Barney Frank in 2003, about Fannie and Freddie:
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 that are fundamentally sound financially and withstand some of the disaster scenarios.
I do think I do not want the same kind of focus on safety and soundness that we have in OCC and OTS. I want to roll the dice a little bit more in this situation towards subsidized housing.
I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.
Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?
Mr. Raines: No, sir.
Mr. Frank: Mr. Gould?
Mr. Gould: No, sir. . . .
Mr. Frank: OK. Then I am not entirely sure why we are here.
Oh, well, if Fannie and Freddie say they don’t need to be regulated, how could there be any argument?
If it’s a private company, Barney Frank wants to regulate it down to the shape of its paper clip holders. But if it’s a government-sponsored enterprise, with the taxpayer on the hook for its losses, Frank leaves them free to do whatever they like. For them, there ought not be a focus on safety and soundness.
What could go wrong?
Freddie Mac, the second largest provider of U.S. residential mortgage funding, on Friday posted a loss of $5 billion in the third quarter and predicted it would need more government support amid a “prolonged deterioration” in housing. . .
Including a $1.3 billion dividend payment on senior preferred stock bought by the Treasury in previous quarters, Freddie Mac’s third-quarter loss increases to $6.3 billion. . .
Its larger rival Fannie Mae on Thursday said it would need $15 billion from the U.S. Treasury after a whopping $18.9 billion third-quarter loss.
That brings the total to $110.6 billion, so far.
POSTSCRIPT: Barney Frank, Wikipedia tells us, is the “brainiest” member of the House of Representatives.