The Wall Street Journal's Stephen Moore falsely accused Rep. Barney Frank of “involvement in giving a blank check to Fannie and Freddie,” echoing the oft-repeated myth that Frank fought efforts to strengthen congressional oversight over Fannie Mae and Freddie Mac.
On the May 13 edition of CNBC's Street Signs, Wall Street Journal senior economics writer and editorial board member Stephen Moore claimed that Rep. Barney Frank (D-MA) supported taxing employee bonuses of troubled financial institutions “as a way of deflecting criticism” because “he was coming under a lot of heat for his involvement in giving a blank check to Fannie and Freddie.” Anchor Erin Burnett interjected: “That's a fair point.” Moore's claim echoes a broader conservative myth that Frank is responsible for the subprime mortgage crisis because he fought efforts to strengthen congressional oversight over Fannie Mae and Freddie Mac. In fact, Frank has supported legislation to strengthen oversight over Fannie and Freddie, both as ranking member on the House Financial Services Committee and as chairman.
As Media Matters for America has documented, Frank has supported efforts to strengthen oversight of Fannie and Freddie, including:
- 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 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 House Financial Services 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 the president signed into law on July 30, 2008.
As Media Matters has also noted, Democrats did not gain a majority of both houses of Congress during the Bush administration until 2007. Only then did Congress pass oversight legislation over Fannie Mae and Freddie Mac.
From the May 13 edition of CNBC's Street Signs:
BURNETT: David, can I ask you a question, though, on what he did last time --
DAVID MIN (Center for American Progress financial markets policy expert): Sure.
BURNETT: -- the 90 percent retroactive tax.
BURNETT: Do you believe that Barney Frank wanted that to pass? Or do you think Barney Frank made a big populist statement knowing full well it would never pass, not wanting it to pass, and just wanting to make his point?
MIN: Well, I think one of the advantages of being Barney Frank is that nobody can quite read you. So, I'm not going to attempt to get at his motivations. I think that it would certainly be something that was consistent with what a lot of people in the Congress were saying as far as trying to recapture some of these bonuses that I think a lot of people thought were unfairly meted out based on taxpayer money.
BURNETT: Now, Stephen --
MOORE: Now let me answer.
BURNETT: Yeah, go ahead, Stephen.
MOORE: Let me answer that question, because --
MOORE: -- remember, I mean, Barney Frank was one of the guys who was right at the center of the financial crisis. I think he had -- a lot of the blame of this [unintelligible] lays in his part. Remember, he was the guy who said, “Roll the dice” --
BURNETT: And Steve, everyone said he was --
MOORE: -- “on Fannie and Freddie.”
BURNETT: -- so reasonable.
MOORE: And so the point is --
BURNETT: Hank Paulson said it.
MOORE: -- I think these Democrats --
MOORE: -- are trying to redirect the populist storm against members of Congress like Chris Dodd and Barney Frank towards executives. And so, I'm not so sure he didn't want that to pass as a way of deflecting criticism.
BURNETT: That's a pretty incredible statement you just said.
MOORE: Well, I mean, you can look at the record. I mean, the guy -- he was coming under a lot of heat for his involvement in giving a blank check to Fannie and Freddie, which now require --
BURNETT: That's a fair point.
MOORE: -- $400 billion of taxpayer bailout money.
MIN: Yeah, I'm not one for conspiracy theories myself. I think that one's a little far-fetched, particularly given that most of the claims around CRA and Fannie and Freddie -- I mean, if you looked at the facts -- and I don't want to get into this debate yet again -- but I think the major issue obviously with the credit crisis was the deregulation, the lack of regulation of primary banks -- and this started with the private sector.
Fannie got pulled into it. Yes, they were overleveraged. They needed more capital. But they weren't the ones out there making subprime and Alt-A loans. That was purely the private sector.
MOORE: That was Fannie and Freddie. But, you know --
BURNETT: They just got in there and started buying them.