Thank You, Barney Frank, For Your Vision And Foresight

[Rage for Order]

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=1

Published September 11, 2003

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

He uttered these words in response to an effort by then-Treasury Secretary John Snow to increase auditing and oversight of Fannie Mae and Freddie Mac, reduce the holdings of their portfolios, and ensure that they were not taking unnecessary risks. My question to Barney: what's it look like now in terms of affordable housing? I guess in a way he was correct; housing will be more affordable because the glut of foreclosed properties have created an over-supply of housing, thereby driving down rents. Good luck getting a loan if want to buy a house, however. More from the 2003 article:

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

More at that link

In addition, the Wall Street Journal wrote a scathing editorial on the subject. Although it was published on Sept 9, I just saw it today so I haven't had time to research the information in it. Therefore, I make no comment as to the veracity of their opinion. However, from what I have read so far in other sources it appears that Barney Frank was disastrously wrong in his position as it relates to Fannie Mae and Freddie Mac, to the tune of hundreds of billions of dollars.

http://online.wsj.com/public/article_print/SB122091796187012529.html

edited to correct NYT link - went to page 2 of article instead of page 1