Senator Barney Frank is the inmate in charge of the asylum.
Instead of acknowledging that forcing banks to make loans that normal risk management would say were high risk loans, likely to default, lies at the core of the current financial crisis, he firmly believes that the sub-prime crisis only developed because bankers were greedy and the Bush Administration is to blame.
And yes: the banks were forced to make the loans. They were required, by law, a law that they strongly opposed, to create and make sub-prime loans. No sub-primes, no sub-prime crisis.
But in the world of Barney Frank, a world that has no economic effects from his actions, it is more important to continue his legacy of "helping those disadvantaged to live the American Dream".
After two years of telling us how lax lending standards drove up the market and led to loans that should never have been made, Mr. Frank wants Fannie and Freddie to take more risk in condo developments with high percentages of unsold units, high delinquency rates or high concentrations of ownership within the development.
After all, it's not real money: it's taxpayer money to bail out the next set of banks that go tits up.
Fannie and Freddie have restricted loans to condo buyers in these situations because they represent a red flag that the developments -- many of which were planned and built at the height of the housing bubble -- may face financial trouble down the road. But never mind all that. Messrs. Frank and Weiner think, in all their wisdom and years of experience underwriting mortgages, that the new rules "may be too onerous."
Duh. High risk investment objects require high risk premiums, turning them, quite properly, into white elephants that no one wants. Want to bet that there are ties between these investors and the Democratic Party? That these investors are crying how terrible it is that these beautiful apartments, built by loyal Democrats, can't be sold because of those greedy bankers?
And in a display of the wit for which Mr. Frank is famous, the letter writers slyly point out that higher lending standards won't reduce taxpayer exposure to bad loans because the Federal Housing Administration has even lower standards for condos. "While the underlying goal may be to reduce taxpayer exposure relating to the current conservatorship of the GSEs [government sponsored entities], such a goal would not have such an effect if it merely results in a shifting of loans from the GSEs to the FHA." Tougher lending standards will merely shift market share from one government program to another, so what's the point in being cautious?
Perhaps one should contemplate, instead, that the FHA tightens its standards...
Fannie and Freddie have already lost tens of billions of dollars betting on the mortgage market -- with that bill being handed to taxpayers. They face still more losses going forward, because in the wake of their nationalization last year their new "mission" has become to do whatever it takes to prop up the housing market. The last thing they need is lawmakers like Mr. Frank, who did so much to lay the groundwork for their collapse, telling them to play faster and looser with their lending standards.
Fannie and Freddie have always been political creatures under the best circumstances. But we don't remember anyone electing Mr. Frank underwriter-in-chief of the United States.No one did.
This is the perfect example of why Fannie and Freddie must be closed and why the US government should be banned, permanently, from ever setting up anything even remotely resembling this. What worked for decades under both Republican and Democratic administrations was abused and ruined by the Clinton Democrats, who have done more damage to this country than anyone really realizes, less direct as indirect, with their greed and their belief that the taypayers owe them a life of luxury and wealth. There is no other way to explain their levels of corruption, malfeasance and outright greed. The Clinton Democrats - and Barney Frank belongs to them - are the reason why we are in recession: they tried to manipulate markets, and in their greed and incompetence manipulated them to the point where when the markets reacted, as markets do, they undid the accomplishments of a generation.
Because that is what the current recession and financial crisis is doing: undoing the accomplishments of an entire generation, the sandwich generation, those between the baby boomers and the lettered generations (X, Y, whatever). It is the folks between 40 and 55 years of age, that age right now, who have seen their major investments disappear in smoke, who are underwater with their mortgages, who will not be able to even contemplate retirement at any age under 65 and who will probably have to work significantly longer just to break even.
Y'all can thank Barney Frank for that. He's still at it, still the inmate in charge of the asylum, digging the hole deeper and deeper.
But y'all voted for him and the Clinton Democrats. Thanks a lot.