Fannie, Freddie, Frank, and fiction
by Jeff Jacoby
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BARNEY FRANK can be ruthless in debate, especially when laying into opponents who try to evade what they have said and done in the past. But as he pursues a 16th term in the US House, Frank seems to be attempting a little evasion of his own.
Frank, who chairs the House Financial Services Committee, has always been ardent in his defense of Fannie and Freddie. In 2003, he insisted that the two mortgage giants were not "facing any kind of a crisis." In July 2008, just weeks before the GSEs collapsed and were taken over by the federal government, he publicly maintained that "Fannie and Freddie are fundamentally sound -- they are not in danger of going under." Frank recently told the Boston Globe's Donovan Slack that "he missed the warning signs [in 2003] because he was wearing ideological blinders," while in 2008 "he was deliberately trying to reassure the public."
Is it fair to blame Frank for the ill-advised home loans to unqualified borrowers that were at the heart of the economic crisis? Not according to Frank. He points instead to Wall Street greed and to the fecklessness of congressional Republicans when they were in the majority. He also points to George W. Bush's passion for expanding homeownership -- a passion that included pressing Fannie Mae and Freddie Mac to "meet ambitious new goals for low-income lending," as The New York Times put it in a 2008 story headlined "White House Philosophy Stoked Mortgage Bonfire." That all of them played a role in the collapse, no reasonable person can doubt. So to the extent that Bielat accuses Frank of primary responsibility for the financial derailment, he goes too far.
But Frank also goes too far in vehemently denying any connection to Fannie and Freddie's failure, or to the risky mortgage lending that caused so much damage. He portrays himself now as a lifelong advocate for affordable rental housing only. To hear him tell it, it was never a part of his agenda to make it easier for low-income homebuyers to get mortgages. Indeed, he says, he always fought the idea.
"Low-income home ownership has been a mistake, and I have been a consistent critic of it," Frank claimed during a debate with Bielat on WRKO.
Over the years, Frank has been a consistent critic of many things (defense spending, Republicans, free enterprise), but an opponent of programs to assist low-income homeowners? The congressman who in 2003 blasted Bush administration efforts to reform Fannie/Freddie on the grounds that "the more pressure there is on these companies, the less we will see in terms of affordable housing"? The one who saluted Fannie Mae in 2004 for backing mortgages with as little as 5 percent down on factory-built "trailer" houses, and chided the media for not showing enough interest in what he called "an essential part of any program to increase home ownership in America"?
As far back as 1991, the Globe reported that Frank lobbied Fannie Mae to ease its rules restricting mortgages on two- and three-family homes, even though the default rate on those mortgages was far higher than the rate for single-family dwellings. Was that being a "consistent critic" of low-income home ownership? How about when he gave a speech in 2005 praising the "advocacy groups that work with us so that we can make homeownership available to people who might not on their own in a market situation be able to afford it"?
To be sure, Frank has on multiple occasions stressed that many Americans are better off renting and that not everyone is suitable for a mortgage. He has been a scourge of predatory lenders. And as mortgage foreclosures were skyrocketing in 2007, Frank said the Bush administration's overemphasis on homeownership had "contributed to the subprime crisis."
But a consistent critic of low-income homeownership? Barney Frank has been called a lot of things, but that's never been one of them. Until now.
(Jeff Jacoby is a columnist for The Boston Globe).
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