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Barney Frank's Bad Loans
On October 8, the New York Times wrote a story on the Federal Housing Administration (F.H.A.) stating:
Many
of the loans the F.H.A. insured in 2007 and last year are now turning
delinquent, agency officials acknowledge. The loans made in those two
years are performing “far worse” than newer loans, dragging down the
whole portfolio, Mr. Stevens of the F.H.A. said in an interview.
The
number of F.H.A. mortgage holders in default is 410,916, up 76 percent
from a year ago, when 232,864 were in default, according to agency data.
Despite
the agency’s attempt to outrun its fate by insuring ever-larger amounts
of new loans to such borrowers as Ms. Shimon — the current rate is over
a billion dollars a day — 7.77 percent of the portfolio is in default,
up from 5.6 percent a year ago.
Barney
Frank, the Massachusetts Democrat who is chairman of the House
Financial Services Committee, said in an interview that the defaults
were, in essence, worth it.
“I
don’t think it’s a bad thing that the bad loans occurred,” he said. “It
was an effort to keep prices from falling too fast. That’s a policy.”
In
other words, Frank approved of the policy of increasing the number of
loans even to people who couldn't really afford to pay their mortgages.
In fact, this is nothing new. As the Boston Globe wrote last year (Note:
I wholly disclaim and disagree with any racism in the Globe's
reporting, and I do not necessarily agree with - and am not commenting on -
its critique of liberal goals):
Barney Frank's
talking points notwithstanding, mortgage lenders didn't wake up one
fine day deciding to junk long-held standards of creditworthiness in
order to make ill-advised loans to unqualified borrowers. It would be
closer to the truth to say they woke up to find the government twisting
their arms and demanding that they do so - or else.
The roots of this
crisis go back to the Carter administration. That was when government
officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.
The
pressure to make more loans to minorities (read: to borrowers with weak
credit histories) became relentless. Congress passed the Community Reinvestment Act,
empowering regulators to punish banks that failed to "meet the credit
needs" of "low-income, minority, and distressed neighborhoods." Lenders
responded by loosening their underwriting standards and making
increasingly shoddy loans. The two government-chartered mortgage
finance firms, Fannie Mae and Freddie Mac,
encouraged this "subprime" lending by authorizing ever more "flexible"
criteria by which high-risk borrowers could be qualified for home
loans, and then buying up the questionable mortgages that ensued.
All
this was justified as a means of increasing homeownership among
minorities and the poor. Affirmative-action policies trumped sound
business practices. A manual issued by the Federal Reserve Bank of
Boston advised mortgage lenders to disregard financial common sense.
"Lack of credit history should not be seen as a negative factor," the Fed's guidelines
instructed. Lenders were directed to accept welfare payments and
unemployment benefits as "valid income sources" to qualify for a
mortgage. Failure to comply could mean a lawsuit.
As long as housing prices kept rising, the illusion that all this was good public policy
could be sustained. But it didn't take a financial whiz to recognize
that a day of reckoning would come. "What does it mean when Boston
banks start making many more loans to minorities?" I asked in this
space in 1995. "Most likely, that they are knowingly approving risky
loans in order to get the feds and the activists off their backs . . .
When the coming wave of foreclosures rolls through the inner city,
which of today's self-congratulating bankers, politicians, and
regulators plans to take the credit?"...
The Globe goes on to show that Frank has been the main enabler of Fannie and Freddie.
Time and time again,
Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five
years ago, for example, when the Bush administration proposed much
tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.
Now
that the bubble has burst and the "systemic risk" is apparent to all,
Frank blithely declares: "The private sector got us into this mess."
Well, give the congressman points for gall. Wall Street and private
lenders have plenty to answer for, but it was Washington and the
political class that derailed this train. If Frank is looking for a
culprit to blame, he can find one suspect in the nearest mirror.
As I have repeatedly written, the financial crisis was not caused solely by idiots on the right or idiots on the left.
It was caused by both. Idiocy - like corruption - is bipartisan.
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And let's not forget the legions of local builders, developers, realtors, bankers, or their local chambers of commerce, or the local newspapers, television stations, and radio stations dependent on their advertising dollars. These good people worked hard throughout the bubble to improve local tax bases and create local jobs by, unfortunately, getting people to do the wrong thing: buy more house, car, TV-set, etc. than they could afford. The ubiquitous business model seems to be, sell as much as possible, not sell what your local workers can afford. But, speed kills. Nevertheless, the model continues: lobbying remains heavy on local governments, even as they lay off librarians, teachers, park rangers, and infrastructure maintenance staff, to build stadiums and downtown commercial centers. Perhaps, if we are to rescue the dollar, we must somehow exchange the growth business model for a sustainability business model, which must start with selling local workers stuff they can actually afford. Do we have any examples? How about Henry Ford's cars, Buckminster Fuller's houses, Jimmy Carter's solar panels on the roof of the White House and tax rebates for home insulation, and now Michelle Obama's kitchen garden?
Nice article.Thanks
I am sure Barney Frank is culpable, but to lay it all on him as if he were a mastermind (obviously not) is pointless. The problem was and is that the fraud, greed, corruption, lying is endemic not only in Congress but throughout the country. Because someone puts a gun in your hand doesn’t mean you have to use it. Those of us who were honest, played by what we thought were the rules received it hard while we were bent over and they continue to stick to us. The result is more people every day throw up there hands and go to the dark side. I fear we have passed the tipping point and it is over. The US, democracy and capitalism as we knew it is gone. What it will be replaced by I don’t know, but it doesn’t look good.
What "racism" is there in the globe's reporting?
The homophobia is rampant on this thread.
You guys worried someone will out ya or something?
As for the article itself, yes, low IQ's and American politics go hand in hand. It's about the only thing that's bipartisan in Washington.
The homophobia is rampant on this thread.
You guys worried someone will out ya or something?
As for the article itself, yes, low IQ's and American politics go hand in hand.
It's about the only thing that's bipartisan in Washington.
Barney Frank is a traitor to the American people, just like half of Congress. Every policy that they enable will slowly destroy this country and everything it stands for.
When will the revolution begin?
And people imply Canadians are passive...
For the record, our Top Ten villians list: Robert 'The Bagman' Rubin, Larry 'Little Bagman' Summers, Phil 'Senator Enron' Gramm, 'Easy Al' Greenspan, 'Baghdad Ben' Bernanke, 'Hanky Panky' Paulson, Christopher 'See No Evil' Cox, Barney 'It's Not My Fault' Frank, Chris 'I'm a Believer' Dodd, Franklin 'Mojo' Raines.
I think all of these worthy gentleman need to hear a little guillotine music..................
unfortunately you have only fingered the the accomplices
and bag men....you need to look elsewhere to
find the king pin...even the bush crime syndicate,
the clintonistas, the obamanauts are deputies of the junta....
the real power behind the throne is the plutocracy
which has its own layers of power but at whose
pinnacle sit the rockefeller / rothschild axix
of evil....until you put their necks in the
guillotine you have no change...
The main DemocRATS in government are committed to the destruction of America. They are statists in the New World Order sense and the Bush's were there with them.
... and then there's FHA: http://www.fool.com/investing/general/2009/10/16/prudence-just-aint-fhas...
I wrote this piece the other day and put some actual numbers behind Barney Frank's quote:
http://homedebtors.blogspot.com/2009/10/barney-frank-fha-tax-credits-and...
Barney Frank is a special kind of a**hole--the prig you remember from the schoolyard that would pick and pick and pick at you, then when you finally got fed up and hit him, cried that you were being mean.
Rather than take responsibility for the role that he did play in this mess--and his explanation for supporting bad loans as "policy" clearly indicts him--he either pretends that it was justified, "just because;" or tries to shift the blame to others (for example, his argument on The Daily Show that the $750 billion "stimulus" would have been successful if Spector and the Maine Senators hadn't left out $50 billion from the bill is priceless). Not to mention he's been sitting his fat ass on the Fed audit bill since February and won't release it until it's been completely nerfed.
In a sane world, Frank would have been tarred and feathered and run out on a rail last fall; instead, he's one of the most powerful members of the House and a classic example of why the corruption hasn't ended.
They serve their master(s), or get booted off the Hill and back to obscurity (like Cynthia McKinny). Cake or Death?
http://www.youtube.com/watch?v=BNjcuZ-LiSY
pedophile barney frank is a ring leader in the crisis....he was easily corruptible due to his pedophilial involvement with the omaha pedophile sex slave ring which has been running since the 1980s when larry king (not the cnn celebrity) was indicted on embezzlement and other charges stemming from the collapse of front bank franklin credit untion during the s&l crisis of the late 1980s/early 1990s....tons of pornographic material were removed from the "credit union."
king delivered boys to powerful washington politicians in the reagan / bush white house through craig spence who conveniently had a "suicide". barney was a very good customer and has been quite rewarded for his patronage of the ring.....as far as i can tell this was a bush operation running straight from the white house just as he ran iran-contra under the nose of reagan.....
the point is that the banksters easily subverted frank and his continued position in office is disgusting on many levels....morals do count...crime does pay....
Hmmm....Barney Frank f***ing us up the a**.
Cheap shot, but worth it.
I guess you could say Barney Frank blew Freddie.......up!?
OOOHHHHHH........
I'll be here all week... Don't forget to try the veal picatta
You might want to take a look at this.
Damn! So the exact time that Frank began this subprime mortgage hell at Fannie Mae, Frank was also sleeping with one of Fannie's top executives - Herb Moses. Frank even called Moses his 'spouse'.
Now this puts a whole new meaning to the term 'screwed'.
Fannie Mae indeed...
A lot of Repulicans on that site...
Barney needs to go. How could anyone seriously even consider voting for that clown, oh wait, he's from Mass. thats how.
Great article.
Any chance we can have a contest as to when the official announcement of the impending FHA implosion occurs?
I'm in for December 2010, just after the mid term elections.