Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I yield the gentlewoman 30 additional seconds. I guarantee this provision will only be what it is. If anybody wants to move elsewhere, I might support that. But entirely separate from this, this will not be a vehicle. In fact, I think it would be dishonorable for anyone. We have had too many examples of people trying to use veterans, and particularly disabled veterans, as a political stick to achieve other objectives. I would find that to be an absolutely outrageous procedure, and I can guarantee you it will not happen.

Mr. FRANK of Massachusetts. I yield 3 minutes to a very hardworking member of the committee, the gentleman from Georgia (Mr. Scott).

Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself 30 seconds to respond to the gentleman from Texas. He says, why isn't the $2.7 written into the bill? It is, in effect, because it is subject to appropriation, and no money will be spent until that is provided. The $300 billion is the number of mortgages that could be insured, up to that. We needed to put that number there before CBO could tell us how much it would cost. And written into this bill before it becomes law and becomes operational will be that $2.7 billion figure. That is the way the process works. You get a CBO score, and then you pay for it. I now yield 2 minutes to the gentlewoman from Illinois, a very diligent member of our committee.

Mr. FRANK of Massachusetts. Mr. Speaker, I understand the complaints about the process. Remember, though, that several of the bills being reenacted today have already been fully debated and amended on the floor. There is one that was not subject to the normal--and I'm a general defender of the normal--process. It's the FHA rescue bill. And I will say, in this case, I think it is fair to ask Members to vote for it up or down. It is a very interrelated piece of legislation. It tries to balance cost and incentive. It would be easy to put it out of whack. And in this one case I think it is fair to say you can vote it up or you can vote it down. Members will have a chance to vote on it. While it's in the form of an amendment, if that amendment is defeated, it dies. I also want to address the issue of the amendment offered by the gentleman from North Carolina and the gentleman from Ohio regarding preemption, because there may be some confusion. I personally spoke, today, with representatives of the banking organizations, the American Bankers Association, the Independent Community Bankers, and the Mortgage Bankers. They took the position that if we were able to adopt the language offered by the gentleman from Ohio, they would find this a bill that they would accept and would not seek to defeat. Because of an objection, we weren't able to do this, so technically, yes, they had previously said they were opposed to it in that form. They have also said, after we outlined the procedure that was followed by the gentleman from Ohio (Mr. LaTourette), the gentleman from North Carolina (Mr. Miller) and myself, that it is now acceptable; that is, while we were blocked by an objection from adopting the actual language, the language that was agreed to by them, by the Attorneys General, by the State bank supervisors, by advocacy groups, will be the language that's in the bill. So let there be no doubt about that. There is no substantive objection to what will happen. Now, let me talk about the bill. I guess I want to, not damn my bill today with faint praise, but support it. It comes from the economists. Now, the gentleman from Arizona (Mr. Flake), for whom I have a great deal of respect, a man of very high intellectual integrity, he chided me because I have taken a free market position, but not here. And I'll respond this way. I have opposed systemic interventions in the market. I think it is generally unwise for us to enact legislation which, in an ongoing way, displaces the market. But that's not what we do here. There is a part of the reality of the market that is called market failure. People have won Nobel Prizes, Joe Stiglitz, for work about market failure. Clearly there has been market failure with regard to mortgages. The market failure was the breaking of the lender-borrower relationship and the substitution of securitization without appropriate countervailing incentives. This bill today is no ongoing intervention in the market. It is time limited, and limited in specifics to a subset of mortgages. It seeks to undo, to some extent, to mitigate a market failure. It will leave the market, I believe, stronger going forward. So I accept the gentleman from Arizona's reminding me that I should stay true to free market principles. This bill is true to free market principles. And let me quote one of the leading advocates of free market principles in the English-speaking world, the Economist, called to my attention by the staff of the Financial Services Committee, which has done enormously good work in substantively putting this bill together, and in listening to me talk about it in various ways. And I appreciate both aspects of that. Here's what the Economist said: ``The plan is hardly a bailout,'' talking about this bill. This is a current Economist. ``Lenders would have to write down their loans to 85 percent of the current value of a house.'' By the way, under FHA Security Administration's plan, they can get a 100 percent loan put in. They can get somebody who's defaulted and get them a 100 percent loan. We require an 85 percent writedown to the value. ``Borrowers would pay a fee for the insurance and give up a share of any later price rise to the government.'' By the way, they would also be barred for 5 years from taking out a second mortgage. So the borrowers under this, if there was an increase in equity, would have to share much of it with the Government, and the earlier in the process in which they sold out, the more the Government would get. That's not the bailout that people have described. People worry about moral hazard. I would assure people, no borrower who goes through this process will say at the end of it, ``Boy, that was fun. Where do I buy a ticket to get back on Space Mountain?'' They will be deterred. But we're not relying solely on this. Two-thirds plus of this House, many of my Republican colleagues didn't do it, but many of my Republican colleagues did. We voted for a bill to regulate subprime mortgages going forward. We're not simply relying on people's bad experience. We have put some restrictions on that. I believe this is pro-market. The markets now are in trouble because a lot of people who were very smart bought things they shouldn't have bought, including subprime mortgages. And having bought things they shouldn't have bought, they now don't want to buy things they should buy. We all know the little story about the child who touches the hot stove, and having touched a hot stove and being burned, won't go near the stove. We have investors today who, having touched the hot stove, are staying away from the refrigerator, the sink and the shower because they have been so badly burned. If we do not adopt appropriate responses to this market failure, we will not cure it, and the lag in investments will continue. We are working through the market here. It is voluntary that a lender says we're going to cut it down. People say, well, they'll dump all their bad loans. Have the Republicans who say that, because many Republicans are with us, so little confidence in the FHA? Nothing in this bill coerces the FHA to accept a single loan that it finds unlikely to be repaid. And CBO accepts that, because they say of 500,000 loans that they expect to be accepted, the failure rate will be, average out to $4,800 per loan. Do you really think if the loan failed it would only cost us $4,800? That figure, that $2.4 billion is CBO saying that there won't be many failures because of the criteria that are in this bill. And people have said, what about the people who paid their mortgages? Well, if they live in a neighborhood where there is foreclosure, they're getting hurt. If they live in a city where the property tax revenues are going down, they're getting hurt. And if they live in America, they are in the midst of a recession in which we are losing jobs when we should be gaining them, in which real wages have been pulled down, and the single biggest cause of this recession is the subprime crisis and its reverberations. This is a rare case of a microeconomic factor causing a macroeconomic problem. And the market got us into this. And we don't say junk the market. And I know people who have said, oh, the market's way too smart. And people have said to me, you know, some smart people don't agree with this proposal. Well, I agree with that. But I also have to note that no dumb people got America into this problem. You had to be really smart to understand collateralized debt obligation derivatives. And the problem is that we need to restrain some of their instincts and let the market function again. And it simply will not happen if you simply let it go. Here's what we say. And, by the way, I supported Hope Now when it came out. But Hope Now had a flaw. It was based on the notion--Members don't even pay attention to this--it was based on the notion that the problem was when the mortgage reset to a higher rate under adjustable rate mortgages, that would be the problem. That hasn't been the problem. The problem has been people who owe more than the loan is worth. Some of them were irresponsible in the first place. Some of them made the mistake that almost everybody else made of not foreseeing the depth of the drop in house prices. So Hope Now has been overtaken by events. We here are responding to reality in a way that is pro-market and minimizes the outlay. I hope the bill is passed.

Mr. FRANK of Massachusetts. Mr. Speaker, I regret that, but sometimes people would rather see things not improved so they can then complain that they weren't improved. Fortunately in this case, we are not constrained. The gentleman from North Carolina and the gentleman from Ohio said it had not come to our attention fully until after the committee markup. What happened was that they came forward with this amendment, and we heard some concerns from the Comptroller of the Currency, as the gentleman from Ohio has said, and from bankers. We then talked to the gentleman from Ohio and the gentleman from North Carolina (Mr. Miller), talked to the American Bankers Association, the Community Bankers Association, the Mortgage Bankers, the OCC, various of the advocacy groups, the State Attorneys General, the National Council of State Legislators, and they came to an agreement that adding these words would make this something that would work. Now, the obvious thing in a constructive way would have been with the agreement of all of the stakeholders and the conversations among Members on both sides to be incorporated into the bill. But constructive isn't always the order of the day. So let me make this announcement which I have also, in anticipation that there might be such an objection, although I had spoken to the ranking member and he told me he thought we should go forward. It was my understanding the gentleman from Ohio had talked to the leadership on the Republican side. They thought it should go forward. So here is where we are. We will vote on the Miller-LaTourette amendment. I will guarantee to the Members that when this goes forward in any discussions we have with the Senate, we will accept this language, the Miller- LaTourette language, or if someone comes up with a better idea, any other language that would be mutually agreed upon by the gentleman from Ohio and the gentleman from North Carolina, the two bipartisan sponsors. So while we don't get the unanimous consent agreement, because some people would rather there not be a resolution over an objection, let me announce what may be a first, and I'm not always the most technologically updated person; I don't have a lot of the devices, but I do want to maybe be the pioneer of the virtual unanimous consent agreement. In good faith the gentleman from North Carolina and the gentleman from Ohio want to amend this, they were denied unanimous consent, but I am prepared to act as if the body, and I have no question that it would have been adopted had we had a chance to vote on it, that it be incorporated. And as we go forward, we can guarantee Members that this language, if this bill is included, this will be included; and I can report that all of the stakeholders, the community advocacy groups, the banks, and the public officials at the State and local level believe that with the language that was worked out by the gentleman from Ohio and the gentleman from North Carolina with the Comptroller of the Currency, it will be fine. So I wish we had got unanimous consent, but I want to assure Members that in this process going forward, our failure to get real unanimous consent, as opposed to virtual unanimous consent, will make no difference whatsoever. On this point, let me yield 3 minutes to the gentleman from North Carolina to complete this conversation.

Mr. FRANK of Massachusetts. Mr. Speaker, before I yield to the gentlewoman from Florida for 3 minutes, I would like to note the use of the figure $300 billion is not a hopeful sign about a rational debate. Three hundred billion is the total value of the mortgages that could be insured. It would cost $300 billion only if nobody made any payments ever, and when the property was taken by the Federal Government, none of it had any value. CBO gave us a score of $2.4 billion. So we can debate this, but I would hope we can debate it with real numbers. The CBO score for the mortgage part is $2.4 billion. Everybody knows that $300 billion is not remotely what is at risk. I yield now 3 minutes to the gentlewoman from Florida (Ms. Ginny Brown-Waite).

Mr. FRANK of Massachusetts. How much time is there remaining, Mr. Speaker?

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 1 minute to the gentlewoman from California (Ms. Lee).

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr. Hinojosa).

Mr. FRANK of Massachusetts. Mr. Speaker, I yield the gentlelady from Illinois an additional 30 seconds.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 2 minutes to the gentleman from Georgia (Mr. Marshall).

Mr. FRANK of Massachusetts. Mr. Speaker, I now yield 2 minutes to the chairwoman of the Housing Subcommittee, who makes her second appearance today, having carried through passage of a very important bill earlier today, the gentlewoman from California (Ms. Waters).

Mr. FRANK of Massachusetts. Mr. Speaker, first I wondered how I'd fill 2 hours, but I could do that just responding to the inaccuracies we've just heard. Let me pick a couple. The gentleman from New Jersey said that the administration wanted FHA reform and GSE reform and this Congress wouldn't get it. Well, he misread the newspaper. Bryan Montgomery, the head of the FHA, was quoted yesterday as saying, if Congress had done what I wanted in 2006, this wouldn't have happened. It was the Republicans who were in power in 2006. It was under the Republicans that GSE reform and FHA reform were frustrated. When we took power as the Democratic majority, last year this Financial Services Committee and this House passed both of those in forms very close to what the administration wanted. In fact, the holdup on the GSE, and I know the gentleman thinks the notion of building affordable rental housing with public help is, as he calls it, a slush fund, and I think it's that lack of sympathy for affordable housing that was one of the contributing factors to getting people into homes they couldn't have owned. But the fact is that we sent the GSE bill over to the Senate last year with a very large majority in favor, and the Senate hasn't acted, partly because the ranking Republican on the Senate committee hasn't wanted to act. I know the administration has been trying to persuade him to act. So the notion that the affordable housing trust fund, that's slush fund for the gentleman from New Jersey, housing for lower income people, for elderly people, for disabled people, that's slush fund, well, it was not that that held it up. It was the refusal apparently of the ranking member to act on it. So this is an example of the inaccurate descriptions you're getting.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 2 minutes to the gentleman who helped put this bill together, the gentleman from California (Mr. McNerney).

Mr. FRANK of Massachusetts. If the gentlewoman will yield, absolutely I can guaranty that. I should be clear. I am cosponsor of the bill that would have provided a bankruptcy avenue for primary residences. That is a separate issue as far as I am concerned. No, this particular provision will not be a vehicle for that.

Mr. FRANK of Massachusetts. I yield.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 2 minutes to the gentleman from Oregon (Mr. Wu).

Mr. FRANK of Massachusetts. I intend to close with our remaining time as our last speaker.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 2 minutes to a very active member of the committee, the gentleman from Colorado (Mr. Perlmutter).

Mr. FRANK of Massachusetts. Mr. Speaker, I yield 2 minutes to the gentleman from Pennsylvania (Mr. Sestak).

Mr. FRANK of Massachusetts. Mr. Speaker, I don't know what the parliamentary status is. Has the gentleman objected or not?

Mr. FRANK of Massachusetts. I yield 3 minutes to the gentleman from Texas (Mr. Al Green), a very active member of our committee.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I rise to speak in opposition to the motion to recommit.

Mr. FRANK of Massachusetts. Mr. Speaker, I hope we are here seriously to legislate. The effect of adopting this will be to make it much less likely that veterans will get the preference. Now I understand the frustration of Members on the other side. The gentleman from Michigan (Mr. McCotter) offered an amendment yesterday, notwithstanding any other preferences, first priority to veterans, members of the Armed Forces on active duty, members of the National Guard or Armed Forces reserves, school teachers and emergency responders. That is now in the bill. That is part of the bill. The gentleman phrased his motion as ``promptly.'' Now we have already seen the kind of delay tactics that the minority has been prone to use. Send this back to committee, and you are very unlikely to get it back on the floor in a way in which we can pass it. So last night we adopted preference for veterans. Today, in the guise of redoing what we have already done, a motion is offered that will keep veterans from benefiting from that preference because the bill won't go anywhere. The gentleman was honest. He began by saying he doesn't like this bill. And since a head-on assault will not pass--no, I will not yield. I will explain why I won't yield. I won't yield because I have consistently, when I was chairing the committee, been open to amendments. I have yielded. But when at the last minute with zero notice something is drafted with no chance to discuss it, and they use their full 5 minutes, of course I won't give up the small amount of time we have. It is already inadequate to discuss this. So this will prevent the veterans from getting the preferences they already have. You have seen what can happen with these delays. We have preference for veterans in this bill. Now let me say procedurally, if this had said ``forthwith,'' I would have been less concerned about it. But there is also this: during the markup of this bill, we accepted nine Republican amendments. Yesterday we accepted several Republican amendments. If I was seriously interested in helping the people who are to be the beneficiaries, I would have offered an amendment at the Rules Committee, and we would have accepted it. I would not have waited to say ``promptly'' so that I would have used the disabled veterans as a way to kill the bill. Similarly, with regard to mortgage fraud--and by the way, this is through the cities. If you think that the cities are going to give out money to rapists, worry about it. I would be prepared, if this would have been put forward in an orderly way so we could vet it and not have unintended consequences as we did with the last recommit on a bill from our committee, we could have accepted it. As we go forward, and let me say further in conference with the Senate, yes, I think we ought to make it explicit that people with mortgage fraud don't get it, as well as certain kinds of sex offenders. Yes, I think we can do these things, and we will do them going forward. But to take it now with a ``promptly,'' designed to kill the bill, and it will in fact undo, take back the veterans' preferences we gave yesterday, and to use disabled veterans and to use concern for the law as a cover to kill a bill for which the votes do not exist to kill it is the wrong way to go. We have amended this bill. Nine amendments were accepted in committee. None of these were offered. Had they been, they would have substantially been accepted, and they can be accepted going forward. But you have seen, my colleagues, what has gone on here. Send this back to committee, we have to go back to committee. We have rules to deal with. You have a crowded agenda in the committee. You will not see this bill again probably for weeks, and we will again have these tactics. The gentleman from Georgia is going to raise the point that it can come out the next day. It cannot. The rules of the House do not allow it. And anyone who thinks you are going to get unanimous consent from this group to waive four and five rules is not paying attention. After we just had two votes on an appeal of a ruling, a frivolous appeal, and we get an appeal of the appeal because people didn't like the wording on the board, you tell me if you think we are going to get serious legislative efforts. So, yeah, I want veterans preferences in the bill. Going forward, we can address this. But Members who are worried about some kind of ad long before your election, the sensible parts of this will be embodied in the bill. You will have a chance to vote to protect against mortgage fraud, et cetera. But vote for this today. And as the gentleman from Arizona made clear, he doesn't like the bill. And I understand the problem the President has. The administration can't decide whether it wants to sign or veto. There are internal debates, so it falls to our Republican colleagues to save this President from having to make the decision. I urge my colleagues not to fall for that partisan ploy. Vote down this effort to delay, and perhaps delay indefinitely this bill. We will, going forward, take the good parts of it and incorporate it. Had they been substantially offered seriously before, they would have been adopted. Please, let's not fall for a partisan ploy and kill a good bill.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I ask unanimous consent that the Clerk be authorized to make technical corrections in the engrossment of H.R. 5818 and amendments to H.R. 3221, to include corrections in spelling, punctuation, section numbering and cross- referencing, and the insertion of appropriate headings.