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Barney Frank: Abolish Freddie And Fannie

From a memory-free Reuters:

Democrat Frank says abolish Freddie and Fannie: report

By JoAnne Allen Joanne Allen Wed Aug 18, 2010

WASHINGTON (Reuters) – Fannie Mae and Freddie Mac should be abolished rather than reformed as part of the Obama administration’s planned overhaul of the government’s role in housing finance, Rep. Barney Frank, chairman of the House Financial Services committee, said on Tuesday.

"They should be abolished," Frank said in an interview on Fox Business, when asked whether the mortgage giants should be elements in housing market reform. "They only question is what do you put in their place," Frank said.

The Federal Housing Administration should be fully self-financing and Freddie and Fannie should be replaced with a new mechanism to help subsidize housing, Frank said in the interview.

"There is no more hybrid private-public," the Massachusetts Democrat suggested. "If we want to subsidize housing then we could do it upfront and let the budget be clear about that."

None of this is really news, since Mr. Frank has been recommending such a move since last January, as we noted at the time.

Of course Mr. Frank, like the rest of the members of the House is running for re-election. But we had no idea that his seat was in jeopardy.

Fannie Mae and Freddie Mac were government-sponsored enterprises, privately owned companies supported by the government, until the Bush administration took control of the companies in 2008 to save them from collapse.

For the record, the Federal National Mortgage Association (Fannie Mae), was established by the Congress in 1938 after the Great Depression to create a liquid secondary mortgage market.

In 1968 Congress converted Fannie Mae into a Government Sponsored Enterprise (GSE), in order to remove its activity (that is, its losses) from the annual balance sheet of the federal budget. In 1970 Congress created another GSE, the Federal Home Loan Mortgage Corporation (Freddie Mac), to expand the secondary mortgage market.

In 1999, the Clinton administration pressured Fannie Mae to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas designated in the Community Reinvestment Act of 1977.

Because of these increased ratio requirements, Fannie Mae eased the credit requirements on the mortgages it was willing to purchase, enabling them to make loans to subprime borrowers at interest rates higher than conventional loans.

Frank said that he does believe the federal government should have a role in building affordable rental housing but thinks money should go toward projects by private developers.


On the question of whether the government should still provide some guarantees in the mortgage market, Frank said: "If we have it (guarantees), it has to be self-financed by the people who are benefiting."

Frank commented after Treasury Secretary Timothy Geithner convened a Washington conference of housing industry leaders to hear ideas about reforms for the $10.7 trillion mortgage market…

In the Fox Business interview, Frank also was critical of public policy that promoted homeownership at any cost. He also said the federal government should not be a "backstop" in guaranteeing mortgages.

"There were people in this society who for economic and, frankly, social reasons can’t and shouldn’t be homeowners," Frank said. "I think we should, particularly, stop this assumption that you put everybody into homeownership."

"Public policy has been too much to try to push people into homeownership."

This too is not news. As we noted at the time, Mr. Frank admitted that the push for home ownership was a mistake as far back as April 2009. Of course he is entirely unwilling to admit his role in such a huge mistake.

Meanwhile, as we have previously noted, back on September 11, 2003, the New York Times reported that the Bush Administration recommended the most significant regulatory overhaul in the history of the housing finance industry.

Under the Bush plan, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac. The new agency would have the authority, which now rests with Congress, to set capital-reserve requirements for the company and to determine whether the company is adequately managing the risks of its portfolios.

Needless to say, such a new agency probably would have prevented the housing meltdown that occurred four years later.

The New York Times also reported the Democrats vehement opposition to the Bush plan, including Mr. Frank’s:

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

But that was then, and this is now.

This article was posted by Steve on Wednesday, August 18th, 2010. Comments are currently closed.

8 Responses to “Barney Frank: Abolish Freddie And Fannie”

  1. Liberals Demise says:

    “I was against reform before I was for it.”
    Looks like Bwarney is now a ‘Home O’ Phobe’.

  2. proreason says:

    Orwell nailed it, didn’t he.

    As for “reform” of the mortgage market, might I humbly suggest that we return to the days when mortgages were only granted to people with the ability to pay them back.

    But of course, we can’t do that.

    That would we going in “reverse”, wouldn’t it?.

  3. tranquil.night says:

    The Big Lie.

    People still have yet to believe it.

    “Needless to say, such a new agency probably would have prevented the housing meltdown that occurred four years later.”

    But there it is.

    Great work Steve. Shout it from the mountain every last time this Home O’ Phobe (©LD) opens his mouth.

  4. wardmama4 says:

    Did Boehner slip something into their drinks when they all ran back to DC for SanFranGranNan’s ‘crisis’ of a no title bill that is just slush fund money to keep Union pensions going? Man SanFranGranNan claiming all mosque critics should be investigated (good luck on that one – investigating 70% of America – aren’t these the same people who claim that they can not find nor deport 12-20 million illegal aliens?!?) and now Frank saying this. We know Harry Reid is as close to past tense as is possible prior to the election fraud committed on election day by ACORN – but the polling numbers must be sinking like a rock for these two to be so far into the insanity realm – does he think simply because he was on Fox Business that no one on the other side would ever hear it? Of course the Dem propaganda machine will do its best to keep this quiet.

    Thank goodness for the Internet – the bright light it shines on these vile people might actually allow We The People to get rid of these vermin.

  5. jobeth says:

    In addition to finally having to admit that Fannie and Freddie are a mess…altho we know it was in “great” shape up to the very day the bubble burst…Barnie boy has probably been jacked up by the tie by some smart conservative behind the scenes and told they have the goods on the old boy.

    A little incentive to “do the right thing”….finally. (Is that even possible for him?)

    Besides…if they are closed down, it’s easier to get rid of incriminating evidence that just might throw a few of these characters in prison for a long while.

    In addition! This rental for the masses idea is the next step in the progressive bag of tricks.

    First screw up the home ownership, American Dream so bad (all the while making a fortune…for the elite….) that many lose their homes…then the push for rentals…Oh? Not enough rental units?…no fear…”We are from the Government and we are here to help”

    “We’ll just build a bunch of very nice apartment complexes to house all those who are in dire need of housing.”

    Enter … stage left…”council housing” controlled by the government.

    For more information refer to the UK.

    I can see this coming around the bend at lightning speed.

  6. canary says:

    Tranquilnight. Agree it’s only a name change, something the federal government is always doing.
    Behind the scenes he & the liberals are recycling the pushing for easier housing loans, and add to this their plans to pay people mortgages that are under the water, one more things people’s taxes will go to.

  7. P. Aaron says:

    Would Frank be so…ah…’Frank’ if a Republican were President?

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