Rep. Frank deserves big share of blame for our economic mess
Writing a column about who was responsible for the Great Recession should be easy. Very easy. Just list the members of Congress, the names of a bunch of high-ranking Treasury Department officials all the way back to the Carter administration and a few top executives of some investment banks who have tony addresses on the Upper East Side of Manhattan and don’t take the subway to work. Column finished.
It would more than likely be accurate, but some people are more responsible than others, so it might not be fair.
So, to be fair, let’s talk about some people who are really responsible. Let’s talk about one who is really, really, responsible, but now claims he had nothing to do with it. There are probably more just like him, but he’s the one I heard about this week. He’s a politician. Imagine that.
He is Barney Frank, representing the Fourth District in Massachusetts. He’s been a champion of loose underwriting standards and was in a position to do something about it, as former chairman of the House Banking Committee for nearly as long as he’s been in Congress.
Now he tries to blame the financial mess of 2008 that we’re still digging out of on the Republicans. There are Republicans enough to blame, but Frank gets more than his share.
Last month, when two dimming lights in the GOP presidential field were asked if any banker should be jailed as a result of the subprime crisis, Newt Gingrich and Michele Bachman both dodged the question and laid the blame at the feet of the federal government. Gingrich suggested Frank and former Sen. Chris Dodd should both be jailed.
Frank fired off an angry response, saying it was all the Republican’s fault since they were in the majority at the time. “In fact, Chris Dodd and I were in the minority from 1995 until 2006, so Gingrich is blaming us for Republican failures,” Frank said.
What he didn’t say, but what he and everyone knows now, was that Republicans and Democrats were all making it easy for Wall Street to package and sell subprime loans that had been made with virtually no documentation. It had become government policy and Barney Frank supported it as much as anyone else in Washington.
Most of those mortgages were originated by Fannie Mae, which later was bailed out by taxpayers to the tune of $150 billion. The congressman says he never put any pressure on Fannie Mae to do anything.
Here’s what Gretchen Morgenson, the author of “Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon,” told NPR about how Barney Frank really dealt with Fannie Mae:
“Back in 1991, when Congress was writing the legislation that would … enhance or improve the oversight of Fannie Mae, or so they thought, Frank actually called up the company and asked them to hire his companion, who had just gotten an MBA from the Amos Tuck School of Business.
“So that was an example of the kind of thing that Fannie Mae would do. Now, when I asked Mr. Frank about this, I asked him, did it have any impact on his approach to the company. You know, was it a conflict? Did he feel that it had … put him in a conflicted spot? And he said absolutely not, that he didn’t really remember being interested or having much to do with the 1992 legislation.
“But the record shows that he was very aggressive and really tough on those who were testifying in Congress about reining in Fannie Mae and Freddie Mac. He was very aggressive to, for instance, (with) the head of the Congressional Budget Office at that time, who was trying to call for increased capital requirements and to call for a focus on safety and soundness at Fannie Mae, that Frank really took him apart in testimony.”
Just think, if the head of the CBO, apparently one of the few sane people in Washington at the time, had been successful in increasing capital requirements at Fannie Mae, maybe we wouldn’t be in the mess we’re in today. Or at least the mess wouldn’t be as big.
And who knows? Maybe if Barney Frank hadn’t been as vicious as he was, then maybe the head of the CBO would have succeeded.
We’ll never know. All we can do is ask the people of the Fourth District of Massachusetts: Why do you elect this guy?