Recently, the editorial staff of the Wall Street Journal repeated unsupported and flat out wrong conservative talking points about me and the root causes of the subprime mortgage crisis. I sought to counter their accusations in a letter to the editor, but the Journal, true to their conservative ideology, is too busy stifling debate and democracy to care that not only are their statements incorrect, they run counter to the own editorials. Here is my response:
Letter to the editor
Rep. Barney Frank
Friday, December 05, 2008
Editor:
I am used to having my views severely distorted by the Wall Street Journal Editorial Board - in contrast to the accurate representation that its reporters present. But the opening of the editorial on December 3rd doesn't distort - it gets the truth absolutely backwards. In short, the Journal's assertion that I have "spent [my] career encouraging mortgage loans to people who can't repay them," is not only entirely inaccurate; it blames me for policies that the Journal has itself defended.
I have consistently argued that the push for homeownership that existed in the Clinton administration, but was significantly upgraded in the Bush administration, made the mistake of assuming that virtually all people could be homeowners. In contrast, I argued that the majority of low-income people should be aided by policies that promoted affordable rental housing.
For example, on February 18, 2002, at a hearing on the budget I said "I am in favor of trying to help lower-income people get the advantages of homeownership...but almost by definition, the large majority of poor people are going to need rental housing." On March 6, 2004, the National Journal reported that "When the FHA's plan to insure subprime loans was included in a Senate-passed appropriations bill, Frank...a staunch supporter of low-income housing, wrote a highly critical letter urging that the measure not be included ... Not only had the House committee not examined ...the proposal he said then, but the measure also offered no protection against lenders inappropriately steering people towards these high-cost loans. Nor did it offer safeguards to ensure that participants 'were fully suitable for homeownership.'"
That same year, when the Bush administration insisted that Fannie Mae and Freddie Mac raise the percentage of below-median income homeowner mortgages they bought, I was correctly quoted in a Bloomberg article on June 17th as saying that this would "do some harm," and the writer noted that "Frank's comments echo concerns...that the new goals will undermine profits and put new homeowners into dwellings they can't afford."
It was a consistent series of statements like that on my part, and efforts to act on them --although these were often unsuccessful when I was in the minority -- that led frequent Republican economic appointee and Wall Street Journal contributor Larry Lindsey to write in April of this year that "Barney Frank is the only politician I know who has argued that we needed tighter rules that intentionally produce fewer homeowners and more renters. Politicians usually believe that homeownership rates should - must - go ever higher."
In fact, I was one of the supporters in 1994 of the legislation that directed the Federal Reserve to restrict inappropriate mortgages at the subprime level, and I also lamented Alan Greenspan's refusal to implement this - a refusal which he in a forthright manner acknowledged recently was a grave error. When he refused to do this, I and others in Congress, mostly but not only Democrats, pushed for legislation to restrict subprime mortgages.
As Mark Zandi notes in his recent excellent study of the financial crisis, when "the Bush administration put substantial pressure on Fannie Mae and Freddie Mac to increase their funding of mortgage loans to lower-income groups," I and other Democrats stepped up our efforts to pass legislation that banned the inappropriate loans that have led to the current crisis. In Zandi's words, "Democrats in Congress worried about increasing evidence of predatory lending...and the Democrats wanted a federal (law) that would cover all lenders nationwide. The Bush administration and most Republicans in Congress were opposed, believing legislation would overly restrict lending and thus slow the march of homeownership...the last attempt to pass any predatory lending legislation occurred in 2005 but it was also stymied."
In other words, I was consistently arguing against efforts to extend homeownership to people who could not afford it, and instead sought to increase rental housing. Indeed, as the Journal knows, one of their criticisms of my attitude towards Fannie and Freddie has been my ultimately successful effort to create an affordable housing trust fund that takes money from Fannie and Freddie and puts it into rental housing.
In fact, Zandi's comment that the last effort to pass any predatory lending legislation was 2005 is correct as it applies to those years from 1995 until 2006 when the Republicans controlled Congress. However, when the Democrats achieved a majority in 2007, and I became Chairman of the Financial Services Committee, the first major piece of legislation the committee approved was a bill adopting the regulatory upgrade for Fannie and Freddie that had been strongly advocated by the Bush administration, but which it had been unable to get the Republican Congress to pass. Next, we moved on to anti-predatory lending legislation and succeeded later in 2007 in passing a bill that, had it been law earlier - when we were in the minority and unable to enact it - would have prevented most of the bad loans.
But, while the predatory lending bill passed by a large majority in the House, there were staunchly conservative advocates of unlimited homeownership who were critical. One prominent conservative voice lamented in November 2007 that I planned "to hold a committee vote on the Mortgage Reform and Anti-predatory Lending Act that would impose new rules and financial penalties on subprime lenders while providing new lawsuit opportunities for distressed borrowers." In objecting to this legislation, this commentator defended the record of subprime lending, although conceding that there had been some "lending excesses." Decrying the attacks on subprime lending, this statement said that "For all the demonizing, about eighty percent of even subprime loans are being repaid on time and another ten percent are only thirty days behind. Most of these new homeowners are low-income families, often minorities, who would otherwise not have qualified for a mortgage. In the name of consumer protection, Mr. Frank's legislation will ensure that far fewer of these loans are issued in the future."
Exactly. That was my intention then, and it was my intention years earlier when Republicans blocked it and carried out the spirit of these comments to allow fairly unregulated subprime lending. And of course the statement I have been quoting here is the Wall Street Journal Editorial of November 6, 2007.
Harry Moroz: Our Shadowy Government: Czars, Health Reform, And Bush's Resurgence
Criticism of Obama and the czar "system" is overblown. In fact, a czar's power comes not from dictatorial authority, but from humble restraint.
Reports are out that over 24 million chinese will be competing for 12 million jobs by next year ... Iceland is in hock ... layoffs in the EU as bailouts are not holding.
The financial institutions may yet have dragged us into war.
The finance institutions want to keep the finger pointed at what congress did to justify being bailed out ... but it is those same institutions the AIG Citi Lehman Brothers and the like who are to blame for the magnitude of this crisis.
Had those loans not been made there would not be a crisis ... but had those loans not been bundled and sold as good there also would not have been a crisis. Everyone selling these loans knew ... I'll say it again "everyone selling these loans knew" they weren't worth the paper they were printed on ... now ... see if that turns a few little light bulbs on.
Do you get it now ...
Outlaw ajustable loans and only go with fixed loans.
I'll give you three guesses and the first two don't count.
Let's keep focused on changes needed to regulate the financial universe; the dark wizards manipulated the financial system & stole our money and home values. but we can take our lives back by local banking and local buying. Thanks for speaking up Barney!
I'm a Broker, I know my own kind.
You are the best. What would we do without you and Maxine Waters?
As the man who heads the Banking Committee, you should have been more vigilant about monitoring the nation's banks. Many things lead to the subprime mess, but you should have been sounding warning bells and using your influence to help ward off this disaster.
As to the bank balilout, why didn't you and the Congress REQUIRE that a fixed portion of loaned money be instantly made available to consumers in the form of credit? The banks have simply pocketed your gift with no strings attached.
Unfortunately, this is just one example of what The Wall Street Journal has been doing for years, if not decades. I believe they should pay a heavy price for ignoring, denying, distorting and twisting the truth. Can there be any doubt that The Wall Street Journal Editorial Board bears more than a little responsibility for our current global economic mess?
Far too many Republican politicians and business leaders have been relying on this mental junk food for years, and we are all now paying the price for their having consumed so many empty intellectual calories. Enough already!
Don't back down. Keep exposing them for the liars that they are.