Bloomberg columnist Caroline Baum asserted that "[a]s the ranking member of the House Financial Services Committee," before he became chairman in 2007, Rep. Barney Frank "consistently opposed stricter regulation of Fannie Mae and Freddie Mac." In fact, Frank has supported legislation to strengthen oversight over Fannie and Freddie, both as ranking member and as chairman. Further, Frank advocated for "a bill that would have enhanced the regulatory structure for Fannie Mae and Freddie Mac" during a hearing from which Baum quoted in the column.
In a February 12 column, Bloomberg columnist Caroline Baum asserted that "[a]s the ranking member of the House Financial Services Committee," before he became chairman in 2007, Rep. Barney Frank (D-MA) "consistently opposed stricter regulation of Fannie Mae and Freddie Mac." In fact, Frank has supported legislation to strengthen oversight over Fannie and Freddie, both as the senior Democrat on the committee when the Republicans controlled the House and as chairman. Further, Frank advocated for "a bill that would have enhanced the regulatory structure for Fannie Mae and Freddie Mac" during a hearing from which Baum quoted in the column.
As Media Matters for America has documented, Frank's efforts to enhance regulatory oversight on Fannie Mae and Freddie Mac include:
- In 2005, Frank, then the ranking Democrat on the House Financial Services Committee, worked with committee chairman Rep. Michael Oxley (R-OH) on the Federal Housing Finance Reform Act of 2005, which would have established the Federal Housing Finance Agency (FHFA) to replace the Office of Federal Housing Enterprise Oversight (OFHEO) as overseer of the activities of Fannie Mae and Freddie Mac. After voting for the bill in committee, Frank voted against final passage of the bill on the House floor, stating that he was doing so because an amendment added to the bill on the House floor imposed restrictions on the kinds of nonprofit organizations that could receive funding under the bill.
- In early 2007, as chairman of the committee, Frank sponsored H.R. 1427, a bill to create the FHFA, granting that agency "general supervisory and regulatory authority over" Fannie Mae and Freddie Mac and directing it to reform the companies' business practices and regulate their exposure to credit and market risk. Among other things, Frank's legislation, titled the Federal Housing Finance Reform Act of 2007, directed the FHFA director to "ensure" that Fannie Mae and Freddie Mac "operate in a safe and sound manner, including maintenance of adequate capital and internal controls" and to establish standards for "management of credit and counterparty risk" and "management of market risk." The FHFA was eventually created after Congress incorporated provisions that House Speaker Nancy Pelosi (D-CA) said were "similar" to those of H.R. 1427 into the Housing and Economic Recovery Act of 2008, which then-President Bush signed into law on July 30, 2008.
Baum also wrote that in 2004, Frank "received a report from the GSE [government sponsored enterprises, which Fannie Mae and Freddie Mac were at the time] regulator showing that Fannie and Freddie had manipulated their earnings, enriching their senior executives in the process" and accused Frank of "look[ing] the other way" and of "sh[ooting] the messenger, Armando Falcon, director of the Office of Federal Housing Enterprise Oversight, who found accounting irregularities at both companies."
In fact, at the October 6, 2004, House Financial Services committee hearing about the allegations, Frank did not "look the other way" when presented with Falcon's report. Of allegations of earnings manipulation, he said, "To the extent that people played games to get bonuses, I am outraged. People making that much money, let me put it this way, at the level of compensation of the top officers of Fannie Mae, they should get bonuses if they rush into a burning building to rescue a kid, maybe a cat, but not for doing their job. I think it is unseemly of them to be getting bonuses in the first place for doing what they are getting paid very well to do. To the extent that there was manipulation, that is very wrong and should be penalized."
Baum also cherry-picked a quote from Frank's questioning of Falcon in which Frank said "I don't see anything in your report that raises safeness and soundness problems" to suggest that Frank dismissed problems at the two companies. In fact, Frank did not criticize Falcon for "showing that Fannie and Freddie had manipulated their earnings" or for exposing "accounting irregularities." Rather, Frank criticized Falcon for what he said was a lack of specifics to back up Falcon's allegations of "safety and soundness" concerns with respect to the two companies. Frank said, "[I]t makes me even more disturbed that you, both in your written statement and again, sort of threw 'safety and soundness' around like kind of boilerplate," and added: "I don't see anything in your report that raises safety and soundness problems." Frank also said:
There is a quality and a quantity issue here. There are inaccuracies that can be disturbing, and if they led to inappropriate compensation, I would be very unhappy. But the notion that any inaccuracy implicates safety and soundness, I think, based on what you have said here, where you cannot even conclude -- you have said you cannot even quantify any potential amount of loss. To throw "safety and soundness" around in that thing I think really is, for a regulator, irresponsible.
Further, at the same hearing, Frank advocated for "legislation that would have enhanced the regulatory structure for Fannie Mae and Freddie Mac." He said:
I believe we were well on the way, the chairman and I and the staffs, to putting together a bill that would have enhanced the regulator and could have passed. What stopped progress on a new bill was the Bush administration's determination to go beyond safety and soundness and into provisions that would have restricted the housing function.
What derailed the legislation was an insistence by the Bush administration on going beyond safety and soundness and giving the regulators, for example, particular power to say, well, they are going beyond their charter in housing; they should not do these new products. There were specific issues here that transcended safety and soundness or went under it, but the administration was seeking powers that were not related to safety and soundness. If they were to have dropped that, we would have a law already signed and in place, because on the question of safety and soundness regulation, there has not been a significant dispute.