Barney Frank decided that introducing himself to a new set of
constituents and asking for their votes was too high a price to
continue wielding power. Thus with his congressional district
redrawn, the Massachusetts Democrat will not seek reelection to
Congress next year.
Holding a House seat for three decades is one thing. Being
accountable to the voters is another. “If I were to run again I
would be engaged full-fledged in a campaign, which is appropriate,”
Frank said, but clearly not, in his view, desirable.
Accountability hasn’t always been Frank’s strong suit. In his
retirement press conference at Newton’s city hall, the congressman
expressed no regrets for his handling of Fannie Mae and Freddie Mac
during his past decade of service on the House Financial Services
Committee, both as chairman and ranking member.
Frank was a cheerleader for policies that helped inflate the
housing bubble that burst painfully in the 2008 financial crisis.
Like many politicians, he encouraged lenders to relax their credit
standards with the goal of promoting home ownership. According to
one report, “Frank pushed [Fannie Mae] to loosen regulations on
mortgages for two- and three-family homes, even though they were
defaulting at twice and five times the rate of single homes,
respectively.”
The risks were obvious, but rising housing prices obscured the
danger. Political activists and federal regulators were leaning on
banks to approve risky loans, with government-sponsored Fannie and
Freddie leading the way on subprime lending.
When new regulations were proposed, Frank accused supporters of
worrying about the GSEs’ financial soundess “to the exclusion of
concern about housing.” He steadfastly denied that there was
anything wrong with the government-backed mortgage finance firms.
Frank insisted “these two entities, Fannie Mae and Freddie Mac, are
not facing any kind of financial crisis.”
Yet Fannie and Freddie failed, racking up at least 12 million
risky loans and accounting for roughly 40 percent of those still
outstanding. American Enterprise Institute scholar Peter Wallison,
who has been fighting a lonely battle against efforts to pin blame
for the financial meltdown solely on the private sector, has
estimated that American taxpayers will find themselves on the hook
for $300 to $400 billion as a result.
Like Fannie and Freddie, Barney Frank was also too big to fail.
Instead of losing power for his contributions to the country’s
financial problems, he was allowed to co-author sweeping federal
regulatory solutions. The Dodd-Frank financial reform bill, written
with the man who has been dubbed “the senator from Countrywide,”
may be second only to the health care law in terms of its
unpopularity.
Dodd-Frank expanded the federal government’s reach into business
decision-making and paved the way for future taxpayer bailouts of
troubled financial institutions. Policymakers who were asleep at
the switch prior to 2008 were perversely rewarded with more power.
But that’s been standard operating procedure during Frank’s thirty
years in Washington.
Peter Wallison concludes that if Frank had acted earlier
“legislation might have been adopted in the early 2000s that could
have prevented the financial crisis and saved the taxpayers from
severe losses.” To be sure, that crisis had many causes that cannot
all be laid at Frank’s feet. And even Frank eventually admitted “it
was a great mistake to push lower-income people into housing they
couldn’t afford and couldn’t really handle once they had it.”
Nevertheless, Frank spent years evading the consequences of
scandals that would have ended lesser pols’ careers. Now that the
prospect of mingling with the little people back in Massachusetts
has apparently proved too much for him to seek another term, we
should at least pause to remember Frank’s “great mistake.”
