Barney Frank’s Bankrupt Ideas

By INVESTOR’S BUSINESS DAILY | Posted Monday, October 06, 2008 4:20 PM PT

Financial Rescue: Democrats created the mortgage crisis by forcing banks to give loans to people who couldn’t afford them. Now Obama and Biden want bankruptcy judges to bail out the same deadbeat homeowners. And once again, Barney Frank is helping.

Read More: Economy


It’s been said that history is a lie agreed upon. Democrats are trying to rewrite history by blaming the Bush administration for the current crisis and claiming that the rescue bill is necessary to save the economy from Republican mismanagement.


More blarney from Barney.

Last Thursday on Fox News, when Bill O’Reilly tried to suggest that both parties might share the blame, House Finance Committee Chairman Frank, in a not atypical meltdown, disowned any responsibility for his lack of oversight over the last two years and his complicity before that.

Frank also claimed: “The fact is, it was 1994 that we passed a bill to tell the Fed to stop the subprime lending. We tried to get them to do it.” In other words, those rascally Republicans did it all when they took control of Congress that November.

The legislation he spoke of was the Homeowners Equity Protection Act. It was supposed to empower the Federal Reserve to set the rules on mortgages. Problem was, the Clinton administration had its own ideas of what the rules should be.

The Community Reinvestment Act, first passed in 1977 under Jimmy Carter, was intended to increase minority homeownership. It grew out of charges that banks were “redlining” entire inner-city neighborhoods as bad credit risks. Banks now were forced to perform outreach to these areas.

In the ’70s and ’80s, banks could show that they were trying to do that by advertising in minority newspapers and having representatives sit on the boards of local groups. In other words, they were rated on the effort made and not on the results achieved. Creditworthiness still mattered.

In 1995, as Howard Husock pointed out eight years ago in City Journal, “the Clinton Treasury Department’s 1995 regulations made getting a satisfactory CRA rating much harder. The new regulations de-emphasized subjective assessment measures in favor of strictly numerical ones. Bank examiners would use federal home-loan data, broken down by neighborhood, income group, and race, to rate banks on performance.”

Creditworthiness and due diligence no longer mattered. As a 1999 New York Times editorial observed: “Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Bill Clinton administration to expand mortgage loans among low- and moderate-income people and felt pressure to maintain its phenomenal growth in profits.”

On Frank’s and Clinton’s watch, the Community Reinvestment Act was changed to force the issuance of bad loans. Banks would be rated on the number of loans, not on their soundness. Fannie Mae and Freddie Mac were then encouraged to buy them up. It was all about affordable housing, even if the housing was unaffordable.

“From the perspective of many people, including me, this is another thrift industry growing up around us,” Peter Wallison, a resident fellow at the American Enterprise Institute, said back in 1999. “If they fail, the government will have to step in and bail them out the way it stepped up and bailed out the thrift industry.”

That prediction came true, but it didn’t have to.

On Sept. 11, 2003, the Bush administration proposed to Congress a new agency under the Treasury Department to assume supervision of Fannie and Freddie. The new agency would have had the authority to set capital-reserve requirements, veto new lines of business and determine whether the two quasi-government lenders were adequately managing the risk of their ballooning portfolios.

When former Treasury Secretary John Snow pleaded for Frank to support Fannie and Freddie reform, Frank responded: “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Democrats believe in affordable housing even if it’s at the expense of the vast majority who watch their credit, work hard and pay their mortgages on time. But for the deadbeats, particularly Democratic constituencies, they have ways to make affordable the housing you couldn’t afford. So first, they forced them into housing they couldn’t afford, and now they give them a financial mulligan.

In the vice presidential debate, Sen. Joe Biden said that “what we should be doing now — and Barack Obama and I support it — we should be allowing bankruptcy courts to be able to re-adjust not just the interest rate you’re paying on your mortgage to be able to stay in your home, but be able to adjust the principal that you owe, the principal you owe.”

To get this bill passed, Obama made a lot of phone calls — particularly to members of the Congressional Black Caucus, including caucus chief Rep. James Clyburn — assuring this would happen.

Those paying their mortgages on time don’t get that break.

Rep. Elijah Cummings said Obama told him that, if elected president, he would direct a Treasury Department official to work with homeowners in foreclosure to restructure their loans. Cummings said Obama also told him he’d seek changes in bankruptcy laws allowing judges to reduce what borrowers owe on their home loans.

Section 110 of the rescue legislation has the Orwellian title of “Assistance to Homeowners” — but only for the deadbeats.

It describes somebody called a “Federal property manager” who “holds, owns or controls mortgages, mortgage-backed securities, and other assets secured by residential real estate.”

Section 110 speaks of “modifications” that this manager can make to these mortgages including not only the reduction of interest rates but the reduction of loan principal.

Not only is Uncle Sam now the world’s largest landlord. He can also arbitrarily set the value of property and the amount owed on it at will, thus distorting the free market.

The vast majority of homeowners who pay their mortgages on time get the shaft. They’re the ones who’ll take up the others’ slack.

Why? And why is the Community Reinvestment Act still law?



3 responses to “Barney Frank’s Bankrupt Ideas

  1. Hey, I want to restructure my debt too. Unfortunately, many people don’t know about Barney Frank, the CRA, or what Clinton had to do with this mess. Some of the ignorance on these WordPress blogs alone…

  2. Dear Americans,

    We would not need any petitions IF OUR CONGRESS and SENATE (employees) DID THEIR JOB.

    I would like to see every American demand an immediate replacement of every Congress Representative and Senator and DEMAND TERM LIMITS and allow any President the power to Line Item Veto with no recourse of overriding a President’s veto by our Congress or Senate.

    What we don’t need, is anyone that has been in public office before in any capacity. We need fresh new faces with new ideas and people who are for the citizens of America and for what America once stood for.

    We do not need any politicians who “cater” to self-interest groups, or pass legislations based on “political correctness”, or refuse to protect our borders with a fence, or will not resend the NAFTA Agreement that has cause the loss of millions of American jobs. Nor do we need someone in office who will not stop the outsourcing of American jobs, such as our FAA allowing Airlines to outsource (out of the USA) airplane maintenance.

    WE DO NEED someone in office that will pass a bill for Balance Budget, support Term Limits, allow Line Item Vetoes and will STOP STEALING FROM OUR SOCIAL SECURITY SYSTEM AND START PAYING THE FUNDS STOLEN BACK.

    Each of us has to work within our budgets everyday. So what right does our Congress and Senate have by not having a balance budget? What right do they have to “earmark” (pork) or “appropriate” funds that are not within the budget guidelines? If it is not in the guidelines they pass a Bill so any action they do is legal. It is just that simple. If they want something, they just make up a law and stuff it deep in a bill not related to the issue, and force the President to sign. This is why they do not want the President to have a Line Item Veto.

    I am sure every American is also disgusted with Washington catering to their self-interest and to Lobbyist and not doing what is right for every American citizen or for America as a whole. We (Americans) need to stop talking about wanting change and start demanding our “employees” either do their job based on their employers (voters) demands or we fire them. Does anyone other than me have the fortitude to make this happen?

    See if I am correct that we need change by answering these questions?

    We the People are tired of the lack of action by “Washington” to do what is best for America?

    We the People are sick of hearing lies, empty promises and the unethical practices by some of our Representatives (elected politicians) that requires legal action?

    We the People are sick and tired of America being the “911” to the world and “saving” every third world country and giving away Billions of our dollars to those countries? Did you know that we have borrowed billions upon billions of dollars from other countries just so America can stay financially afloat? And yet we give away that same money to other countries? What the hell is going on?

    We the People are tired of hearing that Social Security can no longer be promise to continue? What you are not hearing is that Congress and our Senate has robbed from our Social Security to fund other “projects.” Everyone forgets, the money taken out of our paychecks for Social Security is put their by our employers and by us. Our Social Security funds are like a savings account, which have been stolen by our Congress and Senate with NO INTENTIONS OF PAYING BACK. Yet, they both voted for an $810 Billion dollar bailout of Wall Street and the Banking industry under the pretense they are saving America’s financial future. What they are saving is their own bank account and investments. If you had the money, would you personally buy a bad debt with the hope of recovering your investment? HELL NO! Unless you’re really stupid. This is what our Congress and Senate did by passing this bail out “plan.” If you believe any other “story” they may tell you, then you deserve to stand beside them proudly smiling with them when America goes down the drain.

    We the People are tired of being taxed to death by the IRS and with America having the most confusing and highest tax system in the world?

    We the People are tired of the lack of jobs in America and buying products made outside of our borders? You can thank NAFTA for this. Did you know that any immigrant may apply for free Federal funds (loan) with no interest and not required to pay this back to start a business and do not have to show a profit? When is the last time you applied for a loan or had a credit card with no interest or requirement to pay the loan off?

    Speaking of borders, do you feel it is right that America’s borders are not protected as they should be? There is more protection of Iraq’s borders than what we have in America? Is this right?

    We the People are tired of “pressing 1 for English, or press 2 for Spanish”? America is an English speaking country. Or is it?

    We the People are tired of paying extraordinary high prices for health insurance or not having any at all? Did you know that anyone elected to the Congress or Senate has health insurance for life and paid for by the American Taxpayer? I did not vote for this, but our representatives did. Why did this happen? Because they are looking out for themselves and not us.

    We the People are asking every American to write-in a name this November Election of anyone that will, can, do the job they will be elected too without any “ties” to any self-interest group, lobbyist or any other political or monetary gains.


    The AMERICA we once knew is DYING. Only you (we) can stop this death rattle.

    I have always said; a change in government (revolution) begins with an idea supported by the courage to express change. Is this not what our “Founding Fathers” expressed and accomplished?


    Are you with me or against me?

    Joe Cacciotti

  3. averageuscitizen

    Forcing banks to give loans to people who cannot afford them is quite a stretch. Over 50% of the loans were given by private mortgage brokers who are not covered by the CRA, another 20-30 percent were given by subsidiarys who had limited CRA regulation and a good 13 percent of the remaining 30 percent of CRA loans given by banks have NOT gone into foreclosure and are fixed rate loans.

    So, give the whole story or none of it. Barney Frank and the democrats do, however, deserve a very serious and comprehensive looking at, as their part in this fiasco is not a small one, but to put the blame squarely on Democrats is simply dishonest at best. Nobody FORCED bank to make loans that were unsound. They did that all on their own to make a lot of money very quickly.

    The people who ran these companies are not idiots, they simply got greedy and bent the rules of the game further than they could go without breaking.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s