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.