Barney Frank: "In 2003, I Didn't See a Crisis" | Big Think

Barney Frank: "In 2003, I Didn't See a Crisis"

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Barney Frank on why he originally opposed tightened regulations for Fannie Mae and Freddie Mac.

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Barney Frank:

Barney Frank served as a Massachusetts congressman for 32 years before retiring in 2013. While in Washington, Frank served as Chairman of the Financial Services Committee and was a major leader in the Democratic Party. In 1987 he became the first member of Congress to voluntarily come out as gay. Frank has also served as a Massachusetts State Representative and an assistant to the Mayor of Boston. He has taught at several Boston area universities.

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TRANSCRIPT:

Question: When the Bush Administration tried to tighten regulation of Fannie Mae, the New York Times reporting you opposed the move. Do you stand behind this? (Scott Sumner, The Money Illusion)

Barney Frank: No. I changed those views when the Bush Administration changed what Fannie Mae and Freddie Mac were doing. I did believe that Fannie Mae and Freddie Mac should be used to build affordable rental housing. When I said affordable housing there, it's the terms that we used then, I was talking about rental housing. I had been critical of the push for Fannie Mae and Freddie Mac to buy up sub-prime mortgages and in 2003, I did not see a crisis. Of course, I will tell you, I didn't see a crisis with Lehman Brothers or AIG. I did not perceive the crisis as much as it was. I think it was encouraged and brought about by sub-prime lending.

And here's the sequence. The year after I said that, 2004, the Bush Administration ordered Fannie Mae and Freddie Mac significantly to increase the number of mortgages they bought issued to low income people. I criticized that at the time in 2004. There's another quote that doesn't get mentioned as much in Bloomberg saying, "This is bad for the borrowers and it's bad for Fannie Mae and Freddie Mac." We couldn't overrule that. The Bush Administration put in a significant increase in the number of low income mortgages. In fact, one of the Republican members of the Committee put an amendment in on history which specifically mentioned that 2004 decision by the Bush Administration. The Republicans controlled Congress. They didn't let us stop it.

Once that happened, I did agree that we needed to regulate Fannie Mae and Freddie Mac. I should note, by the way, that during the period, 2003, I was in the minority. I was a Democrat in a Congress controlled by Tom DeLay, so no, I didn't really have the power to decide that. The Republicans during their 12 years of control did nothing to deal with it. In 2005, though, I will say this. In 2003 I didn't see a crisis. In 2004 I was critical of them pushing into those sub-prime loans. We did two things. First, Democrats tried to restrict sub-prime loans. The Republicans wouldn't entertain the bill and Greenspan wouldn't use his authority to do it. Secondly, I joined the Republican Chairman of the Committee then, Mike Oxley, in trying to regulate Fannie Mae and Freddie Mac.

Now, I voted in Committee for a bill in 2005 to regulate Fannie Mae and Freddie Mac. I was in the minority, remember. This was a Republican Congress. The bill passed the Committee. It went to the floor. At that point, the Republican leadership ordered Oxley to put in an amendment that cut out affordable rental housing. I voted against the bill because of that, but I was still for the Fannie Mae/Freddie Mac regulation. But here's the point. This is a Republican Congress. The Republican Congress in 2005 with my support passes out of Committee a bill to regulate Fannie Mae and Freddie Mac in the House. It goes to the Senate and the Bush Administration tells the Senate Republicans who control the Senate that they don't like what the House Republicans did. So the bill then dies because of a fight between the House Republicans and the Senate Republicans. I joined Oxley in writing to the Senate Republicans and saying, "Please pass our Regulatory Bill."

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