By reversing himself on Fannie and Freddie, has Frank given his critics a political gift?
On Tuesday, in an interview with Niel Cavuto, Barney Frank made an amazing statement:
â€œI hope by next year weâ€™ll have abolished Fannie and Freddie. It was a great mistake to push lower-income people into housing they couldnâ€™t afford and couldnâ€™t really handle once they had it. I had been too sanguine about Fannie and Freddie.â€
Frank has for years been a strong supporter for Fannie Mae, Â Freddy Mac and affordable housing programs.
The Bielat campaign wasted no time in capitalizing on Frank’s remarkable reversal, making an ad contrasting Frank’s previous statements.Â The video has been getting a lot of play for an online campaign ad – over sixteen thousand views in just a few days.
Is it fair?
The nationalization of Fannie and Freddie has so far cost taxpayers $150 billion dollars in the past two years. Frank has been consistently criticized by Republicans that he did not act to solve the problems that lead to the meltdown.
Frank has always maintained that criticism that he contributed to the financial meltdown has been unfair. Frank makes the case that he acted to regulate the financial industry as soon as he became chairman of the House Financial Services Committee, for example on an interview with Bill O’Reilly:
I became chairman of the committee that has jurisdiction in February of 2007.Â Within two months, the committee had passed a bill that did all of the increased regulation that the Bush Administration ever wanted.Â I was a supporter of the regulation, but the Bush Administration couldn’t get it through Congress. When the Democrats took over Congress, we passed exactly that regulation, and while the Senate didn’t do it until July of this year, here’s the record: Twelve years of Republican control, no legislation to increase the regulation of Fannie Mae and Freddy Mac.Â Nineteen months of the Democrats, and we have done it.
What Frank doesn’t say is that prior to becoming chairman of the House Financial Services committee, Frank was a member of the the House Banking Committee for 22 years becoming the ranking Democrat in 2003. The Banking Committee is responsible for regulating government-sponsored enterprises (GSE’s) like Fannie and Freddie.
Critics are asking why didn’t he act then?
Immediately after the crisis first hit, Frank was an outspoken supporter of Fannie and Freddie, saying that he thought they would weather the financial storm and recover and maintaining that they played an important part in providing affordable loans for low income borrowers. Some say that his support contributed to a delay in taking action which greatly increased the cost of the eventual bailout.
An excellent article in Business and Media points out that during this period, where Frank ardently supported Fannie and Freddie, he was in a long term homosexual relationship with Fannie Mae executive Herb Moses who he then referred to as his “spouse”. They have repeatedly asked for Frank to comment on whether this isn’t a conflict of interest.
The two have since broken up, so one is left wondering.
Troubling also is that Frank has received over $40,100 in campaign contributions from Fannie and Freddie over the past two decades.
Reversal on Affordable Housing
Frank has also reversed himself recently in another important way that relates to Herb Moses.
During the period Frank was “married” to Moses he was a supporter of many initiatives to encourage banks to make loans to low income urban borrowers – programs that Herb Moses was developing.
Moses left Fannie Mae in 1998, the National Mortgage News noted:
Herb Moses, who helped develop many of Fannie Maeâ€™s affordable housing and home improvement lending programs, has left the mortgage industry. … He played an instrumental role in developing the companyâ€™s Title One and 203(k) home improvement lending programs.
In Tuesday’s interview Frank now says that some low income borrowers should not be homeowners:
I have been very critical for a long time that not everybody should be a homeowner. There are people in this society who for economic and frankly social reasons can’t and shouldn’t be homeowners. I do want some government help to build affordable rental housing.
I understand the part about economic reasons. One wonders why it took so long for Frank to come to that realization. But I really wonder what could Frank possibly mean by “social reasons”. Does Frank think that there are some people that even if they had the money are not fit to be home owners for some “social reason”?