Press Release

For Immediate Release: October 15, 2008

Frank Response to Republican Letter Regarding Hearing on Financial Services Regulation

Washington, DC - House Financial Services Committee Chairman Barney Frank (D-MA), today released the following statement in response to a letter sent by House Minority Leader John Boehner (R-OH), House Financial Services Committee Ranking Member Spencer Bachus (R-AL) and Republican members of the committee, and their attempt to divert the focus of the Financial Services Committee’s October 21st hearing on the future of financial services regulation.

“I was disappointed to read the inappropriately political letter from my Republicans colleagues regarding the nature of the hearing we have scheduled next week. 

“My Republican colleagues in raising the issue of ACORN, which is unrelated to the subject of regulatory restructuring, have apparently decided to try to hijack the committee and turn it into an echo chamber in an effort help out the McCain campaign.  No legislation passed by the House has authorized or appropriated funds for ACORN.  The Republicans say they are concerned that the Bush administration and Secretary Preston may be a funding source for the organization.  Since the Republicans have been in power since 2001, if they were serious, they would be questioning the officials in charge and not seeking to divert attention from the disastrous consequences of inadequate regulation.

“As to Fannie Mae and Freddie Mac, the House Financial Services Committee had a full hearing on these organizations with the regulator and the CEOs just three weeks ago.  The focus of next Tuesday’s hearing is the future of financial market regulation.  If the Republicans were seriously interested in examining the causes of the subprime crisis, they would be insistent that we summon Alan Greenspan, who as McCain advisor Mark Zandi has pointed out[1], refused to use the authority given to him by Congress in 1994 to prevent subprime abuses.

“They would also ask us to call the Bush administration officials, who according to Mr. Zandi, pushed Fannie Mae and Freddie Mac into subprime purchases: ‘The Bush administration put substantial pressure on Fannie Mae and Freddie Mac to increase their funding of mortgage loans to lower-income groups.  Both Fannie and Freddie had been shown to have substantial problems during the corporate accounting scandals in the early 2000s, and both were willing to go along with any request from the administration.  OFHEO set aggressive goals for the two giant institutions, which they met in part by purchasing subprime mortgage securities.  By the time of the subprime financial shock, both had become sizable buyers of the Aaa tranches of these securities.[2]’

“How to structure housing finance is a valid issue for consideration, within in the broader context of the regulation of financial services.  I understand why my Republican colleagues do not want to examine our failure to regulate credit default swaps, collateralized debt obligations and their derivatives, and the other fruits of their deregulatory push from 1995-2006.  The results of that effort are now in—a crisis that is sweeping the global economy and threatening tens of millions of working families.  The committee’s job is to see that this never happens again and that is the purpose of the hearing.”

 

[1] Financial Shock: a 360° Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis; “Greenspan’s Regulatory Failure,” p. 152 - 154

[2] Financial Shock: a 360° Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis, p. 151