Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I'm sorry, I reclaim my time. I will yield if you want to clarify what you said. You had your 5 minutes. I'm not going to yield for general philosophy. I'm sorry, but it's my time. I was yielding if the gentleman thought I was misinterpreting him. For him to simply repeat what he already said takes time that I don't want to give him. He did contradict himself completely. First, it was a program that was going to put people further in debt. Now it's a grant program. He can decide which it is. I now want to go back and make my central point, which is that the only reason this has any impact on the taxpayer is that the Republicans insisted on protecting the large institutions. The gentleman from Alabama said all this money is going to the large institutions. Well, that's not true, because it does go to pay off loans to keep people from being foreclosed. Some will go to smaller institutions. Some will go to credit unions. Some will go to community banks. But here is the point: under our proposal, which the Republicans temporarily blocked--and I hope they'll repent--all of the funding would have come from the large institutions, but the Members don't want to address that. Under our proposal in the bill that passed--and we had to amend it, and we're going to try and come back and change it again-- every single penny that will be expended here will come from institutions of more than $50 billion in assets and hedge funds of more than $10 billion in assets. So, if you do it our way, not a penny will come from the taxpayer. It will come from the large financial institutions. And, yes, it will be a help to these individuals. Some of them will pay some of it back, but they won't have late fees. And, yes, the gentleman was correct when he said the second time around that it could become a grant program. I will now yield to the gentleman from Texas if he can explain to me how it can both be a grant program and something that gets people further in debt.

Mr. FRANK of Massachusetts. I understand it's going to be primarily-- --

Mr. FRANK of Massachusetts. I'm sorry. It's my time. You asked me a question. I'm going to answer it. I will note you don't want to answer the question. I am being consistent. Yes, I think it will work out for most people as primarily a grant program, 84 percent. I am pointing out that the gentleman is trying to cover his own embarrassment because he made the argument without any basis that it was going to put people further in debt. He then acknowledges that it's a grant program. People do not become further indebted when they receive grants. So, yes, it will work out for people who are responsible, to a great extent, as a grant program. That's why the CBO says 84 percent will be spent. That 84 percent in our bill, as we did it, would come from the large financial institutions. I don't want it to come from the taxpayers. While temporarily it now does, we will be offering a bill--I hope the committee of which the gentleman is an active member will give us consideration--so we can amend the law under which this program is authorized so that every penny, whether it's loans or grants or some combination--it will be primarily grants--will come from the large financial institutions and not a penny from the taxpayer.

Mr. FRANK of Massachusetts. I yield to the gentleman from Texas.

Mr. FRANK of Massachusetts. Madam Chair, I move to strike the last word.

Mr. FRANK of Massachusetts. The gentleman from Texas who consecutively denounced this program for putting people in debt and for being a giveaway grant asked me whether it was designated as a loan or a grant. The answer is neither. The program is called the Emergency Mortgage Relief Program, meaning it leaves open what kind it would be. So that's the answer to his question, and that's why some of us were less confused than others of us.

Mr. FRANK of Massachusetts. I yield to the gentleman from Texas.

Mr. FRANK of Massachusetts. Reclaiming my time, the gentleman gets himself further and further in the hole when trying to explain his contradictory statements. The facts are very clear. He began by saying it was going to put them further and further in debt. That, of course, contradicted his colleagues who had said it was going to be too much of a subsidy. In fact, it does not say ``loan'' or ``grant'' in the title. It says ``emergency relief,'' and it does provide for a loan and forgiveness. So I am sorry the gentleman got himself tongue-tied, but don't blame the bill. I yield back the balance of my time.

Mr. FRANK of Massachusetts. Madam Chair, I move to strike the last word.

Mr. FRANK of Massachusetts. Madam Chair, I have to respond to what I just heard because it simply isn't true. The notion that the government directed people to make these loans is not true. I don't understand what directive the gentleman is referring to. I would be glad to yield to him. What policy of the Federal Government, what law directed people to make loans of 120 percent loan-to-value? I yield to the gentleman.

Mr. FRANK of Massachusetts. I reclaim my time. Understand the difference, ``directed'' and ``allowed.'' Fannie Mae and Freddie Mac never originated a loan. They could not have directed anybody to do anything. They were the secondary market. Fannie Mae and Freddie Mac could only get into action if some private entity made the loan in the first place. Beyond that, during the period when we had the increased subprime loans, which some of us were trying to ban, Fannie and Freddie were in a declining percentage. But I will yield again to the gentleman to tell me who directed the private sector to make these loans.

Mr. FRANK of Massachusetts. I reclaim my time. I want to say to the gentleman, we are here in the House of Representatives making policy. You have got to be precise. I would say to Members about what you say, ``directing'' and ``allowed'' are two very different things. It is one thing to allow it. By the way, when you were talking from the perspective of the private sector, it's a very big difference. And there are many things that the government allows that I wouldn't direct. There are things it allows that I wish people wouldn't do. But the gentleman didn't say ``allowed''; he said ``directed.'' That's simply wrong. I asked because--and he didn't say this, and I acknowledge that, but there were some who tried to blame the Community Reinvestment Act. I should note that in the Financial Crisis Inquiry Commission, three of the four Republican appointees, including Bill Thomas, our former colleague here, chair of the Ways and Means Committee, and Douglas Holtz-Eakin, who was the chief economic adviser to Mr. McCain, specifically repudiated the notion that the CRA had caused this. So we ought to be very clear.

Mr. FRANK of Massachusetts. I yield to the gentleman.

Mr. FRANK of Massachusetts. I was not talking about Republicans making mistakes. I have no idea what that's supposed to contribute to the debate. I was citing two responsible and thoughtful Republicans, the former chair of the Ways and Means Committee and Mr. McCain's chief budget adviser, plus all of the financial regulators under both Bush administrations who said CRA wasn't the problem. Now, the gentleman didn't say that it was. Some people have said that, because CRA did have some kind of more mandatory position, but it wasn't for those subprime loans. In fact, with regard to the loans the gentleman is legitimately complaining about, it was those of us on the Democratic side who tried to ban them. Beginning in 2004, the gentleman from North Carolina (Mr. Miller), the gentleman from North Carolina (Mr. Watt), I joined them a little bit later, tried to outlaw those loans. And we were blocked by people who said, No, that's a mistake. In fact, in 2007, when this House, when we became the majority, finally did make illegal many of those loans in a bill, The Wall Street Journal denounced us and said we had created a Sarbanes-Oxley restriction for housing. So I just want to make it clear that there was no direction by any entity of the Federal Government. The gentleman appears to acknowledge that when he said, well, Fannie and Freddie allowed it. That's a long way from saying that it was directed. I yield to the gentleman from Michigan.

Mr. FRANK of Massachusetts. You've got to move quickly. I have only got 5 minutes here.

Mr. FRANK of Massachusetts. I am reclaiming my time. The gentleman is using it up with the papers. Here's the deal: 1975 is when it happened in Pennsylvania, not in America, if he had been listening carefully. Secondly, in 1995 we didn't have this foreclosure crisis. Third, as to was this just a new program, in fact, this program for the 32 States where it will operate is based on the program which operated in 18 other States, so we have had experience with it. By the way, the gentleman from Alabama's Governor praised this program in his State where it operated. The Governor of New Jersey, Mr. Christie, praised this program. So this is a new program for these 32 States, but it is modeled on a program that has worked successfully in these other 18 States. In 1975, it was Pennsylvania, not the United States. I yield back the balance of my time.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I yield myself such time as I may consume. First, for people trying to follow this, the gentleman from Alabama has confused several programs in this conversation, most of which aren't up today. We are dealing with one at a time. He talked about money that went to Los Angeles and went to a group instead of the county. That has zero to do with today's program. Zero. And in fact, it doesn't have to do with individual homeowners. It's a program that gives aid to municipalities, which we will be debating later, probably next week, which gives aid to municipalities to deal with property that they have been stuck with. So it has nothing to do with today. But the gentleman does make a good point about the deficit. Unfortunately, he does not put his votes where his rhetoric is. The CBO says that this program is going to cost not $8 billion, but if it's fully operational over a 2-year period, which is its life span, will cost $175 million. Now, that's money. But do you know what it is? It's much less--and the gentleman from Alabama voted during that same period to send money to the cotton farmers of Brazil. We do have a debate about the deficit here, but it's not about whether to reduce it. It's how. The gentleman from Alabama, along with the majority of Republicans voting, defeated an amendment--with some Democrats, although the majority of us voted for the amendment--to stop sending American tax dollars to subsidize the cotton farmers of Brazil. In the 2-year period during which we will be dealing with this program: Brazilian cotton farmers--$300 million. Americans facing foreclosure--$175 million. The gentleman from Alabama has a very odd way of saving money on the deficit. Then he says we have winners and losers. Well, among the big winners under the Republican budget and with the majority of their votes are the farmers who receive more than $250,000 per year in subsidy. Whatever happened to free enterprise? Whatever happened to standing on your own? An amendment was offered to limit to a measly $250,000 the subsidy any one entity could get. The gentleman from Alabama voted ``no.'' That was too harsh. The gentleman from Alabama is for unlimited amounts of subsidy to go to a handful of farmers--but no--we can't spare much less than that over the time period because, in the time period of this bill, that would have cost $200 million, or $100 million a year. Then the gentleman quoted the Secretary of Defense, that we should pay more attention to the Secretary of Defense because he, along with many Republicans, voted to force money on the Secretary of Defense that he didn't want. He voted to fund the programs the Secretary of Defense didn't want. He's trying to get some reprogramming now, but the Republican Appropriations Committee won't allow it. By the way, I don't agree with the Secretary of Defense fully on this either. I disagree with the gentleman from Alabama and the Secretary of Defense because they don't want to spend $175 million in 2 years trying to deal with foreclosures in American cities. Instead, they want to send more than twice that amount to Afghanistan for its infrastructure. You talk about inefficiency. Does anyone think that President Karzai and his administration are going to spend the $400 million my friend from Alabama has voted to send toward Afghan infrastructure projects better than we would spend it here? How about $1.2 billion for the Iraqi security forces at a time when American municipalities are having to lay off police officers and firefighters and other essential employees? The gentleman from Alabama voted to send $1.2 billion to the Iraqi security forces. Does anyone here have a great deal of confidence in how efficiently they'll spend it? Now let me address a couple of mistakes the gentleman made specifically about this program: The $50 million is not being spent on 40 people; $50 million hasn't, in fact, been spent at all. Not a penny has been spent. The $50 million was reserved out of TARP money to cover losses if they were to occur. The CBO does say, yes, if this program is fully funded and if it gets the participation they expect, the total amount of losses will be $175 million, not $8 billion. The $8 billion was a resurrection on the TARP for technical reasons. The CBO says, full scale, this will cost $175 million--again, less than the gentleman of Alabama wants to send during that period to Brazilian cotton farmers. Now, as to the people who vote consistently, as some do, to cut money for Afghan infrastructure or for Iraqi security forces or for Brazilian cotton farmers or for American cotton farmers or for other recipients of subsidy who then are opposed to this program, I honor their integrity. I disagree with them in some ways, but I honor it. Yet I cannot accept the lecture on fiscal responsibility from someone who votes to lavish money in wasteful ways on Afghan cities but begrudges it in American cities; who would send it for Iraqi police officers but not for American police officers; who would send it to cotton farmers and to other farmers in America but not to struggling homeowners. This program has started slowly. By the way, there's a great contradiction between saying it has only helped 40 people and that it's going to cost $8 billion. If the pay starts to increase, it won't cost the full $175 million, but here's what we hope: There are negotiations going on now to allow people the benefit of a refinancing. The gentleman says it's not going to take care of everybody. Of course not. There is not one program that is fit for everybody. There are a series of programs for people in different circumstances, and this is one for people who could benefit from a lower interest rate and a refinancing but who are under water and can't do it. It induces the financial institutions to do it. It's voluntary. If financial institutions find this is unreasonable, they won't do it. There is an effort going on now to achieve a negotiated settlement involving the services of financial institutions, many of which are quite culpable and have misbehaved in this process, so these are not innocent victims being shaken down. The Attorneys General of every State, Republican and Democrat, and the regulators are trying to come up with a solution. This is the other point that gets lost in the rhetoric when the gentleman who was so eager to send money to Brazilian cotton farmers begrudges a small amount going to Americans facing foreclosure, which is that the foreclosure crisis is not just a crisis of individual families. It's a national economic problem. It's a macroeconomic problem. To the extent that we do not do something to retard the rate of foreclosure, then we make it harder to get out of the economic bind in which we have found ourselves, which, as the gentleman correctly said, started from the meltdown of 2008, and we have been getting out of that at too slow a pace. Dealing with foreclosures is a part of it. This program has not yet become fully operational--and it may never be--but it is here to be used as a tool, especially if we are ever to get the agreement among the Attorneys General from both parties, the regulators and the financial institutions. It is a responsible way to deal with this. It will cost less than many of the unnecessary agricultural subsidy programs. I've got to say, Mr. Chairman, that I've got to go reread. Maybe I missed a footnote. I know there are these great free market economic texts by Ludwig von Mises and Friedrich Hayek and others. They talk about free enterprise, about keeping the government out of business, and about letting the free market work. Apparently, there is a footnote that says, oh, except agriculture. Overwhelmingly, my Republican colleagues preach this to working people, to people in urban areas and to people in other jobs, but it doesn't apply to cotton farmers or to wheat farmers or to corn farmers or to grain farmers. Billions of dollars go to them. As a matter of fact, as the gentleman from Alabama said with his vote: How dare you limit some farmer to a mere $250,000 in entitlement subsidies? Because agriculture is an entitlement, but they don't talk about that. They want to talk about Social Security for the elderly, but they don't want to talk about entitlements for agriculture. I do believe we need to cut the deficit. I think we can cut back substantially in what we're doing in Afghanistan and Iraq. We can cut back substantially in agriculture. We can put limits elsewhere, which I would like to do. I would throw in that I did not think it was a good idea to reduce the estate tax that the heirs of William Gates and Warren Buffett are going to have to pay. Although, to the credit of Mr. Gates and Mr. Buffett, they didn't think so either. They weren't for substantially reducing the estate tax on people who were going to be inheriting--not earning--tens of hundreds of millions of dollars. My colleagues over there, and some here, have supported all of that, and then have said we cannot put a program out there that will help Americans facing foreclosure--and not simply to help them but to help the cities and to help the whole economy. There is a great consensus among economists that dealing responsibly with foreclosures is the way to deal with this. So, no, please don't believe in $8 billion. It's not that. The CBO says it's $175 million. And $175 million is considerable, but I will repeat that it's less than my friends want to send to Brazil. It's less than they want to send to build infrastructure in Kabul and Kandahar. It's less than they want to spend to police Fallujah. You know, if I thought that latter set of funds were going to be well used, I might feel better about it, but we know how corrupt it is. There is a double standard, let me say finally. Expenditures within the United States are held to a very, very strict accountability, but as to expenditures in Iraq and in Afghanistan and elsewhere in the world, we know how much more wastefully and corruptly spent they are, and that doesn't seem to bother other people. I reserve the balance of my time.

Mr. FRANK of Massachusetts. I yield myself 30 seconds simply to say the gentleman has simply repeated an absolute fantasy. This is not a $50 million expenditure for 40 loans. The $50 million has not been given to anybody, not a penny of it. It has been put in a reserve account. Fifty million has been set aside in a reserve account. It was disbursed from the TARP to a reserve account. The CBO, as I've submitted if this goes forward, it will be about $12,000 per loan. Last week, the gentleman from Illinois was claiming that if you participate in this program, you would have a tax liability. He learned that that was totally wrong. He is perpetuating error. I now yield 2 minutes to the gentleman from California (Mr. McNerney)

Mr. FRANK of Massachusetts. I yield myself such time as I may consume. Two points: First, you have just heard a fantasy that $50 million has been spent for 42 loans. That is not even remotely close to being true. Fifty million has been set aside in a reserve for defaults if and when they come. Not a penny of it has been given to anybody. It is simply sitting in that account, in case, and the 42 loans have nothing to do with that. Yes, the gentleman from Alabama said I didn't talk about it. I did talk about it. I corrected the misuse of the 50 million from last week. He didn't misuse it today. And I mentioned that it started slow and it may not get beyond where it is now. I mentioned that it is in reserve to use it more. So, yes, we have only got 42. I talked about that. The 8 billion is a fantasy. The CBO says at it's best, this is going to cost $175 million. The 8 billion is a purely bookkeeping account. But I want to get back to the fascinating explanation by the gentleman from Alabama as to why he and the majority of Republicans voted to send $150 million per year last year, this year, and for the next couple of years to Brazil: Obama made him do it. Listen carefully. The explanation for this expenditure to go to Brazil, that the poor gentleman from Alabama voted for, is Barack Obama made him do it. The President is a very convenient place for them to hide. In fact, if he is asking me if I am critical of the President in that, yes, I am critical of the President many times. I agree with him overall. But I did not agree with him that we should send 1.2 billion for Iraq security forces. The gentleman from Alabama did. I didn't agree we should send $400 million for Afghan infrastructure. The gentleman seems to think it's some major debating point because the President takes the position that I disagree? Perhaps his view is you always agree with the President of your party. It's not mine. It's not a responsible way to legislate. Secondly, there was an alternative to sending $150 million to Brazil. We could have sent $150 million less to Americans. The finding was that we were putting Brazilian cotton farmers at a $150 million disadvantage per year because of the subsidy we gave to Americans. We could have come in with legislation that would have reduced the Americans'. So, in fact, I underestimated the waste of money that the gentleman from Alabama is indulging because Barack Obama made him do it and he was powerless to resist, apparently, because it's $300 million a year. We had two options: We could keep the level of subsidy for American cotton farmers and match that to the Brazilians, or we could reduce it by $150 million in America and reduce it to Brazil over a 4-year period when this will be in effect. That's over a billion dollars, a considerable amount of money. So, yes, it is true, the President sometimes makes unwise recommendations, in my judgment. But the argument for the gentleman from Alabama that he is to be absolved from responsibility for his vote, and the majority of Republicans--the majority of us on our side repudiated the President's position in this case. But the gentleman from Alabama has claimed, Don't blame me; Obama made me do it is no more credible than his invocation of some fantasy figures. I reserve the balance of my time.

Mr. FRANK of Massachusetts. I yield 5 minutes to the gentleman from Massachusetts (Mr. Lynch).

Mr. FRANK of Massachusetts. I yield myself 15 seconds to further elucidate matters to the gentleman from Illinois. It has been disbursed in a letter of credit, none of which has been drawn down. It sits there as a reserve in case of losses. I now yield 3 minutes to the gentlewoman from New York (Mrs. Maloney).

Mr. FRANK of Massachusetts. I yield 4 minutes to the gentleman from North Carolina (Mr. Miller), one of the leading House experts on this matter.

Mr. FRANK of Massachusetts. I yield the gentleman 1 additional minute.

Mr. FRANK of Massachusetts. How much time is remaining on both sides, Mr. Chairman?

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Madam Chair, I demand a recorded vote.