Barney Frank

This week The New Yorker has a great profile of Barney Frank, by Jeffrey Toobin. It's timely because Franks will be one of the most important actors involved in trying to stave off Great Depression II. The whole thing is worth a read -- lots of stuff I didn't know about the Brookline Congressman -- but this sums up Frank's style beautifully.

The Committee on Financial Services, which has seventy members, is one of the biggest panels in Congress. (It was known as the Banking, Finance, and Urban Affairs Committee until the Democrats lost control of the House in 1994, and Frank attributes the change to “Republican political correctness.”) Congressional hearings customarily begin with statements from members, a practice that can take hours. Frank and Michael Oxley, the Ohio Republican who was his predecessor as chairman, shared a distaste for the tradition, and together they were known as the “impatient caucus.” Still, Frank allows his colleagues to speak briefly before a hearing, and, on October 21st, Scott Garrett, a conservative Republican from New Jersey, used his time to attack Frank—in particular, his claim that he had anticipated the crisis.

“Before we are able to go forward with new and important changes to the over-all regulatory structure for our financial-services industry, I do believe that it is essential that we better understand just how we got into this problem,” Garrett said. “Now, one of the main parts of the problem was poor regulation in the past, specifically in the area of Fannie and Freddie.” According to Garrett, “our distinguished chairman” had no right “to claim the mantle of being a champion of reform with Fannie and Freddie.” On the contrary, Garrett argued, he and other Republicans had wanted to “raise the capital levels, to reduce the retained portfolios, to lower the conforming loan limits.”

[...]

At the hearing, Frank responded testily to Garrett. “The purpose of this hearing was to be forward-looking,” he began. “And I had hoped we could focus on that. But, after the gentleman from New Jersey’s comments in having decried partisanship, he then practiced it. It does seem to me to be important to set the record clearly before us.” Frank pointed out that when Garrett had attempted to tighten regulations on Fannie and Freddie, Republicans had controlled the House. “Had a Republican majority been in favor of passing that bill, they would have done it,” Frank said. “Now he has claimed that it was we Democrats—myself—who blocked things. The number of occasions on which either Newt Gingrich or Tom DeLay consulted me about the specifics of legislation are far fewer than the gentleman from New Jersey seems to think.

“I will acknowledge that during the twelve years of Republican rule I was unable to stop them from impeaching Bill Clinton,” Frank went on. “I was unable to stop them from interfering in Terri Schiavo’s husband’s affairs. I was unable to stop their irresponsible tax cuts, the war in Iraq, and a Patriot Act that did not include civil liberties.” In other words, Frank insisted, if the Republicans had wanted to try to prevent the mortgage crisis, they would have had plenty of opportunities to do so.

And it's true. In 2005, the article notes, Frank teamed with Oxley in a bipartisan effort to tighten regs on Fannie and Freddie along with new funds for rental housing -- Frank's particular passion is public/private solutions for low-income rental housing. The House passed the bill, but it went nowhere in the Senate as leadership there knew Bush would veto the bill.

Of course opponents of Frank will cite Bush's supposed efforts to rein in the mortgage giants in 2003, but, of course, they're ignoring the complicated reality.

A soft-spoken Texan, Mr. Falcon ran the Office of Federal Housing Enterprise Oversight, a tiny government agency that oversaw Fannie Mae and Freddie Mac, two pillars of the American housing industry. In February 2003, he was finishing a blockbuster report that warned the pillars could crumble.

Created by Congress, Fannie and Freddie — called G.S.E.’s, for government-sponsored entities — bought trillions of dollars’ worth of mortgages to hold or sell to investors as guaranteed securities. The companies were also Washington powerhouses, stuffing lawmakers’ campaign coffers and hiring bare-knuckled lobbyists.

Mr. Falcon’s report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off “contagious illiquidity in the market” — in other words, a financial meltdown. He also raised red flags about the companies’ soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.

Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined “G.S.E.’s — We Told You So.”

But the back story is more complicated. To begin with, on the day Mr. Falcon issued his report, the White House tried to fire him.

At the time, Fannie and Freddie were allies in the president’s quest to drive up homeownership rates; Franklin D. Raines, then Fannie’s chief executive, has fond memories of visiting Mr. Bush in the Oval Office and flying aboard Air Force One to a housing event. “They loved us,” he said.

So when Mr. Falcon refused to deep-six his report, Mr. Raines took his complaints to top Treasury officials and the White House. “I’m going to do what I need to do to defend my company and my position,” Mr. Raines told Mr. Falcon.

Days later, as Mr. Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.