Posted on 06/09/2009 9:17:08 PM PDT by FromLori
Hey, ever heard of Fannie and Freddie? Read »
If we were Barney Frank and we were asked what we might've done differently in retrospect, a few obvious things would come to mind. Like, maybe, we'd regret standing athwart the regulation of Fannie Mae (FNM) and Freddie Mac (FRE). You know, stuff like that. Alas, the powerful Congressman was asked about this in a recent interview with GQ. Here's what he said:
When you look back at decisions you made regarding banking and regulation, what would you do differently?
I would have pressed harder for regulation of hedge funds and other things. We tried. But the whole Senate was against us. And, uh, we did try hard on subprime. We got shut down. I guess regulating hedge funds, derivatives, I backed off too easy because of the opposition. I don’t think we would have succeeded, but we should have pushed harder.
Now, the subprime and derivatives stuff was fine, though the fact that he backed off so easily suggests he didn't think it was much of a problem. But still, what's with the relentless focus on hedge funds? They're politically popular targets, and the fact that they're unregulated makes it easy to say that they should be, but they're not the root of the problem, and they never needed a bailout.
As for his readon history, he says it's all Bush's fault, not Clinton's at all:
How much does Bill Clinton deserve blame for—
Oh, very little. The bad loans, subprime loans, are the cause of this. [Pulls out a chart.] This is a chart as to what percentage of overall loans were subprime loans that went bad. Of the loans that went bad, what percentage were subprime loans? Look at that chart. Look when it starts to spike. [It starts to spike in 2003.] And here, this one too. [He pulls out another chart.] Loans in foreclosure by type. They’re all together, and then the subprimes—
Start to spike in 2003.
We gotta make our argument to the Republicans. Many of us wanted to build affordable rental housing for low-income people. They said, “Oh, rental housing is not good; it’s bad for people’s spirits. We want them to become homeowners.” So the Bush administration pushed hard to make people homeowners, and that was the result.
Read the whole thing >
Next, he’s gonna say he’s not a homosexual either...
Barney Frank to GQ: In retrospect, I should have banged more of your models...no, let’s try that again...
Barney Frank to GQ: In retrospect, lighting the match was my big mistake, but I was only trying to retrieve the gerbil...
omg lmao good one
Deflections from the real problem, which in a case of usually honesty, he, months ago on Morning Joe, said basically that ‘perhaps some people should have just rented’. Yet that is exactly what the Dems armed with ACORN, Rainbow and other ‘community organizers’ (including Obama as lead attorney) prevented from happening by using the coercion of the Community Reinvestment Act to blackmail banks and lending institutions to make loans they wouldn’t have in a truly unregulated banking market. And it was the regulation of CRA not any ‘failure of the free market’ or ‘failure to regulate’ that started the domino effect. Don’t knock over that first domino and all is well. The ‘housing boom’ would have been a normal up market in no need for the ‘bust’.
The hedge funds and even the crimes committed at Freddie and Fannie were ‘after the fact’. No regulation would have exorcised the toxic loans from any of the packaging. No amount of oversite could have stopped what began with CRA forcing bad banking practices.
Even Credit Default Swaps and other ‘insurance instuments’ worked perfectly well until toxic loans spoiled the barrel in which they were packaged.
And... Barney along with a few notable others, should be in jail for not only not stopping that from happening but also for tearing down the people that attempted to stop it all along the way.
“We should have regulated hedge funds more” Actually Barney was a “Regular in the hedges” near Naval Bases” Psst Psst Oh, Sailor..Sailor! Barney, what a pain the the A$$........HIS!
“I would have pressed harder for regulation of hedge funds and other things”
Ah, but ole frankenwhine was too busy dipping into the backseat (pun intended) of Freddie Mac & Fannie Mae for campaign contributions. Frankenwhine’s remarks make me laugh hysterically as the ridiculousness. I remember the one college student that asked Frankenwhine’s role in the downfall of Freddie Mac & Fannie Mae. Frankenwhine denied any part. Now he’s admitting his part.
Also in retrospect, being gay wasn’t a winning idea either.
Blarney Fwank is a fraud, a liar and a crook who has done the most damage to the US economy since the Great Depression. The fact that he is allowed to retain his position is proof of how totally incompetent and corrupt the Democrats are.
If the US economy continues to decline, as it appears it will, Fwank may well turn out to be the most toxic individual to the welfare of US citizens in history.
Uh huh. It was all Bushies fault. Remove the spin and what you have is doublespeak. Let's just say that the Queens interview responses border on a level-five hijinx alert, at best.
I always love this sort of mindless bravado. Franks is a self-driveling moron. He qualifies for nothing more than a voiceover of the Afflack Duck. This guy needs to wake up with a moose head next to his pillow.
Good for Newt! I can't stand for conservatives to call those who want to enslave us, their friend.
bahney fwank needs to be regulated.
“And it was the regulation of CRA not any ‘failure of the free market’ or ‘failure to regulate’ that started the domino effect.”
That is very unlikely. The CRA is an American law that applies to only commercial banks. The credit problem is global and originated in the investment banking world, which was not covered by the CRA. The CRA is a misguided law but it doesn’t have the ability to generate problems of the scale that occurred. And it does appear that misguided deregulation contributed to the problem. Clinton signed a law repealing much of what remained of the Glass Steagall Act. This deregulation allowed investment banks back into the world of retail lending, from which they had been sequestered for 60 years. That trouble came on the heels of repealing Glass Steagall shouldn’t be surprising.
The investment bankers weren’t regulated by the CRA but they were certainly learning of the vast fees that could be generated from securitizing and creating derivatives from subprime lending. They couldn’t get enough of it, and they provided credit lines to mortgage brokers in order to get as much subprime paper as they could. Much of this innovation was occurring in London, which further removes it from parochial American political concerns. While this focus on CRA is useful as a club for beating Democrats it doesn’t illuminate the source of the trouble, which was the unintended consequence of innovation in the credit markets.
I know that was the intent in '77 but I'm pretty sure that was expanded and enforcement beefed up during the Clinton years. As far as "the credit problem was global and originated in the invesetment banking world", the credit problem _went_ global but was driven by the subprime used first in CRA loans which then affects all loans in the market. And as a result you had millionaires buying 2nd, 3rd, and 4th houses who also got crunched when the bubble burst. The investment bankers are the ones that bought the 'packages' from Freddie and Fannie which included those toxic loans that were a direct result of CRA. I've read the act and the loan test isn't the only problem with CRA. The service tests and investment tests alone could wreak havoc on the lenders.
That said, there was some breakdown in the market but mainly by the rating agencies not doing their jobs or ignoring it entirely. The toxic loan laden packages were like a deck of old maids that investors knew what was up and were trying to not get caught with them. The 'innovation' was a direct market response and again, not all instruments including CDS's were created during this crisis. Other insurance-like (insurance IS regulated) instruments have been in existence for a while. That may be considered 'unethical' and in 'need of regulation' by some but not me. When a gun is at your head ethics ceases to exist.
I've debated these points ad nauseum so you can have the last word :-)
BALD FACED LIE. This a$$hole was instrumental in blocking FM/FM reforms in 2003.
http://townhall.com/columnists/WalterEWilliams/2009/01/14/congress_financial_mess
Professor David Henderson, research fellow at Stanford’s Hoover Institution, writes about regulation in “Are We Ailing From Too Much Deregulation?” in Cato Policy Report (November/December 2008). The Federal Register, which lists new regulations, annually averaged 72,844 pages between 1977 and 1980. During the Reagan years, the average fell to 54,335. During the Bush I years, they rose to 59,527, to 71,590 during the Clinton years and rose to a record of 75,526 during the Bush II years. Employees in government regulatory agencies grew from 146,139 in 1980 to 238,351 in 2007, a 63 percent increase. In the banking and finance industries, regulatory spending between 1980 and 2007 almost tripled, rising from $725 million to $2.07 billion. So here’s my question: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal?
“I know that was the intent in ‘77 but I’m pretty sure that was expanded and enforcement beefed up during the Clinton years. “
No, Investment Banks were Wall Street creatures and were never covered by the CRA. That law applied only to retail banks, banks that accept deposits.
“The investment bankers are the ones that bought the ‘packages’ from Freddie and Fannie which included those toxic loans that were a direct result of CRA.”
No, Fannie and Freddie were in the business of purchasing loans, not selling them. Fannie and Freddie bought loans in order to provide liquidity to mortgage originators. For years they were the only players in this field, and the loans had to be ‘conforming’. It was an operation that offered small returns on capital. Subprime loans are not conforming loans.
http://www.calculatedriskblog.com/2008/07/krugman-on-gses.html
But during the Clinton years parts of Glass Steagall were scrapped, permitting investment banks into the mortgage market. Investment banks set up their own system running parallel to Fannie and Freddie, but unlike Fannie and Freddie investment banks didn’t want conforming loans. They wanted subprime loans, and lots of them. Subprime loans had a much higher return than the paltry yields of conforming paper.
So investment banks set up warehouse lines of credit to thousands of small mortgage brokers for the express purpose of generating as much subprime paper as possible. The IBs would then bundle these subprime loans, securitizing them, cutting them into tranches and selling off the parts to investors and financial firms all over the globe.
On top of this structure of sliced and diced subprime paper was built an even larger structure of derivatives, including the wondrous Credit Default Swap market, with which these financial wizards convinced themselves that they were protected. They weren’t protected, of course, and when it looked like AIG would default on its credit default swaps the world’s credit markets came to a shrieking halt. This is what scared the pee out of the banking world, and it is what led to demands for TARP and other bailouts.
Basically the math underlying the securitized loans and their derivatives was extremely complex (”the Gaussian copula function), and the executives in charge of overseeing their traders didn’t understand it. They had no idea how much risk they were taking, or even who was at risk. In the end they managed to blow up their companies, the investment banking industry, and a sizeable portion of the global economy. Not bad for a day’s work.
http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all
Some regulatory agencies had tried to get a handle on these innovations, but they were chased off by a “deregulation is always best” mentality held by Alan Greenspan and numerous politicians who catered to the the investment banking industry.
None of this was intentional. It was the unintended product of innovation and unrestrained greed. One of the best accounts of what happened is the work of Gillian Tett of the Financial Times, whose book on the subject has just been released:
“So here’s my question: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal?”
No, they just now realize that scrapping the Glass Steagall Act in 1999 was very foolish. The hard lessons learned about the danger of letting investment banks run amok in the world of retail banking had all been forgotten by 1999. Now those lessons are being relearned.
me: "The investment bankers are the ones that bought the ‘packages’ from Freddie and Fannie which included those toxic loans that were a direct result of CRA.”
you: No, Fannie and Freddie were in the business of purchasing loans, not selling them.
Along with other GSEs, Freddie Mac buys mortgages on the secondary market, pools them, and ***sells them as mortgage-backed securities to investors on the open market***. This secondary mortgage market increases the supply of money available for mortgages lending and increases the money available for new home purchases.
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