Frank explains bailout, defends role in crisis
Responding to charges that he bears some responsibility for the crisis in the mortgage industry, Rep. Barney Frank, D-Newton, said that as a minority congressman for many years he did not have the power to implement regulations sooner.
After playing a key role last week as chairman of the Financial Services Committee, Frank returned to Newton today to field questions from local media.
Defending the $700 billion rescue plan, Frank told reporters the bailout was necessary to ensure the financial problems weren’t being carried out on the backs of the average citizen.
“People said, ‘Gee, you are bailing out the wealthy people,’ ” Frank said from a podium in the War Memorial at Newton City Hall. “The fact is the people on Wall Street who had been running the show have enough money to live for the rest of two or three lives and never do another day’s work. The banks were going to do fine ...
“It was average citizens, people who worked as salesman in auto showrooms, construction workers, people in small businesses and their employees who couldn’t get inventory. They were the ones that were going to pay. We did what we thought we had to do,” he said.
As a point person in last week’s negotiations on Capitol Hill, Frank worked in his capacity as House Financial Services chairman to convince his fellow congressmen to back a revised financial rescue plan, after it failed earlier in the week.
On the floor of the House chamber last week, he told his colleagues, “This is a vote where many of us feel that the national interest requires us to do something which is in many ways unpopular because what we are talking about, to many of us, is the need to act to avoid something worse from happening than is already happening.”
Members supported the plan in a 263-171 vote, opening Wall Street to greater federal regulation and granting the government permission to buy up bad assets.
For Frank, the root of the problem was lack of regulations. He said, “I think it’s very clear that the lack of regulations led to this crisis. ... We have to step in and impose regulations that will not allow this again.”
Frank’s Republican challenger in November, Earl Henry Sholley, who sat in the second row at today's press conference, accused Frank of being asleep at the wheel over the last few years. Believing Frank could have prevented the financial crisis the country is now facing, Sholley said the 14-term congressman thwarted efforts to reform Freddie Mae and Freddie Mac.
“He does have a hand in it,” Sholley said. “He has been the main force blocking efforts to reform Fannie Mae and Freddie Mac over the years.”
Frank said he assumed chairmanship of the Finance Committee in January 2007, and that the House of Representatives has largely been controlled by Republicans, so he could not have implemented stricter regulations sooner.
“If I had the power to block things when I was in the minority in the House, I wouldn’t have started with Fannie Mae and Freddie Mac,” he responded. “I would have blocked the Iraq war, the Patriot Act, hundreds of billions of dollars in tax cuts to rich people, bills to weaken the Environmental Protection Agency and a very flawed prescription drug program.”
According to a 1991 Globe report, Frank backed efforts to loosen regulations on mortgages for two- and three-family homes, despite the fact that then-Fannie Mae national spokesman David Jeffers said that such mortgages default at two and five times the rate of single-family dwellings, respectively.
“Some people foresaw the subprime crisis,” Frank told the roomful of reporters. “Nobody that I know of foresaw the extent to which modern investment techniques, the amount of liquidity around the world and sophisticated technology would take the subprime problem and magnify it throughout the system.”
Chrissie Long can be reached at firstname.lastname@example.org.