Fannie Mae’s Easy Mortgage Policies Not to Blame, Frank Says
September 23, 2008 - 7:17 PMHouse Financial Services Chairman<strong> </strong>Barney Frank does not place any blame for the mortgage crisis on former Fannie Mae CEO Franklin Raines, who promoted policies allowing people to get mortgages with smaller down payments and imperfect credit histories.
“No, no, no.” Frank told CNSNews.com. “I don’t think he (Raines) was in any way responsible. It was a sub-prime lending crisis. If only Freddie Mac and Fannie Mae had problems, we could say it was Franklin Raines. But he was not responsible for Indy Mac or New Century.
“I think it was just a sub-prime crisis,” Frank said.
Raines went from being the Office of Management and Budget director in the Clinton White House to serving as chairman of Fannie Mae from 1999 and 2004. During his tenure, he pursued policies backed by the Clinton administration that facilitated mortgages and home purchases by people with impaired credit or who had not saved a 20 percent down payment.
Earlier this month, the federal government took over Fannie Mae as part of an effort to stave off a national financial crisis sparked by bad mortgages.
In contrast to Frank’s views, Rep. Jeff Flake (R-Ariz.) told CNSNews.com on Tuesday that he believes Fannie Mae and its former Chairman Raines do share some responsibility for the current crisis, and Frank’s argument that Fannie Mae is just a small piece in a bigger puzzle is inconsistent with previous Democratic views.
“Those same people who say they [Fannie Mae and Freddie Mac] were too big to fail because they touch 70 percent of mortgages are the same ones who are saying now they were just a small part of it,” said Flake. “Well, they were a huge part of it.”
Flake said the Clinton administration should have spoken out against Fannie Mae's irresponsible lending policies.
“Yes,” Flake told CNSNews.com, “Of course they [the Clinton administration] should have spoken out. Keep in mind that many members of the Republican Study Committee did speak out for more accountability.”
Rep. Jose Serrano (D-N.Y.) told CNSNews.com that he does not believe Raines’ mortgage policies were mistaken.
“Those were not mistakes,” said Serrano. “The problem was that there was greed on Wall Street. There were golden parachutes. It was obscene. That’s the word.
“I don’t think that helping some poor folks get mortgages or helping minorities get mortgages is a problem,” Serrano told CNSNews.com. “In fact we have to be careful that we don’t allow some folks to say ‘that’s the problem – in trying to do the right thing for the poor, we got into the mess.’”
Raines, who resigned from Fannie Mae in 2004 amidst an accounting scandal, was reported to have earned somewhere between $65 million and $90 million during his 5-year tenure as its CEO.
“People say that you should have confidence in the economy, but it sounds to me they are more like confidence men,” said Serrano of Wall Street traders, whom he blames for the crisis.