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Media Mum on Barney Frank's Fannie Mae Love Connection
Published: 9/25/2008 3:29 AM ET
By Jeff Poor
Are journalists playing favorites with some of the key political figures involved with regulatory oversight of U.S. financial markets?
MSNBC’s Chris Matthews launched several vitriolic attacks on the Republican Party on his Sept. 17, 2008, show, suggesting blame for Wall Street problems should be focused in a partisan way. However, he and other media have failed to thoroughly examine the Democratic side of the blame game.
Prominent Democrats ran Fannie Mae, the same government-sponsored enterprise (GSE) that donated campaign cash to top Democrats. And one of Fannie Mae’s main defenders in the House – Rep. Barney Frank, D-Mass., a recipient of more than $40,000 in campaign donations from Fannie since 1989 – was once romantically involved with a Fannie Mae executive.
The media coverage of Frank’s coziness with Fannie Mae and his pro-Fannie Mae stances has been lacking. Of the eight appearances Frank made on the three broadcasts networks between Jan. 1, 2008, and Sept. 21, 2008, none of his comments dealt with the potential conflicts of interest. Only six of the appearances dealt with the economy in general and two of those appearances, including an April 6, 2008 appearance on CBS’s “60 Minutes” were about his opposition to a manned mission to Mars.
Frank has argued that family life “should be fair game for campaign discussion,” wrote the Associated Press on Sept. 2. The comment was in reference to GOP vice presidential nominee Sarah Palin and her pregnant daughter. “They’re the ones that made an issue of her family,” the Massachusetts Democrat said to the AP.
The news media have covered the relationship in the past, but there have been no mentions since 2005, according to Nexis and despite the collapse of Fannie Mae. The July 3, 1998, Reliable Source column in The Washington Post reported Frank, who is openly gay, had a relationship with Herb Moses, an executive for the now-government controlled Fannie Mae. The column revealed the two had split up at the time but also said Frank was referring to Moses as his “spouse.” Another Washington Post report said Frank called Moses his “lover” and that the two were “still friends” after the breakup.
Frank was and remains a stalwart defender of Fannie Mae, which is now under FBI investigation along with its sister organization Freddie Mac, American International Group Inc. (NYSE:AIG) and Lehman Brothers (NYSE:LEH) – all recently participants in government bailouts. But Frank has derailed efforts to regulate the institution, as well as denying it posed any financial risk. Frank’s office has been unresponsive to efforts by the Business & Media Institute to comment on these potential conflicts of interest.
While the relationship reportedly ended 10 years ago, Frank was serving on the House Banking Committee the entire 10 years they were together. The committee is the primary House body which along with the Office of Federal Housing Enterprise Oversight (OFHEO) has jurisdiction over the government-sponsored enterprises.
He has served on the committee since becoming a congressman in 1981 and became the ranking Democrat on the committee in 2003. He became chairman of the committee, now called the House Financial Services Committee, in 2007.
Moses was the assistant director for product initiatives at Fannie Mae and had been at the forefront of relaxing lending restrictions at the company for rural customers, according to the Feb. 23, 1998, issue of National Mortgage News (NMN).
“Herb Moses, who helped develop many of Fannie Mae’s affordable housing and home improvement lending programs, has left the mortgage industry,” Darryl Hicks wrote for NMN. “Mr. Moses - whose last day was Feb. 13 - spent the past seven years at Fannie Mae, most recently as director of housing initiatives. Over the course of time, he played an instrumental role in developing the company’s Title One and 203(k) home improvement lending programs.”
Hicks explained in his story how Moses orchestrated a collaborative effort between Fannie Mae and the Department of Agriculture.
“The Dartmouth grad also played a crucial role in brokering a relationship between Fannie Mae and the Department of Agriculture,” Hicks wrote. “This led to the creation of Fannie Mae’s rural housing program where the secondary marketing agency agreed to purchase small farm loans insured through the department.”
While Moses served at Fannie Mae and was Frank’s partner, Frank was actively working to support GSEs, according to several news outlets.
In 1991, Frank and former Rep. Joe Kennedy, D-Mass., lobbied for Fannie to soften rules on multi-family home mortgages although those dwellings showed a default rate twice that of single-family homes, according to the Nov. 22, 1991, Boston Globe.
BusinessWeek reported in its Nov. 14, 1994, issue that Fannie Mae called on Frank to exert his influence against a Housing & Urban Development proposal that would force the GSE to focus on minority and low-income buyers and police bias by lenders regardless of their location. Fannie Mae opposed HUD on the issue because it claimed doing so would “ignore the urban middle class.”
Moses left Fannie in 1998 to start his own pottery business. National Mortgage News called Moses a “mortgage guru” and said he developed “many of Fannie Mae's affordable housing and home improvement lending programs. Moses ended his relationship with Frank just months after he left Fannie.
Even after the relationship ended, however, Frank was a staunch defender of Fannie Mae even as other experts suggested there were serious problems building in Fannie Mae and Freddie Mac.
According to an article by Kathleen Day in the Oct. 8, 2003, Washington Post, Frank opposed giving the Bush administration the right to approve or disapprove business activities that “could pose risk to the taxpayers.” He told the Post he worried the Treasury Department “would sacrifice activities that are good for consumers in the name of lowering the companies’ market risks.”
Just a month before, Frank had aggressively thwarted reform efforts by the Bush administration. He told The New York Times on Sept. 11, 2003, Fannie Mae and Freddie Mac’s problems were “exaggerated,” a gross miscalculation some five years later with costs estimated to be in the hundreds of billions.
“These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis,” Frank said to the Times. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Frank has also reaped campaign contribution benefits from Fannie Mae and its counterpart Freddie Mac. According a front page story in the Sept. 19, 2008, Investor’s Business Daily by Terry Jones, Frank has received $40,100 in campaign cash over the past two decades from the GSEs.
Frank is ranked 16th on a list that includes both houses of Congress and fifth among his colleagues in the House. According to data from the Center for Responsive Politics’ OpenSecrets.org, political action committees financed by both Freddie and Fannie have contributed $3,017,797 to members of Congress since 1989. And according to the July 16 issue of Politico, the two entities have spent a whopping $200 million to buy influence – including not only campaign donations to members of Congress, but also presidential campaigns and lobbying efforts.
In a July 23 op-ed, Wall Street Journal Editorial Page Editor Paul Gigot put the blame for the GSEs’ collapse firmly on the members of the liberal establishment who took money from Freddie and Fannie. “Fan and Fred also couldn't prosper for as long as they have without the support of the political left... This includes Mr. Frank and Sen. Chuck Schumer (D., N.Y.) on Capitol Hill, as well as Mr. [Paul] Krugman and the Washington Post's Steven Pearlstein in the press.”
Frank was asked by CNN’s John Roberts on the Sept. 22, 2008 “American Morning” about this and his opposition to reform Fannie Mae and Freddie Mac. Originally, he claimed he didn’t think the two GSEs were facing any problems when the issue first surfaced in 2003. He instead blamed the Republican-controlled Congress for their ultimate fall, failing to mention his friendly relationship with Fannie Mae and the contributions it had made to his campaign over the years.
“Yes, I did not think we were facing a crisis in 2003, but that didn't mean we didn't have to have reform,” an animated Frank said when confronted with the question. “Here’s the deal, the Republicans controlled Congress from 1995 through 2006. They did zero to reform Fannie Mae and Freddie Mac.”
However, on Sept. 17, 2008, former Bush administration Deputy Chief of Staff Karl Rove elaborated on the Bush administration’s efforts to curb abuses at the two GSEs in 2003. He told Fox News’ “Hannity & Colmes” that Frank was among the most aggressive opponents of White House attempts to reform Fannie Mae and Freddie Mac.
“All of this bad stuff on Wall Street happened because people got greedy and the greed started at Fannie Mae and Freddie Mac,” Rove said. “And I know this because five years ago, the administration was alerted by the regulator, James Lockhart, that there was insufficient authority and that these institutions – particularly Fannie – were out of control.”
Rove said the Bush administration’s efforts to reform Fannie and Freddie were opposed by congressional Democrats – specifically Frank and Senate Banking Committee Chairman Christopher Dodd, D-Conn.
“And I got to tell you, for five years, I was part of an effort at the White House to fight this and our biggest opponents on the Hill who blocked this every step of the way were people like Chris Dodd and Barney Frank. And Fannie and Freddie are the $200 billion contagion at the center of this.”
Frank has been quick to blame deregulation for some of the problems in the financial environment, as he did on Bloomberg television’s Sept. 19 “Political Capital with Al Hunt.” However, as earmark crusader Rep. Jeff Flake, R-Ariz. pointed out – it’s not deregulation, but it was the structure of Fannie Mae and Freddie Mac that had been guarded by Frank and other members of Congress.
“Some people point at deregulation,” Flake said to the Business & Media Institute on Sept. 23. “It’s not deregulation at all. We have for far too long shielded Fannie and Freddie for example, with the implicit and now explicit guarantee. I just found it humorous.”
Flake specifically named Frank as one of the members behind letting allegations of transgressions at the two GSEs for slipping by without oversight from Congress.
“Just a few minutes ago, a reporter was asking me about this and saying, ‘Barney Frank is saying that’s just – because there were allegations,’ correct ones – ‘that Fannie and Freddie have been the playground for politicians for years and now the other side is saying Fannie and Freddie were just a small part of this and this goes far beyond.’ It does, but these same people a couple of weeks ago said, ‘You got to bail out Fannie and Freddie because they touch everything out there. They touch nearly every mortgage out there.’ And because of that explicit guarantee – that we would come and bail them out, nobody has been subject to market discipline.”
Frank claims differently, according to a letter to the editor published in the Sept. 17, 2008 Wall Street Journal. Frank noted that in 2005 he supported regulating compensation for Fannie and Freddie executives.
“In fact, my reform efforts had begun when we were still in the minority. In 2005, I joined Michael Oxley, then chairman of the House Financial Services Committee, in supporting legislation to increase the regulation of Fannie and Freddie that passed the House by a vote of 330 to 90,” Frank wrote. “When former Congressman Richard Baker proposed to examine the compensation structure of Fannie and Freddie's top executives, and some members of Congress tried to block him, I explicitly spoke out in support of his right to do that and our right, as a Congress, to examine the GSE’s compensation practices.”
The red flags were raised long before the government bailed out the two GSEs in August 2008. The first egregious scandal involving Fannie Mae occurred in 2004. A 2004 Wall Street Journal editorial was first to point out claims in an OFHEO report that showed accounting malpractices by the GSE.
“For years, mortgage giant Fannie Mae has produced smoothly growing earnings. And for years, observers have wondered how Fannie could manage its inherently risky portfolio without a whiff of volatility, the Oct. 4, 2004, editorial, “Fannie Mae Enron?” said. “Now, thanks to Fannie’s regulator, we know the answer. The company was cooking the books. Big time.”
Fox News: Barney Frank Escaped Blame for Fannie Mae's Problems Because He Is Gay
11/06/2008 05:12 am ET | Updated May 25, 2011
David Fiderer
When Barney Frank corrected him, Bill O'Reilly threw a tantrum in front of 5.6 million viewers. Then things got interesting. The next day, the Washington Deputy Managing Editor at Fox News uncovered a new angle on the financial crisis. Bill Sammon alleged that Congressman Frank had escaped blame for the problems at Fannie Mae because he was gay.
Sammon's piece wasn't exactly original reporting. He paraphrased an earlier article titled, "Media Mum on Barney Frank's Fannie Mae Love Connection." The "love connection" was a relationship that Frank had with Herb Moses, who was once an executive at Fannie Mae. Frank's romantic involvement with Moses, and Moses' employment at Fannie Mae, both ended ten years ago, in 1998. As Hank Paulson, the Federal Reserve, and the SEC all confirmed, the financial crisis "was triggered by a dramatic weakening of underwriting standards for US. subprime mortgages, beginning in late 2004."
Sammon's original source material was offered up by one of those right wing storefronts, the Business & Media Institute. Sammon quoted Business & Media Institute vice president Dan Gainor, a frequent guest on the Fox Business Network. "If this had been his ex-wife and [Frank] was Republican, I would bet every penny I have - or at least what's not in the stock market - that this would be considered germane," said Gainor. "But everybody wants to avoid it because he's gay. It's the quintessential double standard."
Did a Fox News executive decide to go after Congressman Frank because O'Reilly was embarrassed in front of 800,000 people who caught the meltdown on YouTube? That's the more obvious, and superficial, motivation. Frank also impugned the veracity of reporting by Brit Hume, who dutifully repeats lies fed to him by Karl Rove. Here's Congressman Frank setting the record straight on O'Reilly:
"You've misrepresented this consistently. I became chairman of the committee on January 31st, 2007. Less than two months later, I did what the Republicans hadn't been able to do in 12 years -- get through the committee a very tough regulatory bill...The Senate was dragging its feet, as often happens. And in January of 2008, I asked Secretary Paulson to put in the stimulus bill. So the earliest chance I got to put tough regulation of Fannie Mae and Freddie Mac, we did it."
And here's Brit Hume lying yesterday on Fox News Sunday:
"And what happened here is -- and Fannie Mae and Freddie Mac were very much at the center of this. And it is an odd and, I think, unusual paradox of this whole situation that it was actually Republicans at critical junctures who were pushing for more regulation. Normally they push for less. In this instance, they were pushing for more. And it was principally Democrats, led by Barney Frank, Chris Dodd and others, some Republicans as well -- Bennett of Utah being a conspicuous example -- who resisted this, successfully in the end.
"And there was an effort to -- made to appoint a world-class regulator, as the phrase goes, to supervise Fannie Mae and Freddie Mac, which were -- which were creating a market for these packages of mortgages, some good, some bad. They would buy them up and securitize them, sell them, and it enabled a lot of -- a lot of entities, big banks and investors to get in on the housing boom."
Hume paraphrased Karl Rove, who was quoted at length in "Media Mum on Barney Frank's Fannie Mae Love Connection."
"'All of this bad stuff on Wall Street happened because people got greedy and the greed started at Fannie Mae and Freddie Mac,' Rove said. 'And I know this because five years ago, the administration was alerted by the regulator, James Lockhart, that there was insufficient authority and that these institutions - particularly Fannie - were out of control.'
"Rove said the Bush administration's efforts to reform Fannie and Freddie were opposed by congressional Democrats - specifically Frank and Senate Banking Committee Chairman Christopher Dodd, D-Conn.
"'And I got to tell you, for five years, I was part of an effort at the White House to fight this and our biggest opponents on the Hill who blocked this every step of the way were people like Chris Dodd and Barney Frank. And Fannie and Freddie are the $200 billion contagion at the center of this.'"
The Business & Media Institute writer got his quotes from Karl Rove's Sept. 17 appearance on Hannity & Colmes.
Hume first echoed Rove's propaganda on October 1, 2008, as part of the "straight news reporting" on Special Report. Media Matters identified and explained the falsehoods.
And on Bill O'Reilly, Barney Frank recounted the chronology that absolves the Democrats of any blame.
"Now from 1995 to 2006, when the Republicans controlled Congress, and we were in the minority, we couldn't get that done [i.e. legislate improved regulation of Fannie Mae]. Although in 2005, Mike Oxley, of Sarbanes-Oxley fame, a pretty tough guy on regulation, did try to put a bill through to regulate Fannie Mae. I worked with him on it. As he told The Financial Times, he thought ideological rigidity in the Bush administration stopped that. But the basic point is that the first time I had any real authority over this was January of 2007. And within two months, we had passed the bill that regulated."
Here's what actually happened. In October 2005 the House, by a vote of 331-90, passed a bill to establish a new federal regulator created for Fannie, Freddie and the Federal Home Loan Banks. The new regulator was authorized to set capital standards and, if it deemed necessary, require reductions in mortgage portfolios. The White House opposed the proposed legislation and instead supported the pending Senate bill. But the Senate bill never came up for a vote, and the legislation died.
In other words, the Republicans failed to negotiate a deal when they were in charge, and now place the blame on others. And once again, Fox News treats their distortions of history as reportable fact.
One Republican has a different take on events. Rep. Michael Oxley claims his bill was opposed by White House "ideologues" who wanted to privatize Fannie and Freddie and who opposed a bigger government role.
So you think things would have been better if the government simply did nothing to rescue he economy? No bank rescue? No FnF bailout? No TARP?
Everything was fine, and all this intervention was unnecessary and fraudulent?
Well, when the TBTF banks failed and quit originating mortgages, which surely would have occurred, what was Fannie Mae's new mission supposed to be? Selling Girl Scout cookies? Saving the banks was the only way to conserve the GSEs and the housing market. These events that are railed against, ad nauseum, did not take place in a vacuum.
That is just simple reality.
03/20/16 12:19 PM
AI
