A lot of trash is heading Barney Frank's way these days. One of the things being quote-mined right now is a statement that Barney Frank made in 2003 that Fannie Mae and Freddie Mac weren't in crisis and that's why he was opposing regulation of them.
The truth is he was opposing a specific type of "regulation," splitting the regulation away from HUD (while leaving the low-income housing mandate there) and giving it to Treasury. He decried a lot of "crisis" talk at the time.
And in a hearing before the House, Secretary John Snow agreed with Frank that there was no crisis facing Fannie Mae and Freddie Mac.
The money quote:
Mr. Frank: ...Are we in a crisis now with these entities?
Secretary Snow. No, that is a fair characterization, Congressman Frank, of our position. We are not putting this proposal before you because of some concern over some imminent danger to the financial system for housing; far from it.
Full quote after the jump.
The quote:
Mr. Frank. I agree, Mr. Secretary, but here is my point. I think Treasury is going to be the big brother here, and if one set of goals is in Treasury and the other set is in HUD, I worry about an institutional disadvantage for the set of goals that are important to me.
Let me, with that, turn to the Secretary of the Treasury, because what I am struck by here is what is not in here; and I am glad it is not in here. We have heard descriptions of the situation regarding GSEs as a great crisis and an imminent threat to financial stability. This does not change the essential relationship of the GSEs legally. I am not for changing that, but I think we ought to note that this is not a document put forth by people who think that the sky is about to fall or that we are going to have serious damage; and I am struck by that moderate quality.
Let me ask you, Mr. Secretary--and again I appreciate that there is not a lot of rhetoric in here about how terrible these are. I appreciate that you think we should enhance the regulation, but I get the impression that you were talking more about guarding against potential future problems developing, rather than feeling that there is an urgent need to stave off some crisis.
Are we in a crisis now with these entities?
Secretary Snow. No, that is a fair characterization, Congressman Frank, of our position. We are not putting this proposal before you because of some concern over some imminent danger to the financial system for housing; far from it. Rather what we are saying is, since 1992, or whenever it was that OFHEO was established by statute, over a decade ago, these housing markets have developed.
Mr. Frank. Getting bigger.
Secretary Snow. Huge. Hugely. And those entities have grown and become now very large players on the whole financial
landscape of the United States. We just feel it is time to----
Mr. Frank. Good. I think it is important to have that, to make it clear that that is the context.