Barney Frank: Fannie, Freddie Are Basically 'Public Policy Instruments Of The Government' (VIDEO)

In an appearance on CNBC this morning, House Financial Services Committee Chairman Barney Frank (D-Mass.) made an unusual claim about the mortgage giants Fannie Mae and Freddie Mac. The two mortgage lenders are essentially a "public policy instrument of the government," Frank said.

On Christmas Eve, the Treasury Department lifted a $400 billion cap on the lifeline for the two companies. The move was viewed by many -- including investors -- as a indicator that the two firms will continue to receive billions in direct government support.

Here's Frank:

"Remember now that Fannie and Freddie have been converted...Part of the losses of Fannie and Freddie are that since the housing collapse, Fannie Mae and Freddie Mac...have become a kind of public utility."

Backing Fed Chairman Ben Bernanke's recent comments, Frank argued that regulations -- or lack thereof -- not interest rates were responsible for the financial crisis and housing bubble.

Frank also brushed aside suggestions that Congress could soon pass legislation that would reduce mortgage principal for struggling homeowners. Such a program would violate contractual agreements between lenders and borrowers, Frank argued, and could only work if homeowners went into bankruptcy.

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Comments

[Hysterian68]

06:04 PM on 01/11/2010

If Fanny and Freddie are public utilities, Frank helped to make them that.

So, what should home owners do? Declare bankruptcy, walk away from their house, take their money out of the money center banks, and then bring Fannie and Freddie crashing down. That is the clearest and most unmistakable message the people can send to congress and to this administration.

Next, the good people of Massachusetts who sent Barney to congress need to retire him from further duty.

[boston999]

11:59 AM on 01/07/2010

He is in charge of Fannie and Feddie for all of these years. Hey Barney, were you asleep at the switch? We need to vote this guy out. He's been in there way too long and has lost touch with the rest of us.

[Incorrect Assumptions]

12:12 AM on 01/07/2010

We cannot sustain the economy when all the spending power is concentrated at the top and everyone tapped out. Private debt is now 47 trillion and 300% of GDP. Their is no room for more private debt so govt is filling the gap for now. Here's an idea:

Since we own Freddie and Fannie, why not write the American Dream into law and cut everyone's mortgage in half?

How? By absorbing the private Fed into the public Treasury (public money creation, as the constitution stipulates) and giving Americans what banks now get - direct access to the discount window. We should end private mortgage banking and allow credit worthy Americans to refinance into one near interest free mortgage with our own newly created US public bank. We already own everyone's mortgage already anyway (Freddie/Fannie and the toxic waste that Obama/Congress allowed onto the Feds books, marked to fantasy). Use interest free money for all public debts as well.

By cutting the bankers out of the middle, we could cut everyone's mortgage in half, fix the toxic waste issue, stimulate housing and the economy, balance budgets, provide shelter, save enormous amounts of interest, a real ownership society, revive trust in markets, etc.

Each of us would feel this BIG TIME!

Who loses? The bankers that make money on money by cheating, stealing, fooling, bribing etc.

[Hysterian68]

06:09 PM on 01/11/2010

We are rapidly reaching the point where the choices are going to be either having the people rule by plebiscite via the internet, or, like any emerging banana republic, have the military take over the Government and execute members of congress. Personally, I'd prefer the former.

[yourmomscalling]

02:53 PM on 01/06/2010

EVERYONE VOTE THIS PILE OF DUNG OUT !!!!

[fausto412]

10:23 AM on 01/06/2010

People should file bk. 3 years later if they work on it they will be back in 700+ fico score range.

[Frank N Blunt]

09:23 AM on 01/06/2010

I'm unsure of Rep Frank's capability or capacity to resolve problems where an out-of-whack system scams on citizens to enable participation in ulterior & unregulated market schemes.

[Hysterian68]

06:15 PM on 01/11/2010

I agree. Frank looks and acts like a beaten man. I wouldn't be at all surprised if he throws in the towel and decides not to seek another term. All of his actions are like a toilet filled with Captain Tidy Bowl rowing furiously through the sludge. Suddenly, you have a maelstrum of activity and it all backs up right in your face.

That's what's happened to Barney.

[Hysterian68]

06:30 PM on 01/11/2010

If we reach the point where the public become convinced the entire congress is incapable of "resolving problems", as conditions worsen the actions taken by the people become more drastic and frantic. In 2003 and 2004 in Buenos Aires the people of that city smashed the windows of banks and planted bombs in ATMs when the country defaulted on it's debt and they couldn't get their money out of those banks. They lost ALL confidence in their Argentine congress to do anything.

The same can happen here and that is BEFORE Al Qaida even has to lift a finger.

[Frank N Blunt]

09:16 AM on 01/06/2010

Another great concern needs resolution. Excessive leverage permeates throughout underwriting of transactions participating in ulterior & unregulated markets. Now I fear GSEs too. Even more audacious is ignoring standards demanded of citizens while justifying inordinate rates & fees that enable participation in those markets. Leverage, conveniently used to stomach excessive risk when the deal isn't worth the paper upon which it's written. Aren't reserves lawful requirements but not at the expense of "counterfeiting" dollars from our Treasury? In many cases, leverage is more irresponsible than any criticism regarding subprime borrowers. Absurdly, now any prospective borrower is considered an excessive risk, lost their ability to bargain for just rates & must be aware of unnecessary fees too.
Such leverage without reserves or insurance & participating in schemes that speculate in unregulated markets, shows some nerve to call others risks then demand inordinate interest rates & charge excessive fees. Credit cards - another astounding means to scam. These methods are unjust & usury as the operating funds originated from our Treasury (Federal Reserve - opaque, deficient, & money vacuum). Currently they have access to obtain it at near 0%!
I'm incensed that this isn't enough to satisfactorily prosper. Instead of requiring self-correction, additional access & myriad other means have been provided to bail out or inject liquidity so failed and unjust perpetrators can still maintain their undeserved status. The trust has been broken. I'm unsure of Rep Frank's capability or capacity to resolve problems where an out-of-whack system scams on citizens to

[Frank N Blunt]

08:15 AM on 01/06/2010

Rep Frank is puzzling. Does he know about the programs & processes around him? One thing for sure, he is always ready to suggest layering another bureaucratic level or program when there is one or other in place although not working as it should.
He forgets that GSEs have lobbyists. They are supposed to be profitable & reduce the deficit! Mixing public & private spheres brings trouble via politics, obfuscation and cronyism. Funding GSEs probably allows them to get involved with unsavory schemes or be used as a means to funnel money. Are they required to open the books to public scrutiny?

[Quinny]

03:25 AM on 01/06/2010

Can someone please point out to me the articles of the Constitution
that gives Congress the power to sell mortgages through its proxy
Fannie and Freddy Mac? I'll wait....
And don't try and bulls**t me with the "interstate commerce" clause.

[carbolaw]

01:57 PM on 01/06/2010

I can point out to you the irrationality of thinking a document written over two hundred years ago is going to have specific language to deal with every current issue. The Preamble to the Constitution is so often ignored, but is perhaps the most important piece - our federal government is set up for the general welfare of the citizens of our country. When there are changes to society that lead to corporations and the select few in our country exploiting workers, homeowners and consumers, etc, it is not only the right, but the responsibility of our federal government to take measures to assure the general welfare of the citizens of the US. Strict constructionists have long been a part of the corporatist movement in the US with a very specific agenda, rather than a true ideological belief in the Constitution as a static document. Nothing made this clearer than the SCOTUS taking the side of federal rights over state rights during the 2000 POTUS election cases. However, those who lead this group have done a great job of getting followers to be unwavering ideologues.

[Dangerous Dan]

09:19 PM on 01/06/2010

So you think we deserve a General Welfare State?
If everyone is either on the dole or otherwise out of work,
who will pay?
The government takes money, not makes money.

[Quinny]

04:47 AM on 01/07/2010

Carbolaw,
I could make the argument that the rampant "irrationality" that we are
seeing in the US right now is PRECISELY BECAUSE we have allowed
"our leaders", who aren't worthy of licking the boots of the Statesmen
who created this great Democracy, to "interpret" the constitution INSTEAD
of following it. Which they ALL swear an oath to do. Tell me, does the
Federal Government consider it in the "general welfare" to start illegal wars,
tap our phones, read our emails, stop us at checkpoints as we go about
our business, loot the Treasury with their cronies on Wall Street and put
millions out of work and out of there homes? Because THEY have done
that as well. Care to make an argument in favor of THAT behavior?
Like I said, lets elect people who will FOLLOW the Constitution INSTEAD
of "interpreting" its meaning in such a way as to enrich themselves.
IF you have been paying attention you are no doubt aware that Fannie and
Freddie were paying HUGH salaries to the politically well connected
for running the company....right into the F**king Ground. But hey, its all
part of the "general welfare"...right?

[PhilipTaylor]

01:57 AM on 01/06/2010

Start a "CYCLE OF RENEWAL and GROWTH" for Main Street!

JOINT VENTURES OF COMMUNITY BANKS AND STATE OR OTHER GOVERNMENT BANKS TO SERVE MAIN STREET: The Bank of North Dakota Model (BND)!

For 300 years US has thrived on what Ben Franklin called “ready money” or “ready credit.”

We can have that abundance again, by generating our own credit through our own state and local banks.

Community banks need a partnership with a state-owned banks, or other publicly-owned banks which have ample capital assets. States, counties and cities are actively exploring this option.

The BND model shows us how government-owned banks and community banks can work together to get money flowing back to Main Street again.

And yes, SCREW THE FED. Maximum emphasis not available but fully intended.

We are a nation founded by revolution. We must now become a nation sustained by resistance.

WALL STREET IS SEPARATE AN UNCARING!

Start a "CYCLE OF RENEWAL and GROWTH" for Main Street!

[Research CarolAB]

[No2bailouts]

01:55 AM on 01/06/2010

Can anyone stand barney Frank?
good articles; http://iamned123.blogspot.com/

[dwi]

10:50 PM on 01/05/2010

There is nothing surprising about his comments, and he is correct.

The GSEs were created by federal legislationa and were originally created as government agencies and only later privatized.

[Bunny007]

09:47 PM on 01/05/2010

Wake up America----

The more the banking cabals and our government steal from us, the BOLDER they become.

WHERE is the accountability?? WHERE are the jail sentences?

[ejhickey]

09:38 PM on 01/05/2010

I will always remember Barney Frank's interview on Bloomberg in September 2008 during which he said " Some people are not culturally suited for home ownership" He was right then and he is right now when he argues against writing down the principle of mortgages, except in bankruptcy.

[Hysterian68]

06:20 PM on 01/11/2010

Most Americans since the 70s haven't been "culturally suited" to home ownership. Any people who think their home is an ATM; that real estate prices have no place to go but up, and turn their home equity into an extension of Monte Carlo gaming tables, shouldn't own a home either.

In fact, they shouldn't even own a passbook savings account, let alone be permitted to invest their money.

[research]

09:30 PM on 01/05/2010

He's correct:

"On September 7, 2008, James Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that Fannie Mae and Freddie Mac were being placed into conservatorship of the FHFA. The action is "one of the most sweeping government interventions in private financial markets in decades".[4][5][6] As of 2008[update], Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac) owned or guaranteed about half of the U.S.'s $12 trillion mortgage market.[7]"

http://en.wikipedia.org/wiki/Fannie_Mae