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Say it ain’t so! After doing so much to create the housing bubble and ensuing crash, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, suggested that there might be a limit to federal subsidies for Fannie Mae and Freddie Mac. That would be quite a change from current policy, which is to continue pouring vast amounts of taxpayer cash into the housing market.
An influential voice on Capitol Hill has unexpectedly called into question the safety of investing in Fannie Mae and Freddie Mac, raising the specter that investors who have lent money to the two firms or bought their mortgage-backed securities could one day suffer losses.
The comments by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, forced the Treasury Department to issue a statement Friday reaffirming the government’s commitment to the companies, their creditors and their investors.
If investors come to doubt that Fannie Mae and Freddie Mac debt and investments are risk-free, they would demand a higher return — which could ripple across the U.S. housing market and cause mortgage interest rates to rise, depressing demand for homes. The federal government seized Fannie Mae and Freddie Mac a year and a half ago and, since then, has signaled that lending to the companies or buying their investments is just about as safe as putting money into U.S. government debt.
But in an interview Thursday, Frank said, “People who own Fannie and Freddie debt are not in the same legal position as [those who own] Treasury bonds, and I don’t want them to be.”
Frank said he wanted to make it absolutely clear to creditors of and investors in Fannie Mae and Freddie Mac that the companies are not as safe as the U.S. government. As the government considers how to overhaul the mortgage finance giants, he said he would expect “to preserve the right to give people haircuts.”
So horrified was the Obama administration that the Treasury Department issued a statement assuring investors that they could count on the administration’s willingness to rape and pillage taxpayers whenever Fannie and Freddie needed another financial fix. Reported the Associated Press:
While debt from Fannie and Freddie does not carry an explicit government guarantee, the Treasury has taken numerous steps to reassure investors that the government will keep the companies running. Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie. So far, the companies have needed $126 billion in taxpayer aid.
“As we said in December, there should be no uncertainty about Treasury’s commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market,” Treasury spokeswoman Meg Reilly said in a statement.
Of course, it is hard to believe that a majority of lawmakers would follow Rep. Frank after wasting $126 billion of taxpayer funds already. But he is an influential voice. And his fiscal “born again” experience seems notable.
After all, it was Rep. Frank who last October shrugged his shoulders at the thought of taxpayers taking a bath from Federal Housing Administration guarantees for bad mortgages. Reported the New York Times:
Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.
“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”
What’s hundreds of billions of taxpayer dollars wasted if a few constituents are helped, right?
Well, better late than never for a conversion, I suppose. Now if only Rep. Frank can convince the rest of his colleagues as well as the Obama administration!
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?