Barney Frank's Incompetence, Politics Made Financial Crisis Worse
The document trail below reveals some extremely troubling questions for Representative Barney Frank. Is the GAO report cited below truly the first serious investigation of the mortgage meltdown? Did Congress or the Financial Services committee he chairs have access to mortgage meltdown information from other sources, especially with said GAO report already well on its way to completion?
Why was Barney Frank pushing for his “expanding home ownership bill” in the midst of this looming crisis he already has good reason to suspect was going to get worse? Was he pushing it for purely political purposes prior to the 2008 election, while knowing full well the American housing market was headed for disaster and American taxpayers would be left on the hook as a result of his policies?
While not quite a smoking gun, an examination of the record suggests that while Rep. Barney Frank had good reason to be concerned of a pending meltdown in the housing sector, either out of sheer incompetence, or political maneuvering, he did the exact opposite of what he should have done as a representative of the people of Massachusetts.
Via Mortgage News Daily, on April 24, 2007, problems within the mortgage industry were already coming to light. And it was happening right in front of Barney Frank's committee.
The chief executives of both Freddie Mac and Fannie Mae as well as the Chairman of the Federal Deposit Insurance Corporation and the Federal Housing Commissioner and Assistant Secretary of the Department of Housing and Urban Development testified last week in a hearing before the U.S. House Committee on Financial Services about solutions to the current subprime mortgage turmoil.
In fact, it led Frank, among others, to request an indepth GAO study of the issue. The details of their concerns at link. So, Frank was obviously aware of serious issues within the mortgage industry in Spring 2007. So, what would be the competent, prudent thing to do? The smart play would be to wait before potentially making things worse, unless of course one was thinking more about politics and 2008.
Subsequent to the hearing, Chairman Barney Frank and Ranking Member Spencer Bachus requested that the Government Accountability Office (GAO) conduct a thorough study of the reasons for the recent surge in foreclosures. In a letter to GAO's Comptroller General, Frank and Bachus said that it seems clear that the type of mortgages that have been offered to borrowers in recent years is one such factor, but perhaps not the only one.
The two Congressmen instructed GAO to examine the current state of the problem, its causes, and potential solutions, and seek to provide answers to the following questions, as well as any others that the GAO finds to be relevant.
Just one month before the GAO report referenced above was officially released, Frank teamed up with Maxine Waters and the House passed comprehensive FHA reform. A best case scenario would be that Frank acted incompetently, without having seen the pending results of the GAO study. But these studies aren't done in a vacuum. Had Frank and the Democrats held off just one month, it's quite possible that passing the FHA reform legislation would have been politically untenable. Consequently, there's good reason to question if this wasn't actually a far more sinister action undertaken to appease certain consitutents priot to the 2008 election.
It's time for Barney Frank to stop dancing and answer the questions presented at top.
Washington, DC - The U.S. House of Representatives today overwhelmingly passed H.R. 1852, the “Expanding American Homeownership Act of 2007,” which will revitalize the Federal Housing Administration (FHA), a federally insured loan program that for over 60 years has been a reliable source of affordable fixed rate mortgage loans, especially for first-time homebuyers. The measure, originally introduced by Representative Maxine Waters, Chairwoman of the Subcommittee on Housing and Community Opportunity, and Barney Frank, Chairman of the Financial Services Committee, will enable FHA to serve more subprime borrowers at affordable rates and terms, recapture borrowers that have turned to predatory loans in recent years, and offer refinancing loan opportunities to borrowers struggling to meet their mortgage payments in the midst of the current turbulent mortgage markets.