The View From 1776
Tuesday, September 09, 2008
Another Misguided Liberal-Progressive
Democrat/Socialist Congressman Barney Frank has for many years blocked every attempt to rein in Fannie Mae and Freddie Mac.
Liberal-progressives, led by Congressman Frank, are directly responsible for the Treasury Department’s take-over of Fannie Mae and Freddie Mac and for the resulting huge cost to taxpayers.
Conservative Democrats and Republicans have for years attempted to impose common sense limits on lending activities of Fannie and Freddie and to strengthen their balance sheets. Democrat/Socialists have blocked them at every turn.
It should also be noted that such conduct by liberal-progressives is not an isolated phenomenon. Another colossal cost to taxpayers is the unconscionable punitive damage awards extorted by the tort bar, one of the largest contributors to Democrat/Socialist campaign coffers.
Many companies have been forced into bankruptcy, with loss of thousands of jobs. Insurance rates have skyrocketed. Many doctors, particularly gynecologists, have ceased to practice medicine or have stopped delivering babies. Business profits have been reduced by punitive damage awards, which means that corporate tax revenues to the IRS are lower than they would otherwise be.
Democrat/Socialist refusal to place reasonable limits upon tort lawyers amounts to an out-of-public-sight racket to bypass the IRS and to transfer should-be tax revenues straight into Democrat/Socialist campaign funds.
As with the tort bar, Democrat/Socialist refusal to place common sense limits on Fannie and Freddie is a similar under-the-table siphon of public funds.
To review the record, read Fannie Mae’s Patron Saint.
In January of last year, Mr. Frank also noted one reason he liked Fannie and Freddie so much: They were subject to his political direction. Contrasting Fan and Fred with private-sector mortgage financers, he noted, “I can ask Fannie Mae and Freddie Mac to show forbearance” in a housing crisis. That is to say, because Fannie and Freddie are political creatures, Mr. Frank believed they would do his bidding.
And this is exactly what Mr. Frank attempted to prove when the housing market started to go south. He encouraged the companies to guarantee more “affordable” mortgages, thus abetting their disastrous plunge into subprime and Alt-A loans. He also pushed for, and got, an increase in the conforming-loan limits to allow Fan and Fred to securitize and guarantee larger mortgages. And he pressured regulators to ease up on their capital requirements—which now means taxpayers will have to make up that capital shortfall.
But the biggest payoff for Mr. Frank is the “affordable housing” trust fund he managed to push through as one political price for the recent Fannie reform bill. This fund siphons off a portion of Fannie and Freddie profits—as much as $500 million a year each—to a fund that politicians can then disburse to their favorite special interests.
This is also why Mr. Frank won’t tolerate cutting the companies’ MBS portfolios. He knows those portfolios (bought with debt borrowed at taxpayer-subsidized rates) were a main source of Fannie’s profits before the housing crash, and he figures that once this crisis passes they can do it again. And this time, his fund will get part of the loot.