[Congressional Record (Bound Edition), Volume 155 (2009), Part 8]
[House]
[Pages 9785-9795]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        THE GREAT ECONOMIC HOLE

  The SPEAKER pro tempore (Mr. Nye). Under the Speaker's announced 
policy of January 6, 2009, the gentleman from Massachusetts (Mr. Frank) 
is recognized for 60 minutes as the designee of the majority leader.
  Mr. FRANK of Massachusetts. Thank you, Mr. Speaker.
  I want to address what is one of the major issues that is now 
confronting the country. We have the problem of digging out from under 
the great economic hole in which we find ourselves, not just here but 
worldwide, but as we do that, it is important that we take steps to 
make it much less likely that we'll be in such a difficult spot again. 
It's a hard thing to do simultaneously--to recover from a serious 
problem and also to prevent its occurrence.

                              {time}  2100

  I want to talk today about what we have to do to prevent its 
recurrence. Now, obviously, to prevent its recurrence, you need to have 
some sense of what caused the problems. There are two competing 
theories. The one that I believe, that the President believes, that he 
is in Europe today discussing--and which a wide variety of European 
thinkers somewhat inaccurately said

[[Page 9786]]

today on the floor from the other side, It was the socialists in Europe 
who were pushing the President. Well, those socialists were primarily 
the conservative Christian democratic Chancellor of Germany and the 
conservative Gaullist President of France. They are the ones who were 
saying we have to come together and improve financial regulation.
  In England, when I became the chairman-in-waiting in 2006 after that 
election, I was told that we in America should emulate Great Britain. I 
was told this by conservatives, by people in the financial industry. 
Great Britain, we were told, had the financial services authority that 
used the light touch when they regulated.
  The head of the financial services authority recently announced the 
era of light touch, of soft touch regulation is over. That bastion of 
regulatory flexibility now says we erred with too little regulation. 
Unregulated credit default swaps. Cauterized debt obligations. 
Financial entities largely unregulated taking on far more debt than 
they could pay is a major cause of the problem.
  Now, how do we get there? There is to some extent agreement on one 
particular aspect of this. And that is that it was the proliferation of 
subprime mortgages to people who could not repay them that was at the 
root of the problem. The mortgage loans were made to people who 
couldn't repay them by people who did not expect to be repaid because 
they were selling that right. They were securitizing them.
  And other sophisticated financial institutions then took these badly 
made loans and rocketed them around the world through sophisticated 
financial investments. And there is a great agreement that that is the 
root cause of the problem.
  But what caused the cause is disputed.
  Now, there is a conservative view that says, You know what happened? 
It was the liberals, the Democrats. There they went again trying to 
help poor people, and they forced these poor institutions, these 
vulnerable lenders, into making bad loans.
  Now, we have seen a proliferation, a coordinated proliferation of 
that argument. It was trying to help poor people that did it. Some of 
the poor people were black and Hispanic, others--a majority of them, 
this being the United States with our ethnic composition--were white. 
But that's what's getting blamed, and it's in a coordinated way.
  The talk show hosts, Vice President Cheney said that in his last 
interview, Mr. Rove has been arguing that. It is fairly coordinated.
  Now, I do not argue that we are facing a vast right-wing conspiracy. 
What we are dealing with is something, however, equally troubling. It 
is crass right-wing mendacity. It is systematic dishonesty, lying, 
distortions, misrepresentations, bad history being promulgated.
  Now, I speak as one of the Democrats who's learned our lesson. For 
too long we acted as if inherent implausibility was self-refuting. A 
man I admire greatly, John Kerry, a war hero, was victimized in 2004 
because for too long he delayed fighting back the inherently 
implausible charge that he had not distinguished himself in battle. The 
Swift-boating of John Kerry was a terrible moment in American history, 
and his decency, his belief in fairness, held him back for a bit. He 
fought back, but it was later than it should have been.
  We've had earlier examples of that. We're seeing it now. We are 
seeing a concerted right-wing effort to misrepresent the facts to avoid 
a result they don't want. The result is regulation. The result is that 
this country will do what it has done at least twice before.
  We have a situation in which significant financial innovation in this 
country, beginning about 20 years ago or so, transformed mortgage 
lending. Mortgage lending used to be a matter of you going into your 
community bank--and by the way, among the victims of this whole 
operation have been the community banks. The community banks who have 
been no part of the problem but get the criticisms on an 
undifferentiated way and some of the burden. And we on the Financial 
Services Committee are determined to do everything we can to shelter 
them from that kind of unfair denunciation and excessive regulatory 
burden.
  But what we had was a proliferation of lending now outside of the 
banks. Non-banks were able to lend because of liquidity in the world. 
You didn't have to go to depositors. If you get money from depositors, 
you're regulators. If you get money from pools of liquidity from Asia, 
from oil people in the Middle East, from elsewhere, you do not have to 
face that regulation.
  The other thing, of course, that happened was securitization. Thirty 
years ago people who got a mortgage were getting it from someone who 
expected it to be repaid by the borrower, and they were careful about 
the borrower. Increasingly, loans were made by people who did not 
expect to be repaid by that borrower but who were going to package the 
loans and sell them to other people. And the discipline of a direct 
lender-borrower relationship eroded.
  Then the sophisticated collateralized debt obligation derivatives and 
credit default swaps came in and took loans that should never have been 
made in the first place and sent them around.
  The problem is that there were no regulations, insufficient 
regulation. In the lending process, virtually no regulation in the 
process by which the bad loans were packaged and sent around the world.
  So our job today is to do what Theodore Roosevelt and Woodrow Wilson 
did: address innovations in the private sector. And we are a private 
sector country fortunately, and it is the private sector that creates 
wealth. But in periods of great innovation by definition there are no 
rules, no regulations. So you get a great deal of productive activity 
and you get some abuses. And the job of a sensible public policy is try 
to restrain the abuses while getting the benefit of the innovation.
  Theodore Roosevelt and Woodrow Wilson did that. They did antitrust 
laws, they did the Federal Trade Commission. And the contemporary 
version of today's right-wing ideology said, Oh, my God. You're going 
to ruin everything. They were bitterly opposed to Theodore Roosevelt 
and his trust busting.
  And when the stock market became important as a consequence of the 
large industrial enterprises becoming the basis of the economy to a 
great extent, Franklin Roosevelt did the same thing with the stock 
market. And if you want to read complaints similar to today's laments 
that regulation will ruin the economy and throttle competitiveness, go 
to the Congressional Record of the 1930s and read what they had to say 
about the Securities and Exchange Commission. That's our job today. 
That's what we want to do. We want to put rules in place that allow us 
to get the benefit of innovations, the benefit of securitization, but 
without the abuses.
  The economic fundamentalists feel threatened by this. The 
consequences of their deregulatory policy--which had been successful in 
America for far too long--are devastating, and they understand that the 
American people are unhappy with that and plan to impose regulation. 
And they are as opposed today as they were against Theodore Roosevelt 
and Woodrow Wilson and against Franklin Roosevelt who said, ``The 
economic royalists hate me, and I welcome their hate because they know 
I am a threat to them.''
  We are a threat to the abusers, and by the way, Mr. Speaker, good 
rules are pro-market. Franklin Roosevelt made it possible for people to 
invest with confidence when he created the SEC. He created a situation 
in which you could have mutual funds with the Investment Company Act. 
We suffer today from people who will not invest because of their fears 
of abuse, and creating a set of rules that give comfort to investors 
will get this economy functioning again, get the credit markets 
functioning again.
  All right, what do the conservatives say? First of all, you made us 
lend money to poor people. It was the Community Reinvestment Act. I 
will insert in the Record the article from October

[[Page 9787]]

12 from the McCarthy newspapers, Messrs. Goldstein and Hall about that 
myth. And we will do a Special Order later on it.

               [From McClatchy Newspapers, Oct. 12, 2008]

     Private Sector Loans, Not Fannie or Freddie, Triggered Crisis

                 (By David Goldstein and Kevin G. Hall)

       Washington.--As the economy worsens and Election Day 
     approaches, a conservative campaign that blames the global 
     financial crisis on a government push to make housing more 
     affordable to lower-class Americans has taken off on talk 
     radio and e-mail.
       Commentators say that's what triggered the stock market 
     meltdown and the freeze on credit. They've specifically 
     targeted the mortgage finance giants Fannie Mae and Freddie 
     Mac, which the federal government seized on Sept. 6, 
     contending that lending to poor and minority Americans caused 
     Fannie's and Freddie's financial problems.
       Federal housing data reveal that the charges aren't true, 
     and that the private sector, not the government or 
     government-backed companies, was behind the soaring subprime 
     lending at the core of the crisis.
       Subprime lending offered high-cost loans to the weakest 
     borrowers during the housing boom that lasted from 2001 to 
     2007. Subprime lending was at its height from 2004 to 2006.
       Federal Reserve Board data show that: More than 84 percent 
     of the subprime mortgages in 2006 were issued by private 
     lending institutions; private firms made nearly 83 percent of 
     the subprime loans to low- and moderate-income borrowers that 
     year; Only one of the top 25 subprime lenders in 2006 was 
     directly subject to the housing law that's being lambasted by 
     conservative critics.
       The ``turmoil in financial markets clearly was triggered by 
     a dramatic weakening of underwriting standards for U.S. 
     subprime mortgages, beginning in late 2004 and extending into 
     2007,'' the President's Working Group on Financial Markets 
     reported Friday.
       Conservative critics claim that the Clinton administration 
     pushed Fannie Mae and Freddie Mac to make home ownership more 
     available to riskier borrowers with little concern for their 
     ability to pay the mortgages.
       ``I don't remember a clarion call that said Fannie and 
     Freddie are a disaster. Loaning to minorities and risky folks 
     is a disaster,'' said Neil Cavuto of Fox News.
       Fannie, the Federal National Mortgage Association, and 
     Freddie, the Federal Home Loan Mortgage Corp., don't lend 
     money, to minorities or anyone else, however. They purchase 
     loans from the private lenders who actually underwrite the 
     loans.
       It's a process called securitization, and by passing on the 
     loans, banks have more capital on hand so they can lend even 
     more.
       This much is true. In an effort to promote affordable home 
     ownership for minorities and rural whites, the Department of 
     Housing and Urban Development set targets for Fannie and 
     Freddie in 1992 to purchase low-income loans for sale into 
     the secondary market that eventually reached this number: 52 
     percent of loans given to low-to moderate-income families.
       To be sure, encouraging lower-income Americans to become 
     homeowners gave unsophisticated borrowers and unscrupulous 
     lenders and mortgage brokers more chances to turn dreams of 
     homeownership into nightmares.
       But these loans, and those to low- and moderate-income 
     families represent a small portion of overall lending. And at 
     the height of the housing boom in 2005 and 2006, Republicans 
     and their party's standard bearer, President Bush, didn't 
     criticize any sort of lending, frequently boasting that they 
     were presiding over the highest-ever rates of U.S. 
     homeownership.
       Between 2004 and 2006, when subprime lending was exploding, 
     Fannie and Freddie went from holding a high of 48 percent of 
     the subprime loans that were sold into the secondary market 
     to holding about 24 percent, according to data from Inside 
     Mortgage Finance, a specialty publication. One reason is that 
     Fannie and Freddie were subject to tougher standards than 
     many of the unregulated players in the private sector who 
     weakened lending standards, most of whom have gone bankrupt 
     or are now in deep trouble.
       During those same explosive three years, private investment 
     banks--not Fannie and Freddie--dominated the mortgage loans 
     that were packaged and sold into the secondary mortgage 
     market. In 2005 and 2006, the private sector securitized 
     almost two thirds of all U.S. mortgages, supplanting Fannie 
     and Freddie, according to a number of specialty publications 
     that track this data.
       In 1999, the year many critics charge that the Clinton 
     administration pressured Fannie and Freddie, the private 
     sector sold into the secondary market just 18 percent of all 
     mortgages.
       Fueled by low interest rates and cheap credit, home prices 
     between 2001 and 2007 galloped beyond anything ever seen, and 
     that fueled demand for mortgage-backed securities, the 
     technical term for mortgages that are sold to a company, 
     usually an investment bank, which then pools and sells them 
     into the secondary mortgage market.
       About 70 percent of all U.S. mortgages are in this 
     secondary mortgage market, according to the Federal Reserve.
       Conservative critics also blame the subprime lending mess 
     on the Community Reinvestment Act, a 31-year-old law aimed at 
     freeing credit for underserved neighborhoods.
       Congress created the CRA in 1977 to reverse years of 
     redlining and other restrictive banking practices that locked 
     the poor, and especially minorities, out of homeownership and 
     the tax breaks and wealth creation it affords. The CRA 
     requires federally regulated and insured financial 
     institutions to show that they're lending and investing in 
     their communities.
       Conservative columnist Charles Krauthammer wrote recently 
     that while the goal of the CRA was admirable, ``it led to 
     tremendous pressure on Fannie Mae and Freddie Mac--who in 
     turn pressured banks and other lenders--to extend mortgages 
     to people who were borrowing over their heads. That's called 
     subprime lending. It lies at the root of our current 
     calamity.''
       Fannie and Freddie, however, didn't pressure lenders to 
     sell them more loans; they struggled to keep pace with their 
     private sector competitors. In fact, their regulator, the 
     Office of Federal Housing Enterprise Oversight, imposed new 
     restrictions in 2006 that led to Fannie and Freddie losing 
     even more market share in the booming subprime market.
       What's more, only commercial banks and thrifts must follow 
     CRA rules. The investment banks don't, nor did the now-
     bankrupt non-bank lenders such as New Century Financial Corp. 
     and Ameriquest that underwrote most of the subprime loans.
       These private non-bank lenders enjoyed a regulatory gap, 
     allowing them to be regulated by 5o different state banking 
     supervisors instead of the federal government. And mortgage 
     brokers, who also weren't subject to federal regulation or 
     the CRA, originated most of the subprime loans.
       In a speech last March, Janet Yellen, the president of the 
     Federal Reserve Bank of San Francisco, debunked the notion 
     that the push for affordable housing created today's 
     problems.
       ``Most of the loans made by depository institutions 
     examined under the CRA have not been higher-priced loans,'' 
     she said. ``The CRA has increased the volume of responsible 
     lending to low- and moderate-income households.''
       In a book on the sub-prime lending collapse published in 
     June 2007, the late Federal Reserve Governor Ed Gramlich 
     wrote that only one-third of all CRA loans had interest rates 
     high enough to be considered sub-prime and that to the 
     pleasant surprise of commercial banks there were low default 
     rates. Banks that participated in CRA lending had found, he 
     wrote, ``that this new lending is good business.''
                                  ____


               [From the Financial Times, Sept. 9, 2008]

                     Oxley Hits Back at Ideologues

                     (By Greg Farrell in New York)

       In the aftermath of the US Treasury's decision to seize 
     control of Fannie Mae and Freddie Mac, critics have hit at 
     lax oversight of the mortgage companies.
       The dominant theme has been that Congress let the two 
     government-sponsored enterprises morph into a creature that 
     eventually threatened the US financial system. Mike Oxley 
     will have none of it.
       Instead, the Ohio Republican who headed the House financial 
     services committee until his retirement after mid-term 
     elections last year, blames the mess on ideologues within the 
     White House as well as Alan Greenspan, former chairman of the 
     Federal Reserve.
       The critics have forgotten that the House passed a GSE 
     reform bill in 2005 that could well have prevented the 
     current crisis, says Mr Oxley, now vice-chairman of Nasdaq.
       He fumes about the criticism of his House colleagues. ``All 
     the handwringing and bedwetting is going on without 
     remembering how the House stepped up on this,'' he says. 
     ``What did we get from the White House? We got a one-finger 
     salute.''
       The House bill, the 2005 Federal Housing Finance Reform 
     Act, would have created a stronger regulator with new powers 
     to increase capital at Fannie and Freddie, to limit their 
     portfolios and to deal with the possibility of receivership.
       Mr Oxley reached out to Barney Frank, then the ranking 
     Democrat on the committee and now its chairman, to secure 
     support on the other side of the aisle. But after winning 
     bipartisan support in the House, where the bill passed by 331 
     to 90 votes, the legislation lacked a champion in the Senate 
     and faced hostility from the Bush administration.
       Adamant that the only solution to the problems posed by 
     Fannie and Freddie was their privatisation, the White House 
     attacked the bill. Mr Greenspan also weighed in, saying that 
     the House legislation was worse than no bill at all.
       ``We missed a golden opportunity that would have avoided a 
     lot of the problems we're facing now, if we hadn't had such a 
     firm ideological position at the White House and the Treasury 
     and the Fed,'' Mr Oxley says.
       When Hank Paulson joined the administration as Treasury 
     secretary in 2006 he sent

[[Page 9788]]

     emissaries to Capitol Hill to explore the possibility of 
     reaching a compromise, but to no avail.

  Very simple. The Community Reinvestment Act covers banks, not 
mortgage finance companies, not all of these other entities, not Fannie 
Mae, not Freddie Mac, not Goldman Sacs, not Merrill Lynch, not the 
hedge funds. If mortgage loans had only been made by institutions 
covered by the Community Reinvestment Act, there would be no crisis. 
These are the community banks that do not deserve to be falsely blamed. 
They're not all crazy about the Community Reinvestment Act. But it is 
not, by any means, the source of this problem.
  Most of the bad loans that were made were made by institutions not 
covered by the Community Reinvestment Act. The article I just quoted 
says only 1 of the top 25 subprime lenders in 2006 was directly subject 
to the CRA.
  Well, then, they say okay--by the way, to their credit, every 
regulator in the Bush administration at the Federal Reserve, at the 
FDIC, at the controller of the currency, repudiates the notion that the 
Community Reinvestment Act caused this. Literally, no competent bank 
regulator believes that for a minute because they know, as regulators, 
they would not have allowed this.
  Well, then, the next argument is it was Fannie Mae and Freddie Mac. 
And I will say I am personally involved here because my conservative 
colleagues have done me the compliment of impugning to me powers I 
never thought I had.
  Now, here is the legislative record of the Republican Congress during 
the 12 years that this--the Republicans controlled Congress for 12 
years. Here are the legislative records of 12 years of Republican 
control. Legislation upon bad subprime lending: zero. This is a very 
energy-efficient chart. You can use the chart for both issues.
  Legislation to regulate Fannie Mae and Freddie Mac passed while the 
Republicans were in power from 1995-2006: zero. Now, one of the 
arguments--okay, they can't deny the facts.
  Mr. KING of Iowa. Will the gentleman yield?
  Mr. FRANK of Massachusetts. Will someone tell the gentleman from Iowa 
I will begin yielding after a certain amount of time. I want to get the 
complete argument out. I will yield some time and I will say more than 
that.
  I look forward to when we return to debate--these things get too one-
sided. Let's each take out an hour and we will share the hours and go 
back and forth in debates.
  But that's irrefutable. Zero. Republicans in control of Congress, no 
legislation adopted to ban subprime lending or to regulate Fannie Mae 
and Freddie Mac. Now why is that the case? Well, one argument is that I 
wouldn't let them do that. Newt Gingrich and Tom DeLay apparently had a 
secret passion to regulate Fannie Mae and Freddie Mac, but my secret 
hold kept them from doing it.
  Mr. Speaker, I wish I knew that. If I knew I could have stopped them 
from doing things, I wouldn't have let them impeach Bill Clinton.
  Mr. KING of Iowa. Will the gentleman yield?
  Mr. FRANK of Massachusetts. I told the gentleman that I would not 
yield.
  Mr. Speaker, will you please instruct the gentleman from Iowa, who I 
thought would have known better, that he has to be yielded to.
  Mr. KING of Iowa. It's misstated facts.
  Mr. FRANK of Massachusetts. Mr. Speaker, regular order.
  The SPEAKER pro tempore. The gentleman from Massachusetts controls 
the time.
  Mr. FRANK of Massachusetts. Please instruct the gentleman from Iowa 
if he asks me to yield and I say ``no,'' he's not allowed further to 
speak. Those are the basic rules of the House.
  I said to the gentleman after a certain amount of time, I will yield. 
I am sorry he is upset by the fact that the Republican Party, of which 
he is a member, had a zero record of accomplishment during those 12 
years in which they controlled it. I will allow debate and yielding 
later. People have spoken for hours on this without any interruption. I 
am going to speak for at least 40 minutes without interruption and I 
will then yield.
  So I will instruct the gentleman the rules of the House do not allow 
him to interrupt without permission. I do not interrupt people without 
permission, neither may he.
  Mr. KING of Iowa. I hope the people will stick around, and I will 
yield to the gentleman when I have the time.
  Mr. FRANK of Massachusetts. Mr. Speaker, will you please instruct the 
gentleman of the rules of the House.
  The SPEAKER pro tempore. The gentleman from Massachusetts controls 
the time and does not wish to yield at this time.
  Mr. FRANK of Massachusetts. As I said before the gentleman from Iowa 
tried to divert attention from it, zero legislation adopted by the 
Republican.
  The argument again is Newt Gingrich and Tom DeLay wanted to do it. 
They overcame my objection to have a war in Iraq--that I thought was a 
terrible mistake--to cut taxes to very wealthy people, to intervene in 
the Terry Shiavo case, to do other things that I thought were unwise.
  But I kept them from regulating Fannie Mae and Freddie Mac. Well, I 
wish I did have that power. I was the minority member of the Committee 
on Financial Services who had jurisdiction. It was then called the 
Committee on Banking. In 2003, I did become the senior member, the 
minority leader.
  In the Republican House, the minority leader did not have a great 
deal of power. The Republicans had the power.
  And so here's what happened. It is true that in 2003, the chairman of 
the committee, Mr. Oxley, decided to try to regulate Fannie Mae and 
Freddie Mac. He scheduled a vote on the bill, the Republican chairman 
on the committee, Mr. Oxley. Let me read from a CBS report October 7, 
2003.

                              {time}  2115

  Strong opposition by the Bush administration forced a top Republican 
Congressman to delay a vote on the bill that would create a new 
regulation for Fannie Mae and Freddie Mac.
  Let me quote from the Washington Post on October 8. The Bush 
administration is at odds with the Republican-controlled House 
Financial Services Committee over legislation to impose tougher 
oversight over Fannie Mae and Freddie Mac. The dispute dims prospects 
for quick passage of the bill.
  So, Mr. Speaker, apparently I not only had the power to stop the 
Republican Party; I had a secret power over the minds of men, as the 
old radio serial used to say, and I managed to get Bush and the 
Republicans in the Congress to fight with each other. Boy, I wish I'd 
have known that at the time. There was a lot of damage I could have 
avoided. So the bill did not pass that year because the Bush 
administration stopped it because Assistant Secretary of the Treasury 
Abernathy denounced the Republican bill.
  Now, it is true in 2003 I did say at a hearing that I did not think 
Fannie Mae and Freddie Mac faced a crisis. I did not think they did at 
the time. I didn't think Wachovia did at the time. I didn't think 
Merrill Lynch faced one at the time, or AIG or a number of other 
financial institutions that have failed even more spectacularly than 
Fannie Mae and Freddie Mac. That didn't mean I wasn't for some 
regulation. I didn't think they faced a crisis.
  But I changed my mind a year later because, in 2004, as is made clear 
in an excellent book by Mark Zandi--Mr. Zandi is one of our best 
economists. He's level-headed. He's advised President Obama. He's 
advised John McCain. He wrote a book called ``Financial Shock: A Look 
at the Sub-Prime Mortgage Implosion.''
  And here's what he said happened. He said, Clinton started on 
homeownership for low-income people. President Bush readily took up the 
baton at the start of his administration. Owning a home became one 
pillar of his ownership society. To reinforce this effort, the Bush 
administration--once again, it's my secret power at work--put 
substantial pressure on Fannie Mae and Freddie Mac to increase their 
funding of mortgage loans to lower income groups.

[[Page 9789]]

  So, yes, I didn't think they were in crisis in 2003. In 2004, the 
Bush administration, according to Mr. Zandi's book, put pressure on 
them to increase this.
  OFHEO, the Bush-controlled regulator, set aggressive goals for the 
two giant institutions. By the time of the subprime financial shock, 
both had become sizeable buyers of these securities.
  Now, I didn't think that was a good idea. Let me quote from the 
Bloomberg News Service, Mr. James Tyson. He used to cover financial 
news. This is from 2004, June 17. As Mr. Zandi noted, it was the Bush 
administration that pushed Fannie and Freddie, a year after I said they 
weren't in crisis.
  Fannie Mae and Freddie Mac would suffer financially under a Bush 
administration requirement that they channel more mortgage financing to 
people with low incomes, said the senior Democrat on the congressional 
panel that sets regulations. That was me. I was by then the senior 
Democrat, still in the minority. The rule compelled the companies to 
put 57 percent of their financing towards homes for people with incomes 
no greater than the median income. The White House could do some harm 
if you don't refine the goals, said Representative Barney Frank. 
Frank's comments echo concerns that the new goals will undermine 
profits and put new homeowners into dwellings they can't afford.
  Yes, I thought this was a bad idea. I didn't think giving people 
loans that they couldn't pay back was a good idea. It wasn't we, 
Democrats and liberals, who were pushing loans to low-income people. It 
was, as Mr. Zandi said, as Bloomberg said, the Bush administration 
because they wanted homeownership. By the way, that was part of an 
overall policy in which they cut funding for affordable rental housing.
  And throughout, my difference with them has been I wanted affordable 
rental housing. Yes, in that 2003 quote I said I was worried that 
Fannie Mae and Freddie Mac would cut back on affordable housing, and in 
our language that we use in the housing area, affordable housing is 
rental housing. I tried to get Fannie Mae and Freddie Mac not to buy 
bad subprime mortgages but, if they had profits, to put some of them 
into affordable rental housing.
  So, yes, in 2004, I got worried that they were, as Mr. Zandi said, as 
the Bloomberg News said, putting people into low-income housing. Around 
that time, I had a discussion with Alphonso Jackson, the Bush Secretary 
of HUD. He said he wanted to cut people off the rental housing 
assistance program after 5 years, the section 8 program whereby you 
help people rent housing. He said, What do you think? I said, Well, if 
you can stop them from being poor after 5 years that would be perfectly 
sensible. He said, No, no, be serious. Why aren't you for it? I said, 
Mr. Secretary, what will happen to some of these people who can't 
afford to rent if you cut off their rent supplement after 5 years? He 
said, I will help them become homeowners.
  This was the Bush social policy. This was their compassionate 
conservatism. They were the ones pushing this, not CRA because it 
wasn't the banks doing it. Fannie Mae and Freddie Mac were doing it at 
the orders of the Bush administration.
  So, in 2005, I did agree now, given this, that it was time to 
regulate Fannie Mae and Freddie Mac, and I joined Mr. Oxley, the 
chairman of the committee who tried to do it in 2003 and was stopped by 
the Bush administration, and in 2005, Mr. Oxley began again a bill to 
regulate Fannie Mae and Freddie Mac.
  It passed the Committee on Financial Services, of which I was the 
senior Democrat still, by 65-5. That was the bill Mr. Oxley put out. 
Five Republicans voted against it. They were on the Bush side; it 
didn't go far enough. But 28 Republicans voted for it, with all the 
Democrats. So 65-5. The bill passed the House in 2005 to regulate 
Fannie Mae and Freddie Mac. It's been argued that, oh, yeah, but the 
bill was too weak because at the markup session, the committee vote, 
Democrats blocked good amendments.
  Let me be very clear. Let me check the record. I have the record 
here. I'm going to put it into the Congressional Record. No amendment 
at that session on the committee vote which received a majority of 
Republican votes was defeated. Some Republicans were defeated, but they 
had a minority of Republican votes. A majority of Republicans carried 
the day on every vote.
  There were two efforts to try and tighten it. They were both defeated 
against the chairman's wishes, with a majority of Republicans against 
them on both sides.
  I'll yield later on. I will put that in there. I will yield to the 
gentleman to clarify that.
  Mr. GARRETT of New Jersey. I would like to ask you about that. I'm 
listening to what you are saying, if I could.
  Mr. FRANK of Massachusetts. The gentleman may--I will yield briefly.
  Mr. GARRETT of New Jersey. I'm thinking back. If you're referencing 
the time when--actually, I think I had one of those amendments, if I'm 
not mistaken. I know one of the amendments I made and I withdrew, and 
then I made some other amendments, and I think Ed Royce and I'm trying 
to think. There was a whole series of amendments.
  Mr. FRANK of Massachusetts. I have the amendments. I'll read them. 
I'm sorry, I'm not going to waste time. I'm sorry, we don't have time, 
but I'm not going to give up my scarce time while the gentleman wanders 
through memory lane. I am sorry, I take back my time. I'll read the 
amendment. I'll look for the amendment offered by Mr. Garrett.
  An amendment to the amendment in the nature of a substitute offered 
by Mr. Garrett, number 1R, was withdrawn. We go down. An amendment was 
offered by Mr. Paul. It was defeated 14-56. There were 37 Republicans 
on the committee. An amendment was offered by Mr. Royce. It was 
defeated, 17-53, 20 beat 17. Then we have the only one I see by Mr. 
Garrett, who's asked me to yield, it was withdrawn. So Mr. Garrett 
offered one amendment at that markup, and it was withdrawn.
  I will put the record in there. I don't have further time to yield. 
If the gentleman wants to see if the record was incorrect, and at one 
point I quoted something about the gentleman that was incorrect and I 
apologize, but this one I have double-checked. So Mr. Garrett offered 
one amendment, and it was withdrawn.
  Amendments to strengthen the bill, to put some spine in Mr. Oxley, 
who the Republican administration thought too weak, the author of 
Sarbanes-Oxley, the coauthor, two Republican amendments taken a roll 
call, both defeated. A majority of Republicans defeated them, and then 
we went to the floor of the House on this--and I voted for the bill.
  We went to floor of the House. We came to the Rules Committee, and 
Republicans then in the Rules Committee did something outrageously 
procedurally. We had in there a provision that said some of the money 
from Fannie Mae and Freddie Mac profits would go, if they had the 
profits, to rental housing, not subprime mortgages, to rental housing, 
and it would go through organizations. Conservative Republicans said, 
oh, no, some of these organizations are nefarious, you can't be giving 
money to some of these organizations; you better give only to housing 
groups; if you give it to a multipurpose organization, bad things will 
happen.
  So they put an amendment in that had not been offered in committee 
and did not allow a vote on it on the floor. It was a self-executing 
rule as they call it. A self-executing rule is what you call it when 
you jam it in and don't let people vote on it. This was the Republicans 
in the Rules Committee. Mr. Oxley was not in favor of it, but he had to 
be a good soldier.
  It said no organization could get any money to build this rental 
housing if housing wasn't their prime goal, and we heard from some of 
those radical organizations who were upset. I remember particularly the 
Catholic Church, which does a very good job of building affordable 
housing. I work very closely with the Catholic Church and they do 
excellent work in the Archdiocese of

[[Page 9790]]

Boston, the Diocese of Fall River, Arlene McMame and Lisa Alberghini, 
two wonderful women working under our cardinal and our bishop in this 
regard.
  And the Catholic Church said, you know, it says we can't get any 
money unless housing is our main purpose. Now, we care a lot about 
housing, but God has to be our main purpose. So the Catholic Church 
apologized for the fact that they could not claim for the purpose of 
getting money that their main purpose was to build housing. They would 
have been excluded. I was angry about that, and so when the bill passed 
the House I voted against it. I still wanted the bill to be passed 
without that.
  But the point is this. 2003, Republicans in power, no bill is 
offered. So it's apparently my fault that the Republicans, since they 
were fighting each other, wouldn't offer the bill.
  In 2005, it is offered, and unlike the gentleman from New Jersey, I 
joined the chairman of the committee and a great majority of the 
Republicans, 32 of the 37 Republicans, to bring the bill to the floor. 
I didn't vote for it on the floor because I didn't like the housing 
piece, but it got 300 votes on the floor of the House, and it was about 
to go to the Senate.
  At that point, according to Mr. Oxley, once again the Bush 
administration intervened to kill it. And Mr. Oxley said--I hope it's 
late enough in some parts of the country for me to quote Mr. Oxley--in 
his interview in the Financial Times, he said the ideologues at the 
White House blocked this regulatory bill that would have improved 
regulation that was voted on by 300 Members of the House, by a 10:1 
ratio in the committee, by an overwhelming majority of Republicans in 
both bodies. He said the administration ideologues gave him the one-
finger salute, which I will not illustrate on the floor of the House 
given propriety.
  So, once again, it was blocked by them. I was supportive of Oxley in 
committee. I wanted a bill that created the housing thing. It got 300 
votes on the floor. Did I stop it?
  What happened was, it went to the Senate, and then the Republican 
free-for-all multiplied. It went to the Senate, and the Republican 
Senate voted the bill out by one vote, but it never went to the floor, 
and you had a three-way dispute: the Senate Republican chairman, Mr. 
Shelby; the House Republican chairman, Mr. Oxley; the President of the 
United States. The Secretary of the Treasury actually sided with Mr. 
Oxley, he said.
  That's why we got no Fannie Mae bill. That's the history. By now the 
clock runs out on them. We passed the bill in 2005 in the House. I 
voted ``no,'' but I was prepared to vote for it with an amendment that 
did not affect the regulatory structure. Goes to the Senate and dies. 
The Republicans killed it.
  I certainly don't think I had the power to stop anything from 
happening in a Republican House, but the notion that I have a secret 
power over the Republican Senate is bizarre even by the standards of 
the myth-makers who have gotten into this effort.
  2007 comes, and I'm told, oh, I'm responsible. In fact, the gentleman 
from Missouri (Mr. Akin)--and I checked the record by the way, and Mr. 
Akin, there is zero record of Mr. Akin showing any interest in Fannie 
Mae or Freddie Mac, filing a bill, making a statement, until the 
Democrats took power. So my Republican friends, it's kind of like in 
the bar, the guy who's all ready for the fight as long as the other guy 
isn't there. When the other guy was there, they were very meek and 
mild.
  Mr. Akin said, Well, I was chairman of the committee when the 
collapse came; do I take any responsibility? No, not for that, because 
I tried to work with Mr. Oxley in 2005 to pass a bill over what he 
called the Bush ideologues who blocked him. And in 2007, I became 
chairman of the committee on January 31.
  On March 28, the committee passed a bill that improved the regulation 
of Fannie Mae and Freddie Mac in a way that was tougher than the Oxley 
bill of 2005. In fact, the Bush administration that thought that the 
Oxley bill was too weak approved our bill. They said it was the right 
way to do it. It was the right form of regulation.
  In fact, Richard Baker, who unlike many of the Republicans who now 
are full of fight, was a leader in an effort to restrain Fannie Mae and 
Freddie Mac, was quoted at the time as saying Mr. Baker had been the 
leader in this and here's what he had to say, talking about the bill. 
Here's a quote from Politico: Barney Frank had witnessed Baker's 
battles as ranking member of the House Financial Services Committee. 
When he became chairman this year, he moved swiftly and pushed the bill 
through the Chamber in May with a 314-104 vote. The Frank legislation 
is significantly tougher than the one Fannie and Freddie fought so 
bitterly in 2000, an irony that pleases Baker. And the gentleman, our 
former colleague says, With every iteration--it, the bill I sponsored--
it got stronger. It's to the point where I didn't know what else there 
was to put in it.
  And then there's a group called FM Focus. They were formed to be a 
critical block that sought regulation of Fannie Mae and Freddie Mac. 
Here's what they said in Congressional Quarterly. The chief lobbyist 
was asked, were any other Democrats helpful? Here it is.

                              {time}  2130

  Here's what the chief lobbyist for the Fannie Mae and Freddie Mac 
group said: ``The Senate Banking Committee passed a very good bill in 
2004.'' It never got to the Senate floor. That was under the 
Republicans. There I go again stopping the Senate Republicans from 
bringing their own bill to the floor.
  The Senate Republicans had a bill. Never came to the floor of the 
Senate when I was in the Democratic minority in the House. Then the 
House introduced a bill, which it passed, but we couldn't get it to the 
floor of the Senate.
  ``Then, after the 2006 election, when everyone thought FM policy 
focus issues would be tough sledding with Democrats in the majority, 
Barney Frank as the new chairman of the House Financial Services 
Committee stepped up and said, `I'm convinced we need to do something. 
He sat down with Treasury Secretary Hank Paulson and, frankly, upset 
people in the Senate and Republicans in the House.'' Because they 
wanted an issue to complain about. They didn't want to see a solution.
  ``They came up with a bill that was excellent--and it was the bill 
that largely becomes law, and they were able to be phased out.''
  So let me just summarize on Fannie Mae and Freddie Mac. The 
Republicans do nothing to pass a bill in their 12 years in power. 2003, 
Mike Oxley tries to pass one. The Bush administration called it off by 
pressuring him.
  2005, he gets one passed in the House. The Bush administration 
denounces, he denounces them, and the Senate doesn't pass it. 2007, 
when I became chairman, we passed it. So I don't think I apologize for 
this.
  Unfortunately, Senate deadlock again occurred this time with the 
Democrats in a 2-vote majority, but it has a happier ending because the 
Democrats in the Senate ultimately did pass the bill.
  In January of 2008, worried that the Bush policy of pushing them into 
too many subprime loans, which I document starting in 2004, I appealed 
to Secretary Paulson, who will acknowledge this, when we did the 
economic stimulus bill, and said, please, would you put the Fannie Mae 
and Freddie Mac regulatory bill which you like into the stimulus. It 
also had an affordable housing trust fund.
  So the right wing didn't like it. They didn't like the idea of 
helping build affordable rental housing. But building affordable rental 
housing avoided the problem of bad subprime mortgages. That was the 
solution I always worked for. And Mr. Paulson basically said, I'd like 
to do it, but I've got conservatives here who won't let me.
  So we could have had that in the stimulus in 2008. It didn't finally 
pass until July of 2008. By that time, it was too late to avoid the 
disaster with Fannie Mae and Freddie Mac. But if I had been successful, 
we would have passed it in 2005, myself, working as a

[[Page 9791]]

junior member of a coalition with Mike Oxley. We would have passed it 
in 2007 if the Senate had been able to do it. So that's the story of 
Fannie Mae and Freddie Mac.
  So it is the Republicans' fault because they ran the House and the 
Senate and the Presidency that we didn't get passage of a Fannie Mae-
Freddie Mac bill until the Democrats came back to power. It's 
indisputable. Republican President, Republican House, Republican 
Senate. No bill.
  Democrats take over. We get a bill through the House in 1 year. 
Unfortunately, a year later we have to wait before we get it through 
the Senate.
  But when my Republican friends think about it, I don't want them to 
feel too bad--on this issue--because while they were clearly the ones 
who were responsible for no regulation of Fannie Mae and Freddie Mac, I 
don't think it had as much negative impact as they think. I think the 
Fannie Mae and Freddie Mac collapse was as much an effect as a cause of 
the subprime crisis. Fannie Mae and Freddie Mac did not originate 
mortgages. That's not their goal. They bought mortgages made by other 
people. If people hadn't made those bad mortgages in the first place, 
there wouldn't have been any. So were a lot of others in the private 
sector.
  And that's where the real blame lies. Blame lies with Republican 
policies that resisted our efforts to restrict inappropriate subprime 
loans. This is the crux of it. Bad subprime loans were the root of 
this--and there could not be a clear partisan divide on the issue. 
Again, I would urge people to read Mark Zandi's book.
  In 1994, the last time the Democrats had a majority before 2007, my 
predecessor, an excellent consumer fighter from the State of New York, 
helped pass a bill called HOEPA, Home Ownership Equity Protection Act. 
It said to the Federal Reserve: Regulate subprime loans. Remember, the 
problem I mentioned before is that we got a new form of lending that 
went outside the banks and went to the mortgage finance companies and 
they weren't regulated.
  So the Democratic Congress said: Mr. Greenspan, regulate them. Mr. 
Greenspan said explicitly: No. In fact, Mr. Zandi, a man who's been an 
advisor to John McCain, headlines on page 152 of his book on the 
Financial Shock, a subchapter headlined: Greenspan's Regulatory 
Failure.
  Mr. Greenspan acknowledges much before the Government Reform 
Committee this year. By the way, another one of those who has said that 
we were secretly behind this, who was a member of the Republican Party 
and did nothing in the House to stop this was the gentleman from 
California, Mr. Issa. He was a member of the Government Reform 
Committee for many of these years. They did nothing about Fannie Mae 
and Freddie Mac until Mr. Waxman took over and got into it during the 
first Congress among Democrats.
  But Mr. Greenspan refused to do that in 1994. Many pressed him to do 
it. He refused. In 2004, when the Bush administration began pushing 
harder for subprime loans, many of us became concerned.
  Here's what Mr. Zandi says again. ``A group in North Carolina was 
particularly concerned about that,'' the Committee for Responsible 
Lending, ``working with two of their very effective and thoughtful 
members''--members of our Financial Services Committee, Mr. Watt and 
Mr. Miller--``they sought to get legislation enacted that would prevent 
this sort of abuse.''
  We began conversations. I was then the senior Democrat still on the 
committee. The Republican chair of the committee that had jurisdiction 
on Housing was the gentleman from Alabama, Mr. Bachus, now the ranking 
member, the minority member.
  And I will do him a favor--I will not impute to him the secret powers 
imputed to me. I don't blame Mr. Bachus for what we do or don't do. 
We're the majority and we will take the responsibility. It's the 
Republicans who won't take the responsibility for their zero batting 
average for 12 years when we were in the minority.
  But we sought, as Mr. Zandi documents, to pass legislation to 
restrict subprime lending. Alan Greenspan would use his authority, so 
we tried to do it. And the problem is that the Republican philosophy 
that ruled of no regulation knocked it out of the box.
  I think Mr. Bachus was serious. Mr. DeLay was even more serious. He 
didn't want it. We were in negotiations. Now the gentleman from Alabama 
was chair of the subcommittee. He could have, any time, called a 
markup, brought a bill out. We thought his bill would have been strong 
enough. He could have outvoted us. Republicans often did that when they 
were in the majority, as we often do today.
  But here is what Mr. Zandi said: ``Democrats in Congress were worried 
about increasing evidence of predatory lending. The Bush administration 
and most Democrats wanted a Federal equivalent to the North Carolina 
law to cover all lenders, not just the banks. The Bush administration 
and most Republicans in Congress,'' who were in the majority, ``were 
opposed, believing legislation would overly restrict lending and thus 
slow the march of home ownership.
  ``The last attempt to pass antipredatory lending legislation occurred 
in 2005, but it was also stymied by the Republican leadership.''
  So here's where the Republicans failure is. They pushed for greater 
home ownership among low-income people--not CRA, the Republicans, 
because this was their philosophy. This was their social program as 
opposed to rental housing, much more appropriate for low-income people. 
And then they blocked our efforts to regulate it.
  Once again, we had to wait until 2007. In 2007, when the Democrats 
became the majority, we did pass legislation to block inappropriate 
subprime lending, predator lending. We got the bill through the House. 
This time, we weren't able to get it through the Senate but we did have 
some success because the Federal Reserve under Mr. Bernanke has been a 
much more responsive institution to these kind of problems than Mr. 
Greenspan. I thought Mr. Greenspan did a good job in macroeconomic 
policy. But he was lousy because of his ideological opposition to any 
kind of regulation.
  Mr. Bernanke used the authority in 2007--after we even moved on our 
legislation--he used the authority Mr. Greenspan wouldn't use and 
promulgated rules to ban subprime lending. I don't think they go quite 
far enough, and they should be statutory.
  So we will get a test, Mr. Speaker, because when we return from the 
break, the Committee on Financial Services will bring out a tough bill 
to put rules on all subprime lending. Essentially, we're going to use 
our community banks as a model--these well-run institutions. We're 
going to take the rules they have long used and apply them to all loans 
to prevent the bad subprime loans.
  The last time we did that, two-thirds of the Republicans voted 
against it. In fact, we were opposed by the Wall Street Journal.
  I do think the Wall Street Journal's role here deserves some 
coverage. The Wall Street Journal has been one of those in this 
dishonest, anti-historical efforts to blame the Democrats. In 
particular, they had an editorial recently which said I was pushing for 
people to get subprime loans. Exactly the opposite is the case. And I 
wrote a letter, by the way, documenting that, and it could not be 
printed.
  I have to say this. I respect the press, but the people who write the 
Wall Street Journal editorials in this, Mr. Paul Gigot and Mr. Stephen 
Moore, are cowards and liars. They print stuff that they know is wrong 
and will not give me the access to reprint. Fortunately, I have this 
access, and I'm going to put into the Record the letter I sent refuting 
it.

            Letter to the Editor of the Wall Street Journal

                                         House of Representatives,


                                 Financial Services Committee,

                                 Washington, DC, December 5, 2008.
       Editor: I am used to having my views severely distorted by 
     the Wall Street Journal Editorial Board--in contrast to the 
     accurate representation that its reporters present. But the 
     opening of the editorial on December

[[Page 9792]]

     3rd doesn't distort--it gets the truth absolutely backwards. 
     In short, the Journal's assertion that I have ``spent [my] 
     career encouraging mortgage loans to people who can't repay 
     them,'' is not only entirely inaccurate; it blames me for 
     policies that the Journal has itself defended.
       I have consistently argued that the push for homeownership 
     that existed in the Clinton administration, but was 
     significantly upgraded in the Bush administration, made the 
     mistake of assuming that virtually all people could be 
     homeowners. In contrast, I argued that the majority of low-
     income people should be aided by policies that promoted 
     affordable rental housing.
       For example, on February 18, 2002, at a hearing on the 
     budget I said ``I am in favor of trying to help lower-income 
     people get the advantages of homeownership . . . but almost 
     by definition, the large majority of poor people are going to 
     need rental housing.'' On March 6, 2004, the National Journal 
     reported that ``When the FHA's plan to insure subprime loans 
     was included in a Senate-passed appropriations bill, Frank . 
     . . a staunch supporter of low-income housing, wrote a highly 
     critical letter urging that the measure not be included . . . 
     Not only had the House committee not examined . . . the 
     proposal he said then, but the measure also offered no 
     protection against lenders inappropriately steering people 
     towards these high-cost loans. Nor did it offer safeguards to 
     ensure that participants `were fully suitable for 
     homeownership.'
       That same year, when the Bush administration insisted that 
     Fannie Mae and Freddie Mac raise the percentage of below-
     median income homeowner mortgages they bought, I was 
     correctly quoted in a Bloomberg article on June 17th as 
     saying that this would ``do some harm,'' and the writer noted 
     that ``Frank's comments echo concerns . . . that the new 
     goals will undermine profits and put new homeowners into 
     dwellings they can't afford.''
       It was a consistent series of statements like that on my 
     part, and efforts to act on them--although these were often 
     unsuccessful when I was in the minority--that led frequent 
     Republican economic appointee and Wall Street Journal 
     contributor Larry Lindsey to write in April of this year that 
     ``Barney Frank is the only politician I know who has argued 
     that we needed tighter rules that intentionally produce fewer 
     homeowners and more renters. Politicians usually believe that 
     homeownership rates should--must--go ever higher.''
       In fact, I was one of the supporters in 1994 of the 
     legislation that directed the Federal Reserve to restrict 
     inappropriate mortgages at the subprime level, and I also 
     lamented Alan Greenspan's refusal to implement this--a 
     refusal which he in a forthright manner acknowledged recently 
     was a grave error. When he refused to do this, I and others 
     in Congress, mostly but not only Democrats, pushed for 
     legislation to restrict subprime mortgages.
       As Mark Zandi notes in his recent excellent study of the 
     financial crisis, when ``the Bush administration put 
     substantial pressure on Fannie Mae and Freddie Mac to 
     increase their funding of mortgage loans to lower-income 
     groups,'' I and other Democrats stepped up our efforts to 
     pass legislation that banned the inappropriate loans that 
     have led to the current crisis. In Zandi's words, ``Democrats 
     in Congress worried about increasing evidence of predatory 
     lending . . . and the Democrats wanted a federal (law) that 
     would cover all lenders nationwide. The Bush administration 
     and most Republicans in Congress were opposed, believing 
     legislation would overly restrict lending and thus slow the 
     march of homeownership . . . the last attempt to pass any 
     predatory lending legislation occurred in 2005 but it was 
     also stymied.''
       In other words, I was consistently arguing against efforts 
     to extend homeownership to people who could not afford it, 
     and instead sought to increase rental housing. Indeed, as the 
     Journal knows, one of their criticisms of my attitude towards 
     Fannie and Freddie has been my ultimately successful effort 
     to create an affordable housing trust fund that takes money 
     from Fannie and Freddie and puts it into rental housing.
       In fact, Zandi's comment that the last effort to pass any 
     predatory lending legislation was 2005 is correct as it 
     applies to those years from 1995 until 2006 when the 
     Republicans controlled Congress. However, when the Democrats 
     achieved a majority in 2007, and I became Chairman of the 
     Financial Services Committee, the first major piece of 
     legislation the committee approved was a bill adopting the 
     regulatory upgrade for Fannie and Freddie that had been 
     strongly advocated by the Bush administration, but which it 
     had been unable to get the Republican Congress to pass. Next, 
     we moved on to anti-predatory lending legislation and 
     succeeded later in 2007 in passing a bill that, had it been 
     law earlier--when we were in the minority and unable to enact 
     it--would have prevented most of the bad loans.
       But, while the predatory lending bill passed by a large 
     majority in the House, there were staunchly conservative 
     advocates of unlimited homeownership who were critical. One 
     prominent conservative voice lamented in November 2007 that I 
     planned ``to hold a committee vote on the Mortgage Reform and 
     Anti-predatory Lending Act that would impose new rules and 
     financial penalties on subprime lenders while providing new 
     lawsuit opportunities for distressed borrowers.'' In 
     objecting to this legislation, this commentator defended the 
     record of subprime lending, although conceding that there had 
     been some ``lending excesses.'' Decrying the attacks on 
     subprime lending, this statement said that ``For all the 
     demonizing, about eighty percent of even subprime loans are 
     being repaid on time and another ten percent are only thirty 
     days behind. Most of these new homeowners are low-income 
     families, often minorities, who would otherwise not have 
     qualified for a mortgage. In the name of consumer protection, 
     Mr. Frank's legislation will ensure that far fewer of these 
     loans are issued in the future.''
       Exactly. That was my intention then, and it was my 
     intention years earlier when Republicans blocked it and 
     carried out the spirit of these comments to allow fairly 
     unregulated subprime lending. And of course the statement I 
     have been quoting here is the Wall Street Journal Editorial 
     of November 6, 2007.
                                                     Barney Frank,
                                                         Chairman.

  By the way, one response to their argument--this is my letter--that I 
was pushing for subprime loans--they said that I was the one who was 
always trying to push subprime loans. Here's a quote from Larry 
Lindsey. Mr. Lindsey was an advisor to Ronald Reagan and to both 
Presidents Bush. He was fired by the most recent President Bush because 
he predicted that the war in Iraq would cost $100 billion, and he was 
told that was wrong. He was wrong. It was way too low. That's not why 
they fired him.
  Here's what Larry Lindsey wrote in the Wall Street Journal, all 
places, on April 2, 2008, talking about regulation. ``In fact, 
Representative Barney Frank is the only politician I know who has 
argued that we need tighter rules that intentionally produce fewer 
homeowners and more renters. Politicians usually believe that 
homeownership rates should--must--go even higher. The rarity of Mr. 
Frank's thinking is a reminder that when markets are committing 
excesses, we should not except Washington actors to check on them.''
  The Wall Street Journal, as I said, lies about this. In fact, in 
2007, when we passed a bill over the objection of most Republicans, 
although we had the support of the then ranking member of the Financial 
Services Committee, although I understand he got in a lot of trouble 
with his right wing over this and promised maybe never to do it again. 
We'll see when this comes up.
  But here's what the Wall Street Journal editorial said when we passed 
a bill to stop abusive subprime lending. ``For all the demonizing of 
subprime lending''--2007, they said we were demonizing subprime 
lending, the Wall Street Journal editorial--``about 80 percent of even 
subprime loans are being repaid on time, and another 10 percent are 
only 30 days behind.''
  Isn't that wonderful? Only 10 percent are more than a month behind. 
Ten percent default and 30 days another 10 percent? Only the Wall 
Street Journal in this ideological fantasy world would think an 80 
percent repayment rate of mortgages to low-income people is a good 
thing.
  But here's what they said. ``Most of these new homeowners and low-
income families are often minorities''--so apparently it the Wall 
Street Journal who's pushing to get minority loans which are going to 
get a default at a rate up to 20 percent--``who would not otherwise 
qualify for a mortgage. In the name of consumer protection, Mr. Frank's 
legislation will ensure that far fewer of these loans are issued in the 
future. I hope so, exactly.
  It was our goal, our intention, our mission to have far fewer of 
those loans. And if we had gotten the bill passed in 2007, we still 
would have had a crisis. It wouldn't have been as bad today. It was 
stopped by Republican opposition in the Senate.
  So that's where we are. Republicans are in power. They do nothing to 
regulate Fannie Mae and Freddie Mac. They do not only nothing to 
regulate, they push more subprime loans through the Bush administration 
and they block our efforts to legislate about them.
  We now have an agenda to go forward, and I am going to outline that 
briefly. But I will at this point--I have

[[Page 9793]]

about 17 minutes left--I will yield 4 of my 17 minutes to the gentleman 
from Iowa.
  Mr. KING of Iowa. I thank the gentleman for reaching his conclusion 
and allowing a yield. I sat and listened to this. One thing I think the 
chairman would agree to as just a minor correction to one of the 
posters that references Mr. Paulson as Frank Paulson rather than Henry 
Paulson. Small little correction. It wasn't the reason I asked to 
yield.
  Mr. FRANK of Massachusetts. What poster mentions Frank Paulson?
  Mr. KING of Iowa. That's what the poster said. Frank Paulson.
  Mr. FRANK of Massachusetts. I thank the gentleman for that profound 
correction. I will see that the typist is severely chastised.
  Mr. KING of Iowa. I know that the gentleman is very interested in 
making sure the Record is correct. Having been corrected myself by the 
chairman, I would also offer that correction.
  But my point was this, if the gentleman would yield to a question, 
and that is I'm listening to this this evening and I'm thinking of an 
evening that my recollection tells me was a debate on this floor on 
October 26, 2005, and it had to do with regulation of Fannie Mae and 
Freddie Mac. It was an amendment offered by the former chairman of the 
Financial Services Committee, Mr. Leach of Iowa, that, in essence--and 
I can't quote it to the gentleman from memory--but, in essence, it 
would have regulated Fannie Mae and Freddie Mac in the same 
categories--very similar to the same categories of that of other 
lending institutions.
  Mr. FRANK of Massachusetts. The gentleman is correct. Does the 
gentleman remember how many votes that got on the floor of the House in 
a Republican House?

                              {time}  2145

  Mr. KING of Iowa. I think there were around 35 to 38 votes.
  Mr. FRANK of Massachusetts. Thirty-six. The gentleman has a very good 
memory, 36; 30 were Republicans, 6 were Democrats.
  So it is true, the former chairman of the committee offered an 
amendment to tighten this up, and then the House, with about 230 
Republicans, 30 voted with him and 200 Republicans voted against him. 
Was that my fault?
  Mr. KING of Iowa. If the gentleman would further yield, a 
recollection from the Congressional Record would have been that the 
gentleman, who is now chairman of the Financial Services Committee, had 
made the statement in that debate that he wasn't concerned about Fannie 
Mae and Freddie Mac's viability, and that it wasn't necessary to 
increase the regulation or the capitalization of Fannie Mae and Freddie 
Mac. And, that if anyone was investing in Fannie's and Freddie's 
shares, they shouldn't be confident that the gentleman from 
Massachusetts would support a bailout of Fannie and Freddie.
  Mr. FRANK of Massachusetts. No.
  Mr. KING of Iowa. And today, we have the nationalization of Fannie 
and Freddie.
  Mr. FRANK of Massachusetts. I will take back my time and say it is 
exactly the opposite. Throughout the debate, I said to people that they 
should not consider that there was a guarantee, that they should not 
consider there was an implicit guarantee. I consistently said that. 
They benefited from people's perception when in fact, the share 
holders--I'm sorry, I haven't yielded again. I have consistently said 
that.
  When there was an intervention that Mr. Hank Paulson asked for, it 
did refer to the bondholders, as we often do. The shareholders were 
wiped out, including the preferred shareholders.
  So, in fact, when I was chairman of the committee and we responded to 
Mr. Paulson, we wiped out the Fannie Mae and Freddie Mac shareholders, 
as I had always warned that they could be. I did think at the time we 
passed the bill, at Mr. Paulson's urging, or that we were about to, 
that it would be helpful. It turned out things were worse than I 
thought. But he did mention Mr. Leach, so let me give the voting 
record. And I was neglectful of this.
  The bill came to the floor of the House, the bill the Bush 
administration thought was too weak. Now, the Republican Rules 
Committee allowed nine amendments. By the way, when the bill came to 
the floor when I was the chairman, we had 24 amendments, because I do 
believe, I think, in a more open process. We had the manager's 
amendment was one of them, a couple by voice vote. Mr. Leach sought to 
put in minimum capital levels. He lost 378-36. This is in the 
Republican House.
  Again, the argument is, who did it? This is part of your zero. I 
should have had a footnote. The one time you did try, Mr. Leach, who 
thought Mr. Oxley was being too weak, he got 30 Republicans with him 
and 200 against him. Now, Mr. Royce also had an amendment; Mr. Royce, 
another critic. He did better than Mr. Leach. He got 73 votes versus 
346. So in both cases, the two amendments that were allowed--oh, I take 
it back. Mr. Paul had an amendment, too. And I guess this is a sign of 
the state of the Republican Party.
  Mr. KING of Iowa. Would the gentleman yield?
  Mr. FRANK of Massachusetts. I am sorry, the gentleman has raised a 
point and I am going to respond to it.
  The point is this: Mr. Paul also--there were three amendments offered 
to toughen the bill in 2005. Mr. Paul got 47 votes. Well, that is the 
Republican Party; Mr. Paul gets more votes than Mr. Leach.
  But here are three amendments offered to toughen it, all three 
defeated by an overwhelming majority of Republicans.
  The point is, I supported Mr. Oxley. I thought we had a good bill.
  I would also note that by 2007--and, by the way, in 2005, I was 
hoping that we would regulate Fannie Mae and Freddie Mac but also 
restrict subprime loans. As it became clear to me that Republican 
opposition would prevent us from blocking subprime loans, I did become 
convinced of a need for tougher regulation. That is why Mr. Baker, your 
former colleague, said the bill we brought out in 2007 was as tough as 
it could be.
  Now I will yield again.
  Mr. KING of Iowa. And I appreciate the chairman yielding. But is it 
also true that you opposed those amendments that would have regulated 
Fannie Mae and Freddie Mac?
  Mr. FRANK of Massachusetts. Yes. I will----
  Mr. KING of Iowa. The policy underlying--regardless of how the 
Republican votes came out, did the gentleman oppose those regulatory 
amendments that came to the floor?
  Mr. FRANK of Massachusetts. Yes. I am taking back my time to say yes.
  My point is that it was not my fault that 200 Republicans voted 
against it. I did vote with the overwhelming majority of Republicans. 
The question is, who is responsible?
  But I would also say this. You know, when you are in the minority you 
can't always shape things. Sometimes you have to make unpleasant 
choices. When I became the chairman of the committee on January 31, 
2007, I was able then to combine tough regulation, knowing that we were 
going to be able to restrict subprime, and with help for rental 
housing.
  So the fact is that when I was in power, not forced to choose among 
Republican alternatives but in the majority, I helped pass a bill that 
was tough enough, tougher than the bill in 2005, that was acceptable to 
the Bush administration, acceptable to the leading critical group, 
acceptable to Mr. Baker.
  So, yes, I voted with the great majority of Republicans. So I guess 
that is what I am responsible for: I voted with the overwhelming 
majority of House Republicans to report out a bill that the Republicans 
thought would work.
  I will yield to the gentleman from New Jersey.
  Mr. KING of Iowa. I want to just thank the gentleman for yielding.
  Mr. FRANK of Massachusetts. Well, I yielded to the gentleman from New 
Jersey.
  Mr. KING of Iowa. I am happy to thank the gentleman, and compliment 
him on his diminishment of his own persuasive powers, and be happy to 
yield back.

[[Page 9794]]


  Mr. FRANK of Massachusetts. Well, I agree--the gentleman says my 
persuasive powers. That is the joke of it all. That is, frankly, the 
gap between the propaganda and the reality.
  The Republicans are in control; they pass the bill. In fact, they cut 
out the affordable housing part I wanted. I did at the time hope that 
we could combine moderate regulation of the sort Mr. Oxley wanted and 
the overwhelming majority of Republicans wanted with an affordable 
housing program and with restrictions on subprime. When we were not 
able to get the subprime bill through and things had deteriorated, I 
then said, okay, and I was for tougher regulation.
  So, by the way, at that point the gentleman from Iowa I believe voted 
against it. I know the gentleman from New Jersey did. Do you know why? 
I will tell people, Mr. Speaker. Because I, in the chairmanship that I 
had, was able to get a bill that toughened the regulation of Fannie Mae 
and Freddie Mac.
  But what about the Catholic Church getting money to build rental 
housing, and allowing nonhousing groups like the Catholic Church, and 
others, to build rental housing? They opposed it.
  So, yes, a majority of Republicans voted for the bill in 2005 that 
the Bush administration was too weak, and a majority of the Republicans 
opposed the bill in 2007 that the Bush administration was strong 
enough, because their opposition to rental housing for low-income 
people overcame that. But that is the story.
  Now I yield to the gentleman from New Jersey.
  Mr. GARRETT of New Jersey. Just two quick points. And I appreciate 
the gentleman yielding. One, as an individual who was one of the few in 
those numbers who voted ``no'' on those amendments----
  Mr. FRANK of Massachusetts. And ``no'' in committee.
  Mr. GARRETT of New Jersey. Right. And ``no'' in committee. Obviously, 
I saw some of the problems and had concerns early on.
  Secondly, I will make a suggestion to you as to why you get the 
accusations, if you will, or the statements about you, as you will. I 
didn't see the program. I heard you were on Lou Dobbs and other things 
like that the other night where those statements are often made. I will 
make the suggestion as to why that may be, if you will.
  Mr. FRANK of Massachusetts. I yielded to the gentleman. He may do 
what he wishes.
  Mr. GARRETT of New Jersey. When I came here in 2002, in that election 
and that year and joined the committee, I immediately became somewhat 
involved in this issue, although I had never been involved in it 
before.
  I saw in our committee, between both parties, that one person stood 
out, in my mind, and a lot of other people's mind, as the person who 
was always trying to fight to rein in the GSEs. And that person, who is 
no longer with us, is Richard Baker. He was articulate, he was 
eloquent. He was always on the facts and what have you. He was always 
pounding, pounding, pounding at every opportunity. So I and other 
people saw him as being on that side.
  And, quite candidly, when we had those debates, when some of those 
amendments as you referred to before--and I think there were other ones 
in the later months that I and others made from the conservative point 
of view; a number of us saw the champion on the other side of that 
issue out of both parties, out of both Republicans and Democrats; and I 
agree that there were some Republicans who were vociferous as far as 
letting Fannie and Freddie do----
  Mr. FRANK of Massachusetts. I will take back my time to say a 
majority of the Republicans at every turn. Don't say--not some 
Republicans. A majority of Republicans in the committee, a majority of 
Republicans on the floor. Not some Republicans. But every time the 
issue arose, a majority of Republicans were on the side of Mr. Oxley 
and myself.
  Mr. GARRETT of New Jersey. What I am saying is not how the votes were 
going. I was saying as to which Members actually stood up and were most 
vociferous on this issues. Not all the Republicans were vociferous on 
it; there were one or two or three that were vociferous, as Richard 
Baker was on this side.
  And on those other issues, maybe because you were ranking member in 
the minority years, but otherwise you were very vociferous on opposing 
those bills.
  Mr. FRANK of Massachusetts. I take back my time. Now I guess I am 
guilty. Yes, I was the senior Democrat, and I spoke out. I wish that I 
had that effect elsewhere. You would not have been able to kill the 
affordable housing trust fund.
  While I was the ranking minority member, when I was the senior 
Democrat of the Housing Subcommittee and then on the full committee, 
the Republican majority killed virtually every affordable rental 
housing production program we had. They beat up public housing 
unmercifully, to the great distress of lower-income people.
  I wish I was as persuasive as the gentleman now, I must say, less 
than convincingly tries to argue. And in fact, no, I do not think I 
charmed the majority of Republicans. And, by the way, it was Mr. Baker 
whom the gentleman correctly identified as the leading opponent of 
Fannie Mae and Freddie Mac, who said in 2007, when I became chairman 
and was able to put together the right ingredients in the bill, quote, 
``With every iteration, it got stronger. It is to the point where I 
didn't know what else there was to put in there.'' So I appreciate Mr. 
Baker's endorsement of the bill which I helped pass.
  Now, I do want to address one issue as he closes, and I may expand on 
this. There was one other point--and we have had a legitimate debate.
  But in an article in a publication called Investors Business Daily, 
to my great dismay circulated by the Republican staff of the Financial 
Services Committee, I was accused of betraying my oath and my 
obligation because of a relationship I had with a man who worked at 
Fannie Mae. And I want to address that scurrilous piece of defamation 
right now and express my disappointment that people I have worked with 
on the Financial Services Committee, that their staff, presumably with 
the approval of somebody, would have circulated such a scurrilous lie.
  As we know, there are members in this body who have spouses and 
partners who are variously employed, and it has never been the rule 
that you couldn't do anything because your partner is employed. We have 
a Member of the Republican Party who very conscientiously has been 
voting ``present'' recently on some measures because of his wife's 
position. And the article falsely said that I was having a relationship 
with a senior executive at Fannie Mae, and that is why I did it.
  Now, obviously the fact that it is a gay relationship adds to a 
certain piquancy with the right wing when they circulate this sort of 
vicious defamation.
  The fact is that the man with whom I had a relationship graduated 
from business school in 1990. He was a new MBA. He then went to work in 
an entry-level position at Fannie Mae and Freddie Mac. He was never a 
senior executive. He had a working position at Fannie Mae and Freddie 
Mac.
  After eight years, we ended the relationship. He left town. I was by 
that time a lower ranking member of the committee. The events we are 
talking about happened many years later after we had separated, when he 
had, to my knowledge, no financial interest, and he was 3,000 miles 
away.
  No, I have to say to the gentleman from New Jersey, I reject the 
suggestion that I was so persuasive that the only one issue on which I 
could prevent a right-wing rampage on the part of his party on the 
Financial Services Committee, in which I was unable to get decent 
regulation, in which I was unable to get good subprime lending, or I 
was unable to protect affordable housing--the only thing I was able to 
do was to stop them from regulating Fannie Mae and Freddie Mac. And 
that is why a majority of them never took that position and we never 
got a good bill until I became chairman. No, I think it is something 
else.
  I think it is the fear of the right wing that regulation is coming; 
that unregulated credit default swaps are going to

[[Page 9795]]

be no longer the case; that we will have rules that will prevent 
irresponsible subprime lending. As Mr. Zandi, a great thinker on this, 
notes in his closing passage: Regulators didn't create the subprime 
financial shock, but they did nothing to prevent it.
  In other words, no, it wasn't the CRA that did it; it was the lack of 
regulation that did it. This was the result of first policymakers' 
distrust of regulation in general, their enduring belief that markets 
and financial institutions could effectively police themselves; and, 
second, of the Nation's antiquated regulatory framework. The 
institutions guiding the Nation's financial system were fashioned 
during the Great Depression; and, as finance evolved rapidly, they 
remained largely unchanged, and overhaul was indisputably overdue.
  I happen to be chairman of the committee that is going to have a 
major play in this overhaul, and there are right-wing forces that don't 
want that to happen. So I accept the fact that I am the target. I don't 
think it is me, personally. I am not that paranoid. It is that if they 
can go after me and blame me, and, unfairly, Senator Dodd--who wasn't 
even the senior Democrat when this was happening. It is particularly 
far-fetched to blame Senator Dodd. He wasn't even the senior Democrat. 
The notion that he was as the second ranking Democrat he was running 
the Senate I would have thought was too implausible. But, again, we 
have learned from Swift Boating and elsewhere that vicious right-wing 
propaganda cannot be allowed to go unrebutted.
  The fact is that, yes, there is this concerted effort, there is this 
fear that we won't have unregulated subprime mortgages. And we will see 
this when we bring the bill up, that we won't have any more unlimited 
credit default swaps and collateralized debt obligations.
  It is the fear of regulation that Franklin Roosevelt confronted, that 
Theodore Roosevelt confronted. It is the fear that the disastrous 
results of the policy of deregulation have led the American people to 
understand that the time has come, once again, in our history to adopt 
a good set of regulations.
  I believe that is why there are these lies, distortions, and smears 
about my record, why I am being held accountable for the 0-12 record of 
the Republican Party. And the time has come to have that debate, 
because we have learned, I think, that if we wait too long, the lies 
will stick. And not only will that be bad for reputations; even worse, 
it will be bad for the public policy we need to prevent a retention.
  I yield back the balance of my time.

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