Frank: A Life in Politics from the Great Society to Same-Sex Marriage (53 page)

1992: Large majorities of both parties in both houses adopt a bill that includes amendments to the charters of Fannie and Freddie, creating their structure for the next fifteen years. President George H. W. Bush signs it.

2003: President George W. Bush asks Congress to amend that law and tighten controls on Fannie and Freddie. The Republican-controlled House and Senate decline to act. Barney Frank expresses support for the institutions, especially their role in supporting multifamily rental housing. The Republican House committee chair does not schedule any action on the bill.

2005: The Republican-controlled House adopts a bill to tighten restrictions on Fannie and Freddie. It is supported by a majority of Republican votes in committee and on the floor. Barney Frank votes yes with the Republican majority in committee but votes no on the floor because the House leadership waters down a separate provision calling for a trust fund to build rental housing outside of Fannie Mae and Freddie Mac. The bill passes the House anyway over Frank’s housing-based objection (rebutting the suggestion that he was secretly in control on this issue). Bush treasury secretary John Snow supports the bill.

2005–2006: At the urging of President Bush, the Republican Senate rejects the Fannie-Freddie bill passed by the Republican House as too weak. Senate Democrats support the House Republican bill. But the Republican split dooms the legislation.

2006: House and Senate Republicans drop the effort to enact GSE legislation. Republican House committee chair Mike Oxley later explains that GSE reform died because President Bush gave him “the one-finger salute.”

2006: Hank Paulson becomes secretary of the treasury and persuades Bush to let him approach Congress again.

2006: Paulson asks Barney Frank to work with him on a new bill. Frank agrees.

2007: With Democrats now in the majority for the first time in twelve years, committee chairman Frank makes this bill an early item on the committee agenda.

2007: The Financial Services Committee passes a bill that Paulson supports, although he says it is less than perfect.

2007: The House passes the bill including the undiluted version of the trust fund to build low-income rental housing.

2008: The organization named FM Watch, formed to push for legislation to reform Fannie and Freddie, dissolves, noting that Frank and Paulson successfully collaborated to accomplish their goals.

2008: As the economy worsens, the House passes an additional bill to deal with foreclosures.

2008: Paulson, Senate Democrats, and House Democrats work out a comprehensive housing bill that includes the reforms Paulson seeks in the rules for Fannie and Freddie, including the power to put them into conservatorship.

2008: In September, Paulson decides to exercise that power. He fears Fannie and Freddie will use their congressional support to resist, so he calls Barney Frank and receives Frank’s assurance that he will support the move.

2010: Republicans seek to include a provision leading to the complete abolition of Fannie and Freddie in the conference committee on the Wall Street Reform bill. Barney Frank rules it out of order. Republicans object strongly, insisting that there is an urgent need to act on the subject.

2011: Republicans regain control of the House and refuse to bring their 2010 amendment up for consideration by the Financial Services Committee.

2011: Republicans pass a dozen small amendments to the Fannie and Freddie rules in committee but take no further action.

2011–2013: The Republican-controlled House adjourns without having taken action on the Fannie-Freddie legislation that they argued for in 2010.

2013–2014: The Republican-controlled House continues to take no action on Fannie-Freddie legislation. It is now more than four years since they objected to the exclusion of their bill from the Wall Street Reform bill, insisting that action was urgently needed.

Appendix 2

Conservative Support for Subprime Loans to Minority and Very Low-Income People Before the Economic Crisis

June 2002: President Bush at a press conference announcing “America’s Homeownership Challenge” to the real estate and mortgage finance industries: “The goal is, everybody who wants to own a home has got a shot at doing so.”

June 12, 2003: Bush appointee HUD secretary Mel Martinez, testimony before the Senate Committee on Banking, Housing and Urban Affairs:

The administration wants every family to benefit from our emphasis on home ownership. However, because they face special obstacles on the road to owning their own homes, we’re specifically reaching out to minority communities.

The minority home ownership gap, Mr. Chairman, you pointed out during your comments, exists. We want to see what we can do to contract it, to reduce it, while at the same time improving the lives of so many more families.

The barriers that we have found include the
inability to come up with enough cash
for a down payment,
a lack of credit history or a blemished credit record
, discrimination, and the unfamiliar terms and unreliable information that are often part of the homebuying process [emphasis added].

President Bush and I consider removing these barriers and eliminating the home ownership gap to be a top priority for HUD, and one that is fundamental to our mission as the nation’s housing agency.

Mark Zandi,
Financial Shock
(2008):

Democrats in Congress were worried about increasing evidence of predatory lending. Some noted that the 2001 rule prohibiting such lending only applied to federally regulated lenders. North Carolina had passed a law banning predatory practices in 1999, and the Democrats wanted a federal equivalent that would cover all lenders nationwide. The Bush administration and most Republicans in Congress were opposed, believing legislation would overly restrict lending and thus slow the march of home ownership; moreover, the Republicans argued, existing regulations were adequate to discourage the worst excesses. The last attempt to pass anti-predatory lending legislation occurred in 2005, but it was also stymied.

Alan Greenspan,
The Age of Turbulence
(2007):

I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk, and that subsidized home ownership initiatives distort market outcomes. But I believed then, as now, that the benefits of broadened home ownership are worth the risk. Protection of property rights, so critical to a market economy, requires a critical mass of owners to sustain political support.

Alan Greenspan, in an interview with Greg Ip of
The Wall Street Journal
, June 9, 2007:

There is “a very large number of small institutions, some on the margin of scrupulousness and very hard to detect when they are doing something wrong,” says Mr. Greenspan, who retired in February last year. “For us to go in and audit how they act on their mortgage applications would have been a huge effort, and it’s not clear to me we would have found anything that would have been worthwhile without undermining the desired availability of subprime credits.”

Representative Jeb Hensarling (R-TX), October 24, 2007, committee hearing, speaking in opposition to the Mortgage Reform and Anti-Predatory Lending Act of 2007:

We still have to remember that millions of people have homeownership opportunities due to a subprime market. I am very leery of any legislation that could undercut that market … We should also take note about what is happening in the marketplace now. The market has a wonderful ability to correct itself.

Representative Scott Garrett (R-NJ), November 6, 2007, committee markup, speaking in opposition to the Mortgage Reform and Anti-Predatory Lending Act of 2007:

The increasing availability and affordability of subprime mortgage credit is and has been an important factor leading to the increase in home ownership in recent years. This bill may well limit now the products available to subprime borrowers, particularly minority borrowers, and will deprive many of those consumers from owning or maintaining a home … What we need to do is ensure that it does absolutely nothing to home ownership, particularly among minority communities who have benefited from the innovations that have occurred in the marketplace.

Wall Street Journal
editorial, “A Sarbox for Housing,” November 6, 2007:

As early as today, Mr. Frank plans to hold a committee vote on his Mortgage Reform and Anti-Predatory Lending Act of 2007 … For the first time, banks that securitize mortgages would be made “explicitly liable for violations of lending laws.” This is a version of secondary liability that holds the bundlers and resellers of mortgages responsible for the sins of the original lenders. The reselling of mortgages has been a boon both to housing liquidity and risk diversification. So to the extent the Frank bill adds a new risk element to securitizing subprime loans—and it surely will—the main losers will be subprime borrowers who will pay higher rates if they can get a loan at all … But for all the demonizing, about 80% of even subprime loans are being repaid on time and another 10% are only 30 days behind. Most of these new homeowners are low-income families, often minorities, who would otherwise not have qualified for a mortgage. In the name of consumer protection, Mr. Frank’s legislation will ensure that far fewer of these loans are issued in the future.

Acknowledgments

I have tried in the book itself to note the great debt I owe to the talented, generous people who made my career possible. An appendix of a hundred pages would have been necessary to include all who are in that category. These formal acknowledgments are limited to those who had a direct role in helping me as I wrote this book.

My agent, Eric Lupfer, of William Morris Endeavor Entertainment, played a crucial role from the beginning in alternately advising and reassuring me. Alex Star, my editor at FSG, has been perfect from my perspective in understanding what I was trying to do, and helping me to do it better.

My friend of fifty years, Andy Tobias, made time in a very busy schedule to read the first hundred pages and urged me to keep on at a time when I was self-doubting.

Courtney Flynn, the personal assistant who has done a remarkable job replacing the several dozen staff aides I had while in office, has been an indispensable mediator between me and my computer. She is one of two people who translated the results of my two-fingered, clumsy typing into English.

The other translator is Geoffrey Browning, who also did an excellent job as my research assistant, drawing on his considerable computer skills and his own knowledge of how Congress works.

And then there’s Jim. In this effort, as in every other part of my life since 2007, he has been indispensable. Writing this book was hard. Without Jim’s constant advice, encouragement, and emotional support when I needed it—in sum, without his love—it would have been impossible.

Index

The index that appears in the print version of this title does not match the pages in your e-book. Please use the search function on your e-reading device to search for terms of interest. For your reference, the terms that appear in the print index are listed below.

abortion; Catholic Church against; Democrats against; House jurisdiction over; late term; Nader on; propaganda about; quip about; white male voters and academics, in government

Achtenberg, Roberta

Ackermann, Barbara

activism,
see
radicalism
Act of Congress
(Kaiser) Acton, Lord

ACT UP

ADA (Americans with Disabilities Act)

Adam Clayton Powell, Jr.
(Hamilton) Adams, Sherman

Administrative Law Subcommittee

Advise and Consent
(Drury) affirmative action

Affordable Care Act; opposition to

affordable housing; financial crisis and, for renters; as term Afghanistan

AFL-CIO

Africa

African Americans: affirmative action for; assimilation of; compared to LGBT people; in Congress; during financial crisis; LGBT rights supported by; liberalism and; in Mass. legislature; Mayor White and; in military; racism against; response to King assassination by; separatism of; as voters
After the Music Stopped
(Blinder) agnosticism

Agriculture Committee

AIDS; activists against; deaths from; homophobia and Aid to Families with Dependent Children

Aiello, Virgil

AIG

Alioto, Joseph

Allen, Tom

Al Qaeda

Americans for Democratic Action

Americans for Financial Reform

Americans with Disabilities Act (ADA)

anarchists

anti-Semitism,
see
Jews, prejudice against Appropriations Committee

Armed Services Committee

Armey, Dick

Army-McCarthy hearings

Ashcroft, John

Asia, financial crisis in

Aspin, Les

atheism

Atkins, Thomas

Atlantic, The

Atlas Shrugged
(Rand)

Atwater, Lee

automotive industry

Azores

Bachmann, Michelle

Bachus, Spencer

Back Bay

bailouts

Bair, Sheila

Baker, Howard

balanced budget amendment;
see also
national debt Baldwin, Tammy

Banking Committee

Bank of America

bankruptcy: of businesses; of individuals

banks,
see
financial crisis of 2007–2008

Barclays Bank

Barry, Charles

Bartley, David

Basel Accords

Bauman, Robert

Bayh, Birch

Bayonne, N.J.

Beacon Hill

Bear Stearns

Bellotti, Frank

Bentham, Jeremy

Bernanke, Benjamin; during financial crisis

Bernstein, Leonard

Bernstein, Samuel

Beymer, Richard