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Archive for the ‘Barney Frank’ Category

Dodd-Frank Bill Failure

Posted by Steve Markowitz on July 28, 2012

During the late summer of 2008, the financial markets were unraveling.  Lehman Brothers failed, which precipitated general panic in the markets and the potential failure of other large financial institutions.  When the panic hit jumbo worldwide insurer AIG based out of New York, the government blinked with an over hundred billion dollar bailout.  This bailout was justified with the logic that should AIG fail, it would wreck havoc on the entire world’ s financial markets.  Thus, we had the concept of “too big to fail”.

It is impossible in hindsight to determine if AIG were allowed to fail we would have had the threatened financial Armageddon.  However, it is inarguable that the AIG bailout, as well as that of other firms, benefited some individuals and corporations at the expense of others.  Since the bailouts, we have had the weakest recovery from a recession of modern times.  It is likely that the bailouts and ongoing poor shape of the economy are connected.

The panic and financial markets’ turmoil played huge roles in the election of Barack Obama to the presidency, as well as giving Democrats large majorities in both houses of Congress.  With the mandate, Democrats set out to implement changes in our financial system that would purportedly eliminate future financial crisis.  The result was the infamous Dodd–Frank Bill with far-reaching implications to the financial world.

Ex-Citigroup CEO, Sandy Weil, was responsible for making Citigroup a large mega bank through mergers and acquisitions.  This week Weil came out against allowing these large banks to continue in their current state and recommended that they be broken up, separating their brokerage businesses from regular commercial banking functions.  In explaining his position Weil indicated that this back to the future approach would eliminate future risk to taxpayers of bailouts since no bank would be then too big to fail.

After Sandy Weil went public with his position, CNBC reporter Maria Bartiromo interviewed Congressman Barney Frank, Democrat from Massachusetts who was one of the co-authors of the Dodd-Frank Bill.  She correctly raised weaknesses of the Bill including the fact that more than two years after its passage, important rules relating to the Bill are yet to be written.  Instead of addressing the Bartiromo’s questions, Frank became defensive and obnoxious, as evidenced in the video.

Barney Frank is the same Congressman that refused to place more controls on Fannie Mae and Freddie Mac during the bubble years.  He was famously quoted then saying that these government-backed corporations were financially solid and needed no further government oversight.  After the bubble popped these corporations needed billions in taxpayer bailouts and will likely require more.  Add to this Frank’s performance in the video below and it is easy to understand why Washington’s interference in the economy typically makes bad situations worse.

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Government, Progressives and Wall Street Greed

Posted by Steve Markowitz on December 5, 2011

Last week Congressman Barney Frank, Democrat from Massachusetts, made a surprise announcement that he would not seek reelection.  The motivation behind Frank’s decision is not yet public.  While the Congressman may nearly have had enough after 30 years, he may also be retiring for less noble reasons such as the fear of losing the next election or the outing of some hidden skeleton in the closet.

As a Progressive, Frank attempted to portray himself as a man of the common folk.  However, reality does not match that narrative.  In fact, like many politicians on both sides of the aisle, Congressman Frank will leave a tarnished legacy relating to his involvement with Fannie Mae.

Frank and his Progressive pals, including Jimmy Johnson and Franklin Raines, played key roles in the creation of the housing bubble and its subsequent meltdown.  Johnson, a lifelong Democrat, previously worked on Walter Mondale’s presidential campaign before becoming a managing director Lehman Brothers and later ran Fannie Mae.

Fannie Mae was established by Franklin Delano Roosevelt in 1938 to guarantee mortgages and promote housing loans.  In 1968, Fannie Mae became a public company, thereby removing its debt from the federal government’s balance sheet.  However, the government maintained its guarantor role.  This accounting sleight-of-hand amounts to similar action that ultimately brought Enron down.

Another Democrat, Franklin Raines, was Johnson’s deputy at Fannie Mae and later became its CEO.  Both Raines and Johnson received exorbitant salaries at Fannie Mae exceeding tens of millions of dollars.
Under Johnson, Fannie Mae was a willing partner with Wall Street in taking on outrageous risk that ultimately cost taxpayers tens of billions and caused a meltdown of the worldwide financial system.  However, this history did not seem to trouble President-elect Obama who later on appointed Johnson to his vice presidential nomination committee.  Johnson resigned three days later when his background at Fannie Mae became an issue, as well is some questionable loans he received from Countrywide, a player at the epicenter of the subprime mortgage mess.

By 2003, concerns were growing that Fannie Mae’s financial obligations and risky loans could cause systemic problems to America’s overall financial system.  This prompted the Bush administration to propose that Fannie Mae be overseen by a division of the United States Treasury Department to set lending standards.  Then Treasury Secretary John Snow informed the House Financial Services Committee that: ”There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises.

The Bush Administration’s attempts to rein in Fannie Mae was fought by the financial industry lobby.  One of its strong supporters was Congressman Barney Frank, a member of the House Financial Services Committee who then said:

  • “I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis.  That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis.”  …
  • “I must say we have an interesting example of self-fulfilling prophecy.  Some of the critics of Fannie Mae and Freddie Mac say that the problem is that the Federal Government is obligated to bail out people who might lose money in connection with them.  I do not believe that we have any such obligation.  …..But there is no guarantee, there is no explicit guarantee, there is no implicit guarantee, there is no wink-and-nod guarantee.  Invest, and you are on your own.”
  • “I believe that we, as the Federal Government, have probably done too little rather than too much to push them to meet the goals of affordable housing and to set reasonable goals.”
  • I think we see entities that are fundamentally sound financially and withstand some of the disastrous scenarios.  And even if there were a problem, the Federal Government doesn’t bail them out.  But the more pressure there is there, then the less I think we see in terms of affordable housing.”

At the very least, Frank’s decision relating to Fannie Mae was a colossal error.  Fannie Mae subsequently had to be taken over by the US government at the cost of over $100 billion to US taxpayers.  Had the regulations of Fannie Mae been implemented when requested, the financial meltdown may have been avoided.  In addition, Frank had conflict of interest given that this is longtime partner, Herb Moses, worked at Fannie Mae at a job that Frank helped him obtain.  Further, Frank’s mother received a $75,000 grant from Fannie Mae for her foundation.  As they say, if the quacks like a duck it’s not an elephant.

Americans rightfully feel anger towards the banks and that played a role in the creation of the financial meltdown.  In recent months Occupy Wall Street has become a vocal spokesmen of this anger.  Some politicians on the Left have attempted to harness this movement for political gain.  This is a risky game.  Should Americans look under the covers just a bit, they will find that government, including both sides of the aisle, played roles in creating the crisis.

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Barney Frank Announces Plans to Retire

Posted by Steve Markowitz on November 28, 2011

Barney Frank, longtime Democratic Congressman from Massachusetts, today announced he will not seek reelection when his term expires in late 2012.  While at 71 this retirement decision shouldn’t be too much of a surprise, it is since Frank previously announced his intention to seek reelection.

Frank is an unapologetic ultra Liberal known for his sharp tong, as well as questionable policy judgment.  Frank was a leading figure in Congress that pushed Fannie Mae and Freddie Mac to offer mortgages to those that could not afford them.  He is therefore partially culpable for the housing bubble and financial meltdown that followed.  He is also responsible for the Dodd-Frank  financial regulations that are not only poorly thought out, but threaten to raise the cost of banking for consumers and have especially raised the cost of banking for smaller banks.

Whether Frank is leaving office due to some impending scandal breaking or fear of future electability, those on the Right will certainly celebrate this day when a leading Progressive decided to call it quits.  However, that party will be tempered by his likely replacement on the powerful House Financial Services Committee who will be Representative Maxine Waters, Democrat from California.  Yikes!  At least Frank has a basic understanding of economics and supply and demand.  As the video below indicates, Waters is lacking in these basic skills.

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