Party of NO!

The Boston Globe is vigorously campaigning to re-elect Barney Frank.  Today the paper leaps to exhonerate him from any culpability in the ultimate meltdown of Fannie Mae and Freddie Mac.

The issue that day in 2003 was whether mortgage backers Fannie Mae and Freddie Mac were fiscally strong. Frank declared with his trademark confidence that they were, accusing critics and regulators of exaggerating threats to Fannie’s and Freddie’s financial integrity. And, the Massachusetts Democrat maintained, “even if there were problems, the federal government doesn’t bail them out.’’

Now, it’s clear he was wrong on both points — and that his words have become a political liability as he fights a determined challenger to win a 16th term representing the Fourth Congressional District. Fannie and Freddie collapsed in 2008, forcing the federal government to buy $150 billion worth of stock in the enterprises and $1.36 trillion worth of mortgage-backed securities.

[...]

Republican Sean Bielat, who is trying to unseat Frank, has been hammering away at him with a website titled “Retire Barney’’ that features clips of Frank at the 2003 hearing and elsewhere. During debates this week, he called Frank “one of the leaders of the economic disaster’’ because he supported Fannie and Freddie when they were taking the risks that led to their collapse.

But Frank said that putting blame entirely on him is unfair — and several independent analysts agree. They said Republicans also failed to take warning signs seriously enough to avert disaster, despite controlling the White House and both houses of Congress between 2003 and 2007, a crucial period leading up to the Fannie and Freddie failures.

“Selling Fannie and Freddie as a purely partisan issue, it doesn’t really work,’’ said Jonathan Koppell, director of the School of Public Affairs at Arizona State University. “Both parties have plenty of responsibility.’’

Another analyst, University of Maryland economics professor Peter Morici, put it more succinctly. “This is a bipartisan mess,’’ he said.

In what way was it a bipartisan mess, one might ask.  The Globe diligently repeats the Barney Frank defense.  Republicans were in charge.  They could have done whatever they wanted.  Or could they?

Top Bush strategist Karl Rove still blames Frank for its failure, saying Frank and other Democrats portrayed a vote to regulate Fannie and Freddie as “anti-black, anti-brown, anti-poor, anti-homeowner’’ because of the enterprises’ affordable housing mission.

“They were brutal,’’ Rove said in a recent interview. “And so Republicans shied away from confronting it.’’

Frank dismissed those assertions, saying the splintering of GOP support was not his fault.

“They couldn’t get their act together,’’ he said.

So let's see if I have this straight.  When Republicans as the minority party block legislation they are the Party of NO.  When Democrats as the minority party block legislation, it's because Republicans can't get their act together.  At least that's how the Boston Globe sees it.

Comments

[RobSmith]

You need to get off this. The issue doesn't help Republicans.

Bush political appointees ran Fannie Mae and Freddie Mac from 2003-2007. The sub-prime debacle, in which Bush was a cheerleader for home buying, caused the collapse of a number of institutions including Fannie Mae and Freddie Mac. And those institutions collapsed because they were buyers -- not the fraudulent sellers who got away scott free.

George W. Bush and Karl Rove are fake conservatives. The sooner the Republican Party admits this and assures the American electorate that there will not be a return to their policies, the sooner the Republican Party will win sustained election victories over multiple elections cycles.

There is only one strategy with regard to the Republican Party's conduct from 2000-2008 -- apologize.

And if they do it, and people think they are sincere, it will work, because people don't really want the democrats in charge.

Unfortunately, large egos are getting in the way of this.

[TakeBackCongress]

"But Frank said that putting blame entirely on him is unfair — and several independent analysts agree."

Barney Frank mischaracterizes Bielat's comments on this matter, and the Globe appears to back Frank up in the mischaracterization. Bielat never said Frank was solely to blame. So the Globe created a false issue and a false response to Bielat.

At least on this particular issue, Bielat is running and the anti-incumbent, not as a Republican.

Bielat said he’s not focused on “who screwed up,” but he is targeting Frank’s role in the downturn.

“This isn’t a Democrat or a Republican thing. I’m not spending any time defending Republicans. I’m talking about Barney Frank, and his role in this, and whether he’s been held accountable for that."

[Tom Bowler]

The sub-prime debacle, in which Bush was a cheerleader for home buying..."

Did you say 2003? Here's what the Bush administration was trying to do in 2003, as reported in the New York Times.

September 11, 2003 New Agency Proposed to Oversee Freddie Mac and Fannie Mae By STEPHEN LABATON

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

[...]

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

Your case against Republicans is as week as the Globe's. Give it up.

[RobSmith]

That article has nothing to do with subprime loans.

[Tom Bowler]

No, but it has everything to do with under collateralized loans.

[RobSmith]

I don't know why your going on about this.

First, most free-market conservatives acknowledge an explosion of dubious private sub-prime lenders shortly after 2000 who sold their wares to Citi, Goldman, Bank of America, Lehman, Countrywide, Merrill, Bear Stearns and a host of other institutions on Wall Street who proceeded to gobble these things up for years. They were motivated by money, not pressured by the government.

While Conservatives oppose government regulation of free market instruments, they don't support fraud. Those things shouldn't have been allowed on the market for anybody to sell or buy. You seem to want to believe this scam depended on Fannie and Freddie for its existence.

Second, to the extent your article has any validity, it's of no value anyway.

You’re claiming that the Republicans, who controlled the House and Senate along with the White House, showed no backbone and did not bring the matter to a vote in either chamber because they were afraid of the Democrats calling them names and losing seats in an election.

If this is the case, then like any other form of appeasement, it didn’t work. They lost Congress and the White House anyway didn’t they. Maybe it would have been best if they had shown some guts and stood up to be counted.

Can I expect them to do the same thing when they are back in the majority?

Perhaps it is enough if we agree that the Tea Party will need to hold Republicans feet to the fire if this is going to be anything other than a typical midterm election where the party out of the White House gains seats.

[Tom Bowler]

I go on about this because the housing bubble was inflated by rapid influx of buying power into the housing market. This had less to do with subprime loans than it did with people's ability to borrow with low or no money down. More than half the foreclosures were on properties with conventional mortgages. Because they were bought with small or no downpayment, a drop in housing prices put the properties under water. Not a problem if a homeowner can remain gainfully employed.

But there was a bubble, housing prices were inflated, and a recession began. With unemployment climbing the result was foreclosures on a record pace. Foreclosures eroded, or maybe destroyed, the value of mortgage backed securities. In fact their value was eroded to the extent that firms which were heavily invested in mortgage backed securities found themselves under capitalized, and in danger of being shut down by the regulators.

Some were shut down, some were bailed out. You may recall Warren Buffett suggesting that regulators abandon mark to market accounting on MBSs for determining capital requirements while retaining it for disclosure and financial reporting purposes.

But there was congress castigating firms for playing fast and loose with MBSs, and for failing to maintain adequate levels of capital when the real under capitalization was with the homeowner who didn't need to bring any money to the table. Again, it was no problem as long housing prices continued to rise and nobody was in danger of losing a job.

The explosion of under capitalized homeowners were created because the government promoted lending standards that allowed people to buy with no money down. Subprime is old news. We're going on three years down the road and foreclosures are not slowing down. It's not a subprime issue.

The financial crisis had its origins at Fannie Mae and Freddie Mac. The lending standards they promoted set the standard for the rest of the housing market. Those standards encouraged under capitalization by the homeowner.

I would also note that Freddie Mac was guilty of fraudulent accounting and Fannie Mae was guilty of failing to maintain adequate capital reserves long before the hand wringing started over subprime mortgages. It seems they were guilty of the same things Wall Street is being accused of.

[RobSmith]

When I say I don't know why you go on about this, I mean that insofar as any point of your article has merit, you are rationalizing Republican appeasement. Karl Rove's excuse for why the majority stood quaking in their boots before the minority and did not act is an embarrassment. It can't be condoned.

I have very much enjoyed your posts on the Tea Party. And enjoy your columns overall.

[Tom Bowler]

Thanks, Rob. I've enjoyed our discussion, as well. Truth be told, I'm not thrilled with the Republican performance over the last four years. You are absolutely right about the Republican lack of courage to stand for what they are supposed to believe, and it's heartening to see the Tea Party candidates knocking some of the worst ones off.

That said, one point I was trying to make in this article was to highlight the double standard in how the media portray two parties. You never heard them calling Democrats the party of no for blocking Bush's attempts to reform Fannie and Freddie, or for blocking so many of his judicial appointments.

I would also make the point that Barney Frank had a role in in the housing meltdown that he's only recently owned up to. I fervently hope he pays the political price for it in two weeks.

Thanks for your comments.