Although the financial reform bill that was hammered out by Democrats last month does nothing to address the causes of the recession — the semi-government entities Fannie Mae and Freddie Mac and their manipulation of the housing market — its primary sponsor in the House of Representatives, Congressman Barney Frank of Massachusetts, believes it could have prevented the crisis if it had been in place all along.
Frank told PBS that his bill would have averted catastrophe with “very tough rules that prevent the kind of mortgages going to people that can’t afford them.”
The congressman spoke of “abusive subprime mortgages,” in effect blaming banks for selling bad mortgages but not their customers who bought them knowing that they could not afford to pay them back.
The reform bill does not rein in the entities that were responsible for providing those unsustainable mortgages. The government-sponsored Fannie Mae and Freddie Mac aren’t even mentioned in it.
Frank defended the institutions, which are supposed to allow low-income families to own property, in the past. When Republicans pushed for regulation of the mortgage giants in 2004, Frank was among the Democrats who refused to see a problem.
Rather than curb the market-disturbing influence of Fannie and Freddie, Frank is going after small banks, which, he believes, aren’t lending out “enough” money to businesses. House Democrats have called on the administration to buy $30 billion worth of stock in small banks to encourage them to provide credit.
“And we will increase the dividend they have to pay us if they don’t do that lending,” Frank warned.
The lack of economic recovery, according to the Massachusetts congressman, is due to Europe’s debt crisis. “It was doing well,” he said, “and then the crisis in Europe hit.”
The United States is still “gaining private-sector jobs,” though, “but not nearly at the rates that we had been in April and May, or March and April.”
This is untrue. Ed Morrissey of Hot Air points out that Bureau of Labor Statistics show that private-sector job growth in the United States has been minimal since the beginning of this year. There were no “hundreds of thousands of new jobs,” as Frank claims; there was no surge last spring.
“The private sector,” writes Morrissey, “has lost 3.2 million private-sector jobs since Barack Obama’s inauguration.”
Rooting for failure
Just as the White House urged the rest of the world to keep spending ahead of the G20 summit in Toronto, Canada last month, lest austerity weaken the global recovery, Frank believes that his opponents are “rooting for failure” when they propose to discontinue unemployment compensation and restore balance to the federal budget.
Republicans “don’t mind that,” according to Frank, “because they think they’ll benefit from it in the congressional elections.”