Friday, January 22, 2010
Barney Frank Wants to Abolish Fannie and Freddie
Barney, what do you see?
Reported by Bloomberg:
At a hearing in Washington D.C. today Barney Frank stated, “The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance”. Fannie Mae and Freddie Mac, the largest U.S. mortgage- finance companies, have received $110.6 billion in taxpayer- funded aid since regulators took over the government-sponsored enterprises in September 2008.
Vanity Fair has an Excellent Article in their 9/15/2009 issue, 100 to Blame: Barney Frank, Richard Fuld and more
As far back as 1991, Frank was pushing Fannie Mae to break its rules, lower its standards, and buy risky loans. As The Boston Globe reported in November 1992, he helped to convince Fannie Mae to make “substantial concessions” on its rules regarding multiple-family-home mortgages, despite data from Fannie itself showing that the “default rate on mortgages on two-family homes is twice that of single-family homes, and the rate for three-deckers is five times the rate for single-family dwellings.”
On September 10, 2003, the House Committee on Financial Services met to hear the Treasury Department’s plea for a new, tougher regulator to oversee Fannie Mae and Freddie Mac. In Frank’s opening statement to the committee, he said:
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.Link to complete article:
In June 2005, virtually every major newspaper in America carried stories warning about the housing bubble. It was the subject of 15 articles in The New York Times alone. Yet here is how Barney Frank saw the world on June 27, when he delivered a speech on the House floor in favor of a resolution celebrating National Homeownership Month:
This is a very important resolution, particularly at this time, because we have, I think, an excessive degree of concern right now about home ownership and its role in the economy.
Obviously, speculation is never a good thing. But those who argue that housing prices are now at the point of a bubble seem to be missing a very important point. Unlike previous examples, where substantial excessive inflation of prices later caused some problems, we are talking here about an entity, home ownership, homes, where there is not the degree of leverage that we have seen elsewhere.
This is not the dot-com situation. We had problems with people having invested in business plans for which there was no reality and people building fiber-optic cable for which there was no need. Homes that are occupied may see an ebb and flow in the price at a certain percentage level, but you will not see the collapse that you see when people talk about a bubble.
So those of us on our committee in particular will continue to push for home ownership.