As Congress and the Administration work to prevent the crisis in the financial sector from spilling over into the larger economy, the vultures are swarming. In an Associated Press article yesterday, the following quote is made by Barney Frank, ultra-liberal Democrat of Massachusetts:
“The private sector got us into this mess…The government has to get us out of it. We do want to do it carefully.”
This is obscene. This “mess”, as Congressman Frank so eloquently put it, is the fault of government pure and simple. And, it is the personal fault of Barney Frank. For him to now hide his near-criminal behavior by pointing a finger at the entire private sector is the height of arrogance.
Consider the facts.
Under rules implemented by the Clinton Administration in 1995, banks and mortgage companies were required to give loans to people who could not afford them. This scheme was welfare pure and simple—hand over money to people everyone knew would not be able to pay it back. The banks and mortgage companies did as required. Otherwise they would face stiff penalties and possibly lose their license to operate. So, they gave out the money to put people in homes they could not afford.
But the banks had to get the money from somewhere. They got it from Fannie Mae and Freddie Mac, the two failed quasi-government organizations. Fannie and Freddie urged, encouraged and bullied banks to give out more and more high-risk loans. They then bought these bogus mortgages and sold them to investors, again with the implied backing of the U.S. Government.
So, why wouldn’t an investment firm not buy these securities? After all, they were marketed as having the backing of the U.S. taxpayers.
The Wall Street Journal detailed Barney Frank’s sorted history of defending the scammers:
• In 2000, then-Rep. Richard Baker proposed a bill to reform Fannie and Freddie's oversight. Mr. Frank dismissed the idea, saying concerns about the two were "overblown" and that there was "no federal liability there whatsoever."
• Two years later, Mr. Frank was at it again. "I do not regard Fannie Mae and Freddie Mac as problems," he said in response to another reform push. And then: "I regard them as great assets."
• Again in June 2003, the favorite of the Beltway press corps assured the public that "there is no federal guarantee" of Fan and Fred obligations.
William Wilson is the President of Americans for Limited Government. He has spent his career working in political strategy and public affairs for various causes and organizations.