Saturday, December 3, 2011

Why Barney Frank is the Poster Child for Congressional Malfeasance

Today's blog post comes from, summarizing the reason Barney Frank in any other business setting would be sitting on a cot in isolation at the Graybar Hotel somewhere. As a Congressman, however, he gets a pass. If Frank wasn't one of the architects and promoters of the mortgage securities crisis bubble, then he was certainly at least one of its ardent enablers.

At least I have the satisfaction of having seen him early for what he is, corroborated by this well-documented trail of malfeasance. If there is some doubt in your mind about the meaning of the word "malfeasance," try looking it up in a dictionary in some future day. You will likely see a picture of Barney Frank as the defining visual aid for the word.

If you need a target for loathing someone who had a principal role in the current financial debacle this country has inherited, look no further than Mr. Barney Frank. There is nothing "Honorable" about him.

One can only hope the American electorate at large in 2012, and the constituents in his district specifically, will have the collective wisdom to make a better choice than to send people like this to Washington ever again.

Take a deep breath and read some of the excerpts below. Taken in the context of the quotes cited from various Wall Street Journal articles below, Frank's fingerprints are all over the debacle. If it is upsetting to you, it should be.

Rep. Maxine Waters (D-Calif.): “Through nearly a dozen hearings, where frankly we are trying to fix something that wasn’t broke, Mr. Chairman, we do not have a crisis at Freddie Mac and in particular at Fannie Mae under the outstanding leadership of Mr. Frank Raines.”

Rep. Maxine Waters (D., Calif.): “Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals.”

Rep. Gregory Meeks (D-NY): In a hearing several years ago about a report on the safety and soundness of Fannie Mae and Freddie Mac from their regulator, Armando Falcon, Federal Housing Enterprise Oversight Director, Falcon came under fire. Meeks said; “The GSEs have done a tremendous job. There has been nothing that was indicated that’s wrong with Fannie Mae, Freddie Mac has come up on its own,” adding the regulator was trying to give the two a “heart surgeon [sic] when they really don’t need it.”

Rep. Barney Frank (D., Mass.): “The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities [Fannie Mae and Freddie Mac] that are fundamentally sound financially and withstand some of the disaster scenarios.”

Rep. Barney Frank (D-Mass.): In the same hearing several years ago about a report on the safety and soundness of Fannie Mae and Freddie Mac from their regulator, Falcon, Frank attacked Falcon: “I don’t see anything in your report that raises safety and soundness problems.”

Sen. Christopher Dodd (D., Conn.): “I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time.” (Senator Bob Bennett [R-UT] was Dodd's wingman on the Senate Banking Committee, one more reason he was unseated by his Republican nominating convention in 2010). 

When these elected officials are tasked with regulating the banking industry, but take political donations from their lobbyists, you end up with corruption.

Sen. Charles Schumer (D., N.Y.): “And my worry is that we’re using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie’s mission.”

Franklin Raines, former head of Fannie Mae: “These assets are so riskless that their capital for holding them should be under 2%.

Richard Syron, former head of Freddie Mac: “If I had better foresight, maybe I could have improved things a little bit. But frankly, if I had perfect foresight, I would never have taken this job in the first place.”

Note: Raines was forced out of Fannie Mae in December 2004 after the Securities and Exchange Commission launched an investigation into alleged accounting problems at Fannie Mae involving an estimated $6 billion in accounting problems. The Office of Federal Housing Oversight sued Raines in 2006, accusing him of aiding accounting shenanigans at Fannie, which allegedly involved the delay of reporting losses so top executives could earn large bonuses.

The suit attempted to recover the $50 million Raines in pay got based on billions of dollars in overstated earnings. In total, OFHEO demanded $110 million in fines and a clawback of $115 million in bonuses for three executives accused, including Raines.

Raines, Fannie’s former chief financial officer and its former controller settled the case in April 2008, agreeing to pay fines totaling about $3 million, paid for by Fannie’s insurance policies.

Raines also agreed to donate the proceeds from the sale of $1.8 million of his Fannie stock and to give up stock options, though the options were worthless. Raines also gave up an estimated $5.3 million of “other benefits” said to be related to his pension and forgone bonuses. In the end, Raines kept most of his largesse – in 2003 alone, his compensation was estimated at over $20 million.

And what of Mr. Barney Frank? Another member of Congress who escapes into retirement without a scratch.

On Monday, Rep. Barney Frank (D-Mass.) announced that he would not seek re-election.

Frank, who is in his 16th term in the U.S. House of Representatives, is the highest ranking Democrat on the House Financial Services Committee. In recent years especially, he's been a prolific fund-raiser, often raising huge sums from the industries that the Financial Services Committee regulates.

Since 1989, Frank has raised more than $13 million for his campaigns, according to research by the Center for Responsive Politics. About $1 of every $3 he has raised as come from interests within the finance, insurance and real estate sector, according to the Center's research, or a total of $4.3 million since 1989.

The securities and investment industry alone has given Frank more than $920,800 -- or about 7.5 percent of his total war chest, according to the Center's research. In every electioncycle since 2004, the securities and investment industry has ranked as Frank's top industry backer.

Commercial banks, too, have shared their riches with Frank. Since 1989, the people and political action committees associated with the commercial banking industry have donated $623,400 to Frank's campaigns -- or about 4.8 percent of his total haul over the years, according to the Center's research. That's enough to rank the industry as his No. 5 top all-time backer.

During the 2008 election cycle, Frank was the top beneficiary among all members of the U.S. House of Representatives from the mortgage banking interests -- an industry that includes Freddie MacFannie Mae and the Mortgage Bankers Association. (During the 2010 election cycle, he ranked as the third highest beneficiary of the industry.)

As the chair of the House Financial Services Committee during the 111th Congress, Frank helped shepherd the Wall Street Reform and Consumer Protection Act of 2009 to President Barack Obama's desk last year.

That law is commonly referred to as the Dodd-Frank Act, after Frank and the legislation's chief sponsor in the U.S. Senate, Chris Dodd (D-Conn.), who chaired the Senate Banking Committee. (Notably, Dodd opted not to stand for re-election last year, and instead, he spun through the revolving door and now serves as the chairman of the Motion Picture Association of America, a pivotal player in the film industry lobby in Washington.)

Frank, who, in 1987, was the first member of Congress to come out as openly gay has also reaped financial rewards from gay rights advocates. The PAC of the pro-gay rights group Human Rights Campaign has donated $76,000 to Frank over the years -- enough to rank the group as his No. 5 top organizational backer.

Additionally, about 22 percent of the money that Frank has raised over the years has come from residents of the Boston metro area, according to the Center's research.

He ended the third quarter with $389,600 cash on hand.

His retirement will set off a race among Democrats to both fill his seat and find a new leader on the House Financial Services Committee next Congress.

No comments:

Post a Comment