PS Please explain how Frank's legislation helped cause the financial meltdown - it was supposed to place more regulatory power over the banks & Wall St firms, wasn't it? I know it didn't go far enough, but it was a step in the right direction: limiting debit card fees and creating new oversight on consumer affairs, eliminating and combining many agencies to provide more effective oversight, blablabla...
Well, blablabla notwithstanding, it gets a little tiresome having to give a course in recent history every time one of these discussions arises. The legislation of which you speak, the Frank-Dodd legislation, had nothing whatsoever to do with the financial meltdown - it was legislation
in response to the meltdown. As the article from Dave's link notes, "Capitalizing on the fervor after the 2008 financial crisis, Dodd-Frank purported to promote financial stability, accountability, and transparency." Of course it simply made things worse, as the article points out, but the Frank-Dodd legislation didn't have anything to do with what happened before it.
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 from liberals to make more loans to minorities (i.e., to borrowers with weak credit histories) became relentless. Congress passed the
Community Reinvestment Act, led by Frank, 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, both with Barney Frank as their overseer, 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 home ownership among minorities and the poor, because it feels good to say that. 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 Federal guidelines authored primarily by Frank 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.
The much-maligned Bush Administration recognized the Fannie-Freddie problem early on. Slowly, relentlessly, from the 1980s on, mostly Democrat-controlled Congresses pushed both quasi-governmental entities to prod banks into ever more liberal loan policies that would allow less and less qualified loan applicants to obtain mortgages and—often for the first time—purchase housing, regardless of whether they were financially able to carry their mortgages.
The problem became acute in the early 2000s as lower and lower down payments and “liar loans” that required little if any substantiating documentation became the norm. The Bush Administration, along with eventual GOP presidential candidate John McCain, tried to put an end to these practices, but to no avail. Barney Frank, the Democrats, and a surprising number of incredibly stupid Republicans steadfastly opposed legislation geared toward heading off the already-gathering fiscal storm. They did this mainly because the guy in charge of Fannie and Freddie, Barney Frank, in fine Baghdad Bob fashion, kept insisting that they were sound and that there was no housing bubble.
In 2003 following a Bush Administration proposal for a new agency charged with the financial oversight of both Fannie Mae and Freddie Mac (a proposal that was defeated and in later years was resurrected and renamed the Frank-Dodd legislation, ironically), Barney Frank, the ranking Democrat on the Financial Services Committee, said frankly,
"These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
In 2003, he called Fannie and Freddie ‘fundamentally sound financially’ and accused the Bush Administration of trying to “exaggerate a threat of safety… [to] conjure up the possibility of serious financial losses to the Treasury, which I do not see.
A year later, he said talk of financial problems at Fannie and Freddie were, "an artificial issue created by the administration…I don’t think we are in any remote danger here."
In 2007, as Chairman of the House Financial Services Committee and just as Fannie and Freddie – overleveraged and stuffed to the gills with risky mortgages they’d encouraged and facilitated – were about to go over the cliff, Mr. Frank attacked President George Bush's call for reform as "inane" and "unnecessary."
Yet, when Fannie and Freddie went belly up in the fall of 2008, Mr. Frank voted for the same Bush Administration reforms that could have averted the bankruptcies of Fannie and Freddie, and took credit for it as the Frank-Dodd legislation.
The truth is, for decades, both Fannie and Freddie were used at least in part as slush funds to help fund the political campaigns of Democrats, much in the way that mandatory public employee union dues are used to provide the same functionality.
Employing loyal Democrats throughout their upper echelons (those Angry White Men you are so fond of), both Freddie and Fannie, being technically quasi-public corporations, “donated” hundreds of millions of dollars to mostly leftist Democrat advocacy groups of the ilk of ACORN and others to fund get-out-the-vote efforts (and heaven knows what else) often in major American cities. In other words, both organizations, supported in large part by the American taxpayer, thanks to some very crafty legislation that allowed it, were in many ways re-purposed to stir those taxpayer dollars to one political party only.
Barney Frank was, for years, the master of these fiscal revels.
So much for the notion that the Democrats only
"enrich themselves without taking from the less advantaged. Or at least not obviously doing it, their style is more kickbacks and sweetheart deals than writing legislation that helps other WM squared to profit at the expense of the poor and middle class."
And it will continue. Frank, of course, didn't do all this by himself. He's left Congress in the wake of this mess, but the next ranking Democrat in the House Financial Services Committee is Maxine Waters, an unrepentant redistributionist to the core, she’s the last person on earth to be interested in wrapping up her party’s continuing interest in tapping taxpayer cash flows to Fannie and Freddie, the better to help her party and its big business and banking friends on Wall Street. The WM squared ain't even all that white. Fannie and Freddie is and will continue to have strong Democratic allies with her as the ranking Democrat on the committee. Waters has long resisted efforts to reform the mortgage finance giants, and was a real PITA to those who have tried. Part of that is, of course, because Waters herself is the subject of a so-far rather hushed probe into some shady banking maneuvers during the recent fiscal debacle, but the smoke is there with her dealings.
But here's the WM Squared kicker, Barney Frank, thanks to his legislation that allowed all this, and him being the Chariman of the House Financial Services Committee, and the author of the Frank-Dodd legislation in response to the meltdown, he was directly overseeing and in charge of patrolling the executive bonuses to AIG and other giants bailed out with $700 billion in taxpayer funds.
In 2009 he gave a speech at Harvard University's Kennedy School of Government, and during a question and answer period he was asked by a student, "How much responsibility, if any, do you as the chairman of the the House Financial Services Committee felt for the global economic meltdown.?"
He became incensed, dismissed the question as "a right-wing attack," and challenged the student to make clear what else a Democratic congressman from Massachusetts might have done to prevent the crisis. The student suggested that Frank could have ceased insisting that Freddie and Fannie were not in trouble when they clearly were, and that he could have done more to prevent the massive bonuses of the CEOs of the corporations who were bailed out.
"The private sector got us into this mess. The government has to get us out of it." That's Barney Frank's story, and he's sticking to it. He maintains the financial crisis is the spawn of the free market run amok, with the political class guilty only of failing to rein the capitalists in. The Wall Street meltdown was caused by "bad decisions that were made by people in the private sector," Frank said; the country is in dire straits today "thanks to a conservative philosophy that says the market knows best." And that philosophy goes "back to Ronald Reagan, when at his inauguration he said, 'Government is not the answer to our problems; government is the problem.' "
How rich. You know, I'd say something like, "Ya just can't make it up," but Barney Frank actually did.
FWIW: I don't find the Democrats any more appealing [in general] than the Republicans. As you say, they're all in it for themselves. And their friends. And families. And former coworkers, etc.
Hopefully, after this course in Recent History 101, you'll find the Democrats even less appealing, and you won't be as quick to blame the Republicans for things they really aren't even responsible for, and you'll have a better understanding of exactly who these mysterious WM Squared people actually are. And, you won't be as quick to believe people like Barney Frank liberals when they blame everything that's bad on Republicans and the conservative philosophy and those evil capitalists and evil corporations and those uber evil CEOs. Now you know why not one of the Wall Street types who were neck deep in all this has been prosecuted under this Democratic administration.
