Barney Frank Wants to Eliminate Fannie and Freddie?

This news came out last Friday that Rep. Barney Frank, chairman of the House Financial Services Committee, was considering eliminating Fannie Mae and Freddie Mac:

“The remedy here is…as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance,” said Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee.

His comments initially rippled through bond markets on concerns that the government might pull away from the mortgage market. Many believe that’s unlikely and that any revamp would include continued government involvement. The government took over the companies in September 2008 as loan losses mounted. …

Mr. Frank, who didn’t elaborate on forthcoming recommendations, said last month that one possible revamp could merge some functions of Fannie and Freddie that overlap with the Federal Housing Administration into the government mortgage-insurance agency.

I would guess that Mr. Frank means something other than what I am thinking he means. I’m thinking he’s come around and sees that his encouragement of Fannie and Freddie to “roll the dice” with lower loan standards as being a big part of the problem. Just kidding. I know he is thinking that the federal government should grab more power over the financing of the housing industry.

When he gets through with “coming up with a whole new system of housing finance,” the government will further manipulate the housing market to reward the Democrat constituency.

I would suggest that the best reform would be to eliminate Freddie and Fannie. The secondary reason for the creation of the housing bubble (after the Fed’s creation of cheap credit) were the Fred-Fan guarantees of loans written according to their poor and lax underwriting standards. They did control 51% of the housing mortgage market. And Mr. Frank was right there cheering them on:

House Financial Services Committee hearing, Sept. 10, 2003:

Rep. Barney Frank (D., Mass.): I worry, frankly, that there’s a tension here. 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.

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .

The government’s goal is to carry out social and political agendas. “Market reform” is just rhetoric they use to justify what they want to do. We should reform Barney Frank and Chris Dodd first.