Here is the letter I sent last Friday to Representative Barney Frank as a follow-up to our March conversation.
July 11, 2008
Last March you and I exchanged several emails the contents of which initially concerned my opposition to the then proposed increase of the government sponsored enterprise (GSE) conforming loan limit but, our dialog inevitably broadened to a more general discussion and disagreement over the soundness of the federal government’s response to the housing-credit debacle, it’s complicit role in the development of this historic crisis and ultimately the final plight of Fannie Mae and Freddie Mac.
Within our exchange you essentially issued a challenge of our respective predictions for the fate of Fannie and Freddie when you wrote the following:
“I am glad to have your prediction that we will soon be engaged in a "federal bailout of Fannie Mae and Freddie Mac," because I disagree and this will give us some measure of the accuracy of our respective predictions in this regard.”
As we now see today, your outlook was seriously flawed.
To be blunt, I believe your inability to see the true nature and severity of the state of this issue not only represents a failure on your part but also truly embodies the extent to which our federal government has mishandled this economic crisis and more generally strayed from the path of prudent, deliberative and sound regulatory and legislative process.
However, I don’t believe your lack of understanding or our government’s overall failure to properly address the economic crisis to date represents a complete failure.
To the contrary, it appears plainly obvious that the worst and most dangerous legislative blundering has yet to come.
Your support of the further expansion of the role of the Federal Housing Administration (FHA) to effect insolvent borrowers, continued insistence that the temporary increase of the GSE conforming loan limits become permanent as well as all other permutations of radical public policy that would seek to bailout debt-laden and bankrupt homeowners (and firms by proxy) by some form of government supported continuation of the injurious effects of the massive housing-credit bubble environment, is more than simply irresponsible.
As chairman of the House Financial Services Committee your lack of a developed depth of knowledge and seemingly blind reliance on the “expert” statements voiced by “leaders” from the housing, mortgage and finance industries during committee meetings and likely during other, more private, conversations and the obvious effects this has had on our public policy is nothing short of disgraceful.
Again, to reiterate a statement I made in our prior conversation, what the American people need now is a legitimate government that will work diligently to restore the credibility, soundness and transparency of our financial markets and our economic system in general.