Getting to the bottom with Barney Frank

In "Barney's Rubble" the Wall Street Journal presents the latest installment of their ongoing argument with Rep. Barney Frank regarding the government regulation of Fannie and Freddie.  Even now, with the obvious evidence of the failure of Congress' policies, Mr. Frank continues to protest any role of Congress in creating the problems with these two entities.  Mr. Frank has issued a letter stating his disagreement with their assessment. 


Here is the conclusion of their reply to his letter:

For years, Mr. Frank and other friends of Fan and Fred opposed not only bills written to limit the size of their portfolios, but any bill that in their view gave an independent regulator too much discretion to order a reduction. This was true of the reform that his House committee passed last year. Only when the White House caved to Mr. Frank and dropped its earlier insistence that a reform bill rein in the portfolios did Mr. Frank move his bill.

In his letter, Mr. Frank also repeats his familiar claim that Fannie and Freddie are vital because they support "affordable housing." This is political smoke. The awful irony of Fan and Fred is that they have done very little to assist affordable housing. Most of the taxpayer subsidy has gone to enrich shareholders and Fannie managers, as a 2003 study by the Federal Reserve shows.

Mr. Frank says he favored the disclosure of Fannie and Freddie compensation -- which is nice, but beside the point. The source of the rich pay packages was the Fannie business model that Mr. Frank fought so hard to protect. Instead of helping the poor, Mr. Frank was enriching Jim Johnson, Frank Raines, Angelo Mozilo and Wall Street.

If Mr. Frank thinks his "affordable housing" goals are so popular, he can always ask Congress to appropriate money for any housing subsidy he desires. But he knows those votes are hard to come by. It's much easier to have Fannie and Freddie take inordinate risks, even at taxpayer expense, so they can pay a political dividend called an "affordable housing trust fund" that politicians will disperse. In opposing genuine reform of Fan and Fred, Mr. Frank wasn't acting like a principled liberal. He was protecting corporate giants while hiding their risks from taxpayers until the middle class got stuck with the bill.  MORE....

The Journal  has also provided their archive of columns regarding their criticisms of Fannie and Freddie.  You can be the judge in this dispute.  

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• Bailout for Billionaires 09/11/08 -- The mystery of saving Fannie Mae's sub debt holders.

• Fannie Mae's Patron Saint 09/09/08 -- A bailout history, as told by Barney Frank.

• Weekend at Henry's 09/08/08 -- Propping up the living dead at Fannie Mae and Freddie Mac.

• When Henry Met Fannie 08/19/08 -- That taxpayer capital injection looks closer all the time.

• Fannie Mae's Political Immunity07/29/08 --Congress sets the rules in favor of Fan and Fred, which then repay the Members with cash from their rigged profit stream.

• Fannie and Freddie's Enablers 07/21/08 – The same folks who put taxpayers on the hook for Fannie Mae and Freddie Mac are now demanding ransom to let taxpayers bail them out.

• Paulson's Fannie Test 07/15/08 – Does Hank Paulson want to leave the U.S. financial system better than he found it? That's his test in the wake of his commitment to use taxpayer money to rescue Fannie Mae and Freddie Mac.

• Fannie Mae Ugly 07/12/08 – Investors continued to flee Fannie Mae and Freddie Mac almost as frantically as the political class tried to reassure everybody there was nothing to worry about.

• The Price of Fannie Mae 07/10/08 – It's time Americans understood the price they could soon pay for the Beltway's confidence game with these high-risk "government-sponsored enterprises."

• Too Political to Fail 04/21/08 – Fannie Mae and Freddie Mac aren't held to the same standards of accountability as everyone else.

• Fannie Mayhem 11/20/07 – Chuck Schumer is lucky Congress ignored his idea that Fannie Mae and Freddie Mac should ride to the rescue of the housing market.

• Fannie More 10/23/07 – Barney Frank and Chuck Schumer have come up with a proposal that would increase the risk to taxpayers from Fannie Mae and Freddie Mac.

• Fannie to the Rescue? 09/29/07 – Fannie and Freddie went up the Hill to fetch a pail of money.

• Freddie Krueger Mac 05/10/07 – Just when you think they're defeated, Fannie Mae and Freddie Mac arise in Congress to kill any attempt to clean up their dangerous habits.

• The Fannie Tax 04/12/07 – Democrat Barney Frank and the Bush Administration seem to have found common ground on new rules for Fannie Mae and Freddie Mac. Naturally, there's a catch.

• Memo to Fannie 06/14/06 – A joke in Washington these days goes like this: "What's the difference between Enron and Fannie Mae? Answer: The guys at Enron have been convicted."

• Freddie's Friends on the Hill 04/27/06 – The Federal Election Commission sheds some light on how Freddie Mac rewards its friends.

• Fannie Mae's House 10/25/05 – Every Congressional session can be counted on to produce its share of bad bills. But the "reform" bill for Fannie Mae and Freddie Mac is in a class of its own.

• Fannie's Friends on the Hill 05/09/05 – Congress finally seemed ready to protect taxpayers from Fannie Mae and Freddie Mac. Then Republican Mike Oxley decided to ride to their rescue.

• Fannie Turns a Page 12/23/04 – Fannie Mae – a slick, semiprivate firm operating with the patronage of politicians – is the kind of institution one still expects to find in a country like France.

• Fannie the Centaur 12/17/04 – Understanding their half-man, half-beast nature is crucial to fixing Fannie Mae and Freddie Mac in the wake of their recent financial scandals.

• Fannie Mae Liberals 10/14/04 – There were many moments of high entertainment during the House hearings on Fannie Mae's creative accounting. But our favorite was the Mister Magoo performance given by Barney Frank (D., Massachusetts).

• Fannie Mae Enron? 10/04/04 – The company was cooking the books. Big time.

• Fannie Uncovered 09/23/04 – The housing-finance giant has been engaging in some accounting funny business.

• Fannie's Risky Business 02/25/04 – Alan Greenspan puts his credibility behind the cause of reforming Fannie Mae and Freddie Mac.

• Christmas for Fannie Mae 12/23/03 – The Federal Reserve Board releases a new staff study about the impact of taxpayer subsidies for Fannie Mae and Freddie Mac.

• White House Fannie Pack 11/11/03 – White House chief economist N. Gregory Mankiw dares to tell the truth about Fannie Mae and Freddie Mac. The mortgage giants were not amused, which means we're getting somewhere.

• Fannie Takes the Hill 10/09/03 – When the House of Representatives can't get even a modest regulatory bill out of committee, the dangers of Fannie Mae become clear in reality.

• Speaking Truth to Fannie 03/12/03 – The president of the Federal Reserve Bank of St. Louis warns of a potential crisis arising from Fannie Mae and Freddie Mac.

• Fan and Fred Get the Business 02/19/03 – The year has not started auspiciously for the two mortgage-finance behemoths.

• Fannie Mae's Risky Business 09/23/02 – We've been suggesting that Fannie Mae was exposed to too much interest-rate risk. All of a sudden investors seem to agree with us.

• Fannie Capitulates, Sort Of 07/15/02 – Fannie Mae and Freddie Mac end months of resistance, stonewalling and downright crankiness and agree to register their common stock with the Securities and Exchange Commission.

• Fannie's Inside Info 07/01/02 – Even in this post-Enron world, Fan and Fred do not provide as much information about these securities as private mortgage lenders do.

• Inside Fannie 03/19/02 – Fan and Fred don't function like other companies. They're allowed to pile up debt, implicitly guaranteed by taxpayers, without being held to even the minimum of corporate governance standards.

• Frantic Fannie 02/28/02 – Companies taking on so much risk and debt, and backed by taxpayers, ought to be more transparent in what they tell the world.

• Fannie Mae Enron? 02/20/02 – Fan and Fred look like poorly run hedge funds: lots of leverage and snarkily hedged risk. Does the word Enron ring any bells?