Joe Burns: A (Barney) Frank conversation
“Just so you don't come off as a flaming Lib, would you please research and then write about how Barney Frank and the Welfare Party ‘shook down’ these lending institutions into making bad loans.”
So read an e-mail request from a reader challenging me to expose the liberal conspiracy behind our economic meltdown. And who can resist that kind of flattery?
So I did some research, on behalf of my flaming flatterer, trolling the muddy right-wing waters for evidence incriminating the Massachusetts Democratic congressman. First I took a few tabs of Prilosec and watched a video of Fox News’ Bill O’Reilly going head to head with Frank.
For those of you who haven’t had the displeasure of catching O’Reilly’s act, let me enlighten you: O’Reilly is to discourse what a bull is to ballet. Working himself into a contrived lather of blather, O’Reilly interrupts his guests with shouts and screams of indignation as genuine and predictable as a World Wrestling routine. Such was the case when he and Frank went at it.
O’Reilly aired a video of a speech Frank made several months ago in which he said that Fannie Mae and Freddie Mac — the government-sponsored mortgage lenders whose practices have been seen as the source of the current problems —were fundamentally sound, and although not the best investments in the long term looking back, were better going forward. And it seemed to be O’Reilly’s intent to misinterpret those comments as Frank shilling for the lenders, and to browbeat Frank into admitting that he did.
But even O’Reilly, in his rare moments of coherence, found fault with Republicans for their part in this fiscal fiasco. And O’Reilly can’t be criticized for suggesting that Frank’s position as chairman of the House Financial Services panel puts him in a position to take some of the blame. But others also can be cited for the failure
On Sunday, the St. Louis Post Dispatch reported that in 2004, Missouri Republican Sen. Christopher Bond, then chairman of the Senate committee that funds HUD and the oversight office, tried to remove the oversight office's director, Armando Falcon Jr., who was investigating questionable accounting at Fannie Mae.
"There wasn't a member of Congress who did more to try to obstruct the agency's efforts than he did," Falcon told the Post-Dispatch last week. "Perhaps some of Fannie's and Freddie's problems might have been averted with more support and less obstruction from key members of Congress.”
Frank’s romantic relationship with Herb Moses, a former Fannie Mae executive, has been cited by some as evidence that Frank had conflicts interests as regards Fannie Mae. But Moses left Fannie Mae in 1998 the same year he and Frank ended their relationship. So it would not seem to be grounds for a conflict of interest these past 10 years.
Others right-wingers less fixated on Frank have spread the blame to Democrats, going back decades. Anne Hilbert, writing in the Boston Herald said the Community Reinvestment Act introduced by Democrats in 1977, when Jimmy Carter was in office, is the culprit, and that Bill Clinton compounded the problem in 1993 when he allowed the Community Reinvestment Act to increase the number of mortgage loans by 39 percent.
The argument against the CRA is that it forced banks to make bad loans to low-income and minority borrowers, thereby leading to the crisis. Republican apologists charge that Bush attempted to initiate reforms but Democrats prevented him from doing so.
Whether that is correct or whether those reforms would have prevented the economic freefall is an arguable point. But since its inception, no president — not even Ronald “Trickle Down” Reagan or George “Thousand Points of Light” Bush — has sought to retract the act, because they had sense to know that it takes more than spare change and charity to make this nation grow. It takes affordable housing. And that’s what the CRA is supposed to be about.
But it didn’t always work that way. Many have pointed to predatory lending by banks, and the lack of oversight by regulators for the present problems.
In 2002 a study of the predatory lending implications of the CRA by Kathleen C. Engel and Patricia A. McCoy found that by the late 1990s, predatory high cost mortgages to “gullible borrowers” were leading to foreclosures against low-income people of color and the elderly.
Predatory leading, if I understand an explanation given to me by a local affordable housing expert, is a bank betting that the borrower can’t keep up the mortgage payments, a nice scheme when property values were rising. When the borrower defaulted on the loan the bank foreclosed on a property worth more than the money owed them. But that didn’t work as well at a time when property values were in decline and banks started suffering losses instead of gaining profits from the foreclosures.
There’s more than enough blame to go around for the collapse, and to pin it on one man is absurd. Both parties bear responsibility, but the bulk of it has to go the party in power not only because the collapse occurred on their watch, but also because of their policies and platforms, which have led to the growing disparity between the rich and everyone else, and the increasing number of families and individuals for whom basic needs, such as health care and housing are no longer affordable.
If you have an idea for a "Who Cares" column, you can call Joe Burns at 508-375-4936 or e-mail him at email@example.com.