Barney Frank: The Poor Should Rent, Not Own( Dem admits disastrous mistake)

In its final installment of the Big Think's "Went Went Wrong" Series on the financial crisis, they interviewed Financial Services Committee Chairman Barney Frank (D-MA). Much of the interview was predictable: Frank mostly explained what anyone closely following the financial regulation push in Congress already knew. But there was one fascinating gem in discussing where Fannie and Freddie went wrong. Frank views ushering the poor to own homes as a mistake and believes they should rent instead.

Frank was responding to the question about how Fannie and Freddie could be structured to avoid moral hazard and a too cozy relationship with the regulators. After stating that we should separate the liquidity creation function from the subsidy objective (which we already knew he supported), he said:

I think the answer is you separate out the function of providing the equity in general for the mortgage market and doing some subsidy and in my judgment, the subsidy again, as I said before, should be focused on affordable rental housing, not in pushing low income people into owning homes that they can't afford.

Can I get an "Amen!"? If someone cannot afford a house, they should not be encouraged to purchase a house. The logic couldn't be simpler. And yet, over the past decade it was utterly ignored. I've never understood why renting is viewed as so shameful or low class. I've rented my entire adult life. I once had a supervisor pushing 50-years-old with a wife and two kids that probably made over a million-dollars-per-year, and he still rented.

>> Why should owning a home be synonymous with debt?

Purchasing a home is necessarily synonymous with debt for broke people. If they could buy a home with no debt, they wouldn’t be broke. Having the cash to purchase a home negates the label of “broke”.

>> Virtually anywhere, discarded construction materials are arriving at the local dump by the truckload, but laws usually prohibit people from taking them even though it would be easy to build serviceable homes from them. Add a few hundred dollars for materials that would usually need to be bought new — roof shingles, mortar, paint, nails, etc — and for a couple thousand dollars total, anyone could outright own their own little home that they built with their own hands.

Sounds like a third world country.

First, this seems somewhat shortsighted. There are left over building materials precisely because property values made it worth building and renovating properties. You suggest we drive values down by allowing people to erect shacks with leftover building materials ... which will make building and renovation less profitable, and reduce the availability of scrap building materials.

There is a reason thrid-world countries seem to have more damage and casualties during natural disasters. That building codes and restrictions have driven up home prices is probably true ... but they also help us avoid a Haiti-like disaster every time the wind picks up or the ground shakes.

Renting in a good safe structure is better than owning a shack with no central heating/air (because if you can only afford to steal building materials, how are you going to afford heating/cooling?), no gas, no water, no plumbing, etc. Seems like a better arrangement all around — for renters (who get to live in structures of a quality they could not afford to purchase), for property owners (who avoid having property values plummet because of a third-world scrap-material tent-city popping up on every corner) ... for everybody.

SnakeDoc

WHY THE WORM TURNS Bwaney Frank’s 4th congressional district went overwhelmingly for Scott Brown; just five of the 24 cities and towns voted for Coakley. Frank acknowledges that it may be a tougher race than he’s used to. “But, if I want to get re-elected it’s my job to talk about the issues and my record, and that’s the nature of democracy,” he said.........fierce competition or not, Frank said he will “definitely” seek re-election this November.

NOT HIS DECISION TO MAKE What this self-absorbed Lipless Wonder fails to fathom is that his constituients (including those townhallers he sneered at) will decide whether he is fit to run for reelection. Now Frank wants to talk about his "record?" Fine. Here it is.

Let The Inquisition Start With Barney Frank
Investor's Business Daily | 3/6/09
FR Posted on 03/08/2009 by FreeManN

Congressman Barney Frank says he wants some of those responsible for our current financial meltdown to be prosecuted. And we couldn't agree more. First up in the court dock: Rep. Barney Frank, D-Mass.

Even by the extraordinarily loose standards of Congress, it takes some chutzpah for someone such as Frank to suggest that he'll seek prosecutions for those behind the housing and financial crunch and for what he called "a strongly empowered systemic risk regulator." Frank: Fannie Mae and Freddie Mac's point man in Washington.

For Frank, perhaps more than any single individual in private or public life, is responsible for both the housing market mess and subsequent bank disaster. And no, this isn't partisan hyperbole or historical exaggeration. But first, a little trip down memory lane. (Excerpt) Read more at ibdeditorial.com ...

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September 24, 2008
Media Mum on Barney Frank's Fannie Mae Love Connection
Businessandmedia.org BY Jeff Poor
FR Posted by khnyny

Are journalists playing favorites with some of the key political figures involved with regulatory oversight of U.S. financial markets?

MSNBC’s Chris Matthews launched several vitriolic attacks on the Republican Party on his Sept. 17, 2008, show, suggesting blame for Wall Street problems should be focused in a partisan way. However, he and other media have failed to thoroughly examine the Democratic side of the blame game.

Prominent Democrats ran Fannie Mae, the same government-sponsored enterprise (GSE) that donated campaign cash to top Democrats. And one of Fannie Mae’s main defenders in the House – Rep. Barney Frank, D-Mass, a recipient of more than $40,000 in campaign donations from Fannie since 1989 – was once romantically involved with a Fannie Mae executive.

The media coverage of Frank’s coziness with Fannie Mae and his pro-Fannie Mae stances has been lacking. Of the eight appearances Frank made on the three broadcasts networks between Jan. 1, 2008, and Sept. 21, 2008, none of his comments dealt with the potential conflicts of interest. Only six of the appearances dealt with the economy in general and two of those appearances, including an April 6, 2008 appearance on CBS’s “60 Minutes” were about his opposition to a manned mission to Mars.

Frank has argued that family life “should be fair game for campaign discussion,” wrote the Associated Press on Sept 2. The comment was in reference to GOP vice presidential nominee Sarah Palin and her pregnant daughter. “They’re the ones that made an issue of her family,” the Massachusetts Democrat said to the AP.

The news media have covered the relationship in the past, but there have been no mentions since 2005, according to Nexis and despite the collapse of Fannie Mae. (Excerpt) Read more at businessandmedia.org ...

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Barney Frank - Don't Blame me for the Housing Bubble !!
Yahoo Finance | Jul 20, 2009 | Yahoo Finance
FR Posted 07/20/2009 by JosephSmithNAW

Who’s to blame for the subprime housing bubble? A popular answer – especially on the right side of the aisle - is Massachusetts Democrat, Barney Frank. Why? The argument, best summed up in an Investor's Business Daily editorial published in March 2009, goes like this: "Starting in the early 1990s," Rep. Barney Frank "(and other Democrats) stood athwart efforts by regulators, Congress and the White House to get the runaway housing market under control." It goes on to say in, "2002, Frank nixed reforms" of Fannie Mae and Freddie Mac and that in 2003, "led by Frank, Democrats stood as a bloc against any changes" that President Bush proposed making to Fannie and Freddie.

The Fannie Mae Dice Roll Continues
The Wall Street Journal / FR Posted Nov 11, 2009, by MissesBush

Rep Barney Frank, Sept 25, 2003." I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing."

It was six years ago that Mr. Frank announced his famous dice roll on Fannie Mae and Freddie Mac in the name of affordable housing. Mr. Frank got his wish, and the losses keep rolling in, with no end in sight as Washington finds new ways for the companies to serve political purposes. Last week, Fannie Mae posted a quarterly loss of $19.8 B—which believe it or not was an improvement on the $29.4B it lost a year earlier.

Last quarter's results came with yet another request for government aid—$15B worth. That brings the total tab for Fannie and Freddie to $111B since they were put into conservatorship in Sept 2008. It would be bad enough if Fannie and Freddie's continuing losses were merely the product of bad bets made amid the housing bubble in 2006-07. But the latest red ink is in large part the result of a deliberate choice to run their businesses at a loss over the past year to support WHouse housing policies.

The most recent losses include $22B of what Fannie Mae calls "credit-related expenses," which in English means foreclosure costs and losses on loans that are "worth" more than the house. Of that amount, $7.7B comes straight from Fannie's support of the Obama Admin's mortgage-modification program. (Excerpt) Read more at online.wsj.com ...

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With all of this negative information on Barney Frank out there, why isn’t someone running against him in the primary? Not to worry----all this info on Frank is being reexamined under a new light b/c of the Brown win. Wait'll Frank tries to raise money from all those special interst groups hat propped him up..........that's what torpedoed Chris Dodd. His backers refused to pony up. Frank's days are numbered.....and he knows it.

As Scott Brown said in his acceptance speech: "If Dems have trouble in MA, then they have trouble everywhere....and they know it."

Yoo-Hoo----Where's Obama’s Pay Czar? Fannie Mae Chief Executive Officer Michael Williams and Freddie Mac CEO Charles Haldeman Jr. are each eligible for compensation of as much as $6 million this year, the companies said today in regulatory filings.

But you ain‘t seen nuttin’ yet, taxpayers, Read on.
December 28, 2004, By PAUL THARP, NY POST
RAINES' FAREWELL: $26 MILLION+

Franklin Raines proved you can fool most of the people most of the time until you get caught. Raines (here with Clinton), reigned for 5 years following Clinton's appointing him as CEO of Fannie Mae was ousted with a package of endless cash and perks that would satisfy an emperor.

Although Fannie Mae chief Franklin Raines was fired for bungling its books, he'll get a $26 million parachute — not counting a MONTHLY PENSION of $116,300 for life. The 55-year-old Washington, D.C. insider (and his CFO J. Timothy Howard) left their jobs under a cloud of suspicion that they undermined the financial soundness of Fannie Mae.... and that they created losses of up to $9 billion (the entire bill to taxpayers has exceeded $114 Billion.)

Regulators overseeing Fannie Mae urged it not to pay any benefits to either executive until reviews are made of their contracts, feds said.

RAINES' ROYAL EXIT PACKAGE Actual Fannie Mae filings indicate Raines owns options that give him $5.8 million in net profit after redemption....... plus another $8.7 million in deferred compensation for his six years at the helm. Raines has already collected $4.87 million in special performance shares this year and also keeps $5 million of paid-up life insurance. He and his spouse get free medical and dental benefits for life, worth over $1 million.

Last year, Raines earned $20 million in (a) salary, (b) bonuses, and, (c) stock awards.

The SEC said Raines broke accounting rules by playing with risky derivatives. After he was fired, Raines told the board that he's entitled to get paychecks until next June 22 giving him another $600,000, which triggers a $2,000 monthly raise in his lifetime pension. He also says he's entitled to disputed options with a gross value of about $5.6 million.

To keep Raines happy within philanthropic circles, Fannie Mae will match his charitable contributions by $10,000 a year.

Raines' partner in crime---CFO Howard---gets a parachute valued at more than $13.1 million — not including a monthly $36,071 pension for life. Howard gets free medical and dental coverage for himself and family for life, and the matching $10,000 annual perk for making charitable contributions.

SOURCE http://www.nypost.com/business/37312.htm ///// Candor7 to Liz; STE=Q; rocco55; thouworm; rxsid; GOPJ; Fred Nerks; null and void; stockpirate; george76; ... THOSE EXECUTIVE PAY BONUSES HAVE TO STOP ( sarc.). Where is the pay Czar in all this. Maybe we need to raise bloody hell. (Ping to Geither’s Christmas Day Fast One!)

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Rahm Emanuel's Profitable Raping of Freddie_Mac

Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.

OBAMA COVERUP Freddie Mac records exempt from FOIA
Sunlight Foundation | 03/26/2009 | Bill Allison
FR Posted 03/27/2009 by BuckeyeTexan

Bob Secter and Andrew Zajac of the Chicago Tribune report that, while researching what went at Freddie Mac during the period White House Chief of Staff Rahm Emanuel served on the government-sponsored enterprise’s board of directors, they were unable to get minutes of board meetings and other information.

The Obama administration rejected a Tribune request under the Freedom of Information Act to review Freddie Mac board minutes and correspondence during Emanuel’s time as a director. The documents, obtained by Falcon for his investigation, were “commercial information” exempt from disclosure, according to a lawyer for the Federal Housing Finance Agency. Freddie Mac executives cooked the books, mismanaged the firm, and ultimately drove it into the ground, costing taxpayers billions of dollars. The “commercial information” exemption is reserved for private companies–Freddie Mac is by no means a private company anymore.

TWO-FACED OBAMA Obama "said" in the FOIA memo, “The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears.” Obama added later that “In responding to requests under the FOIA, executive branch agencies (agencies) should act promptly and in a spirit of cooperation, recognizing that such agencies are servants of the public.”

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Rahm Emanuel was director when Freddie Mac board was tipped to fraudulent BONUS scheme

"On (Rahm) Emanuel's watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments.

The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass. The accounting scandal wasn't the only one that brewed during Emanuel's tenure. During his brief time on the board, the company hatched a plan to enhance its political muscle.

That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago.

The board was throttled for its acquiescence to the accounting manipulation in a 2003 report by Armando Falcon Jr., head of a federal oversight agency for Freddie Mac. The scandal forced Freddie Mac to restate $5 billion in earnings and pay $585 million in fines and legal settlements.

It also foreshadowed even harder times at the firm. Many of those same risky investment practices tied to the accounting scandal eventually brought the firm to the brink of insolvency and led to its seizure last year by the Bush administration, which pledged to inject up to $100 billion in new capital to keep the firm afloat. The Obama administration has doubled that commitment."

SOURCE http://www.chicagotribune.com/news/politics/obama/chi-rahm-emanuel-profit-26-mar26,0,5682373.story

>> Renting a good quality home costs more than buying one, on a month to month basis, because a profit has to be built in for the landlord.

This is likely true — but, in exchange for putting the debt risk on the landlord rather than the poor person. Still a good deal for the broke renter.

>> Actually very few people in the US are so poor that they could only afford the sort of house I described, and most of those won’t stay that poor, and would soon be improving and expanding their modest starter home, or selling it for more that they paid for it (because of the value of their labor that went into it), and buying/building something bigger and better.

If this is true ... why not rent while you’re broke, and buy when you’re not? There is FAR less risk in renting, and broke people should not be taking financial risks.

>> Whatever sort of housing they end up staying in long term, they will OWN, and that has a very salutary effect on their own finances and that of their offspring who will inherit from them.

As you said — most people won’t be poor/broke forever. The same benefits can be felt from buying a good home when you can afford it, and renting until then, rather than buying a lousy home you can’t afford for the illusion of stability.

SnakeDoc

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