James Pethokoukis

IBD‘s great Capital Hill blog makes a good point about F&F and the midterms:

That’s more bad news for Rep. Barney Frank, D-Mass., who’s in the political fight of his life with Republican Sean Bielat. The businessman and Marine reservist has laid into Frank, now chairman of the House Financial Services Committee, for his long support of Fannie and Fannie.

The government-sponsored enterprises were a major cause of the financial crisis. With their implicit — now explicit — taxpayer guarantees, Fannie and Freddie were able to expand and leverage far more than any truly private company could, and they used that heft to plow into subprime loans.

Back at a 2003 hearing, Frank pooh-poohed Republican and regulator concerns about the size and scope of Freddie and Fannie, saying he didn’t want to emphasize “safety and soundness.” Instead, he said, “I want to roll the dice a little bit more in this situation towards subsidized housing.”

Here is Barney Frank at yesterday’s House Financial Services hearing:

I had a study done. Ninety percent of Federal Open Market Committee [dissents] are from regional bank presidents and 90 percent of the 90 percent are for higher interest rates.

Those are inappropriately placed private businessmen, or women, occasionally, picked by other private businessmen, and occasionally women, and they should not be setting public policy.

I don’t care that the Fed rejected what the Treasury said. That may be a nice discussion among gentlemen. The Fed will not reject it when we, I promise you, next year, take up legislatively the issue. And I think it’s very clear. You should not have private citizens like the presidents of the regional banks voting on policy. And I guarantee that will happen.

Me: Along with the Fed audit bill, it is clear Congress wants to have more influence over the Fed. This, right at the time when global financial markets will have to remain confident America will not inflate its way out of its debt.