “serves us badly to raise safety and soundness issues.”
So Bush raised the alarms and got slammed, and then backed down. So in that way, Bush was very wrong. We all know how the media would have treated it. “Bush demands that banks stop lending to low income!” Kanye West would have have said, “Bush hates poor people.” The NYT would have headlined,”Frank fights for the little guy!” This is part of the problem with Republicans. They back down because of the PR, look where it has gotten us! Don’t back down from what you know to be right! Forcing banks into risky loans was always a bad idea. We should have fought against it at the time.
When people say that the financial meltdown was decades in the making, they are right, and Barney Frank was there at the beginning:
Frank was one of the architects of the 1992 legislation authorizing HUD to slap the affordable housing goals on Fannie and Freddie in the first place. Then he demanded the mortgage giants relax their standards to meet those goal
Let us not forget ACORN’s role in this mess:
ACORN leader Madeline Talbott, who personally led Chicago ACORN’s campaign to intimidate banks into making high-risk loans to low-credit customers. Using provisions of a 1977 law called the Community Reinvestment Act (CRA), Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards — and to fill ACORN’s coffers to finance “counseling” operations like the one touted in that Sun-Times article.
Read the entire article at the link to see the tactics of ACORN. But the worse was how they intimidated banks into risky loans. They would say to banks, “Lower your credit standards or we file protests and prevent your merger.”
Although the statistics produced by these studies were presented in highly misleading ways, groups like ACORN were able to use them to embarrass banks into lowering credit standards. At the same time, a wave of banking mergers in the early 1990’s provided an opening for ACORN to use CRA to force lending changes. Any merger could be blocked under CRA, and once ACORN began systematically filing protests over minority lending, a formerly toothless set of regulations began to bite.
The article also outlines Pres. Clinton’s role in the financial disaster.
But Barney Frank is so central to the disaster, that it is beyond me how he is still a Congressman. Let’s hope that won’t be true for much longer.
crossposted at KathleenMcKinley.com
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