Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. The committee and the House are constrained by a number of rules that cause substantial numbers of days to elapse. Does this motion, if it passes, in any way empower us to forget those rules of the House which require a certain number of days in committee, certain number of layovers, an announcement of a markup, a delay before the bill is reported, the Rules Committee, et cetera? Does this motion in any way reduce any of those timetables?

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

Mr. FRANK of Massachusetts

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 yield 2 minutes to the gentleman from Texas (Mr. Hinojosa).

Mr. FRANK of Massachusetts. Mr. Speaker, pursuant to House Resolution 1175, I call up the bill (H.R. 3221) moving the United States toward greater energy independence and security, developing innovative new technologies, reducing carbon emissions, creating green jobs, protecting consumers, increasing clean renewable energy production, and modernizing our energy infrastructure, with the Senate amendments thereto, and ask for its immediate consideration in the House.

Mr. FRANK of Massachusetts. Mr. Speaker, I have a motion at the desk.

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

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. 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. FRANK of Massachusetts. Madam Speaker, it has been common for those who support increased trade without any accompanying policies to address the impact on foreign and domestic workers to dismiss arguments for such policies as mere protectionism, lacking any economic justification. In the Financial Times, Monday May 5th, one of the leading economists in the country, former Treasury Secretary Lawrence Summers, refutes this effort to dismiss our concerns. As former Secretary Summers says, some of the ``opposition to trade agreements and economic internationalism more generally, reflect a growing recognition by workers that what is good for the global economy and its business champions was not necessarily good for them, and that there were reasonable grounds for this belief.'' Lawrence Summers has been and is a strong supporter of increased trade. But unlike many others who have stuck with a far less sophisticated analysis, ignoring contemporary reality, Secretary Summers explains why the current globalized economy means that trade can have a negative impact on some workers in higher wage countries. As he notes, ``in an open economy, where investments in innovation, brands, a strong corporate culture or even in certain kinds of equipment can be combined with labour from anywhere in the world, workers no longer have the same stake in productive investment by companies as it becomes easier for corporations to combine their capital with lower priced labour overseas. . . . Moreover businesses can use the threat of relocating as a lever to extract concessions. . . . Inevitably the cost of these concessions is borne by labour.'' Madam Speaker, the economic explanation given by Secretary Summers is not meant by him as an argument against trade, but rather as an argument for accompanying continued expansion of trade with appropriate public policies that deal with some of these effects, and recognize that while trade has overall beneficial effects for the economy, the distribution of the costs and benefits are far from uniform. And the New York Times for Tuesday, May 6th, illustrates the economic reality that gives rise to the political opposition to increased trade and internationalization that Secretary Summers notes--as the Times article of that date noted, ``In inflation adjusted terms . . . weekly wages have slipped by 1.3 percent since late 2006.'' Madam Speaker, I strongly urge leaders in the business community and others who would like to see further progress towards internationalization to read and understand Secretary Summers' economic analysis, and the very thoughtful public policy recommendations he includes that stem from this analysis. And because I can think of no more important contribution to the debate about economic policy in America, I ask that Secretary Summers' very important essay be printed here. [From the Financial Times, May 5, 2008] A Strategy To Promote Healthy Globalisation (By Lawrence Summers) Last week, in this column, I argued that making the case that trade agreements improve economic welfare might no longer be sufficient to maintain political support for economic internationalism in the U.S. and other countries. Instead, I suggested that opposition to trade agreements, and economic internationalism more generally, reflected a growing recognition by workers that what is good for the global economy and its business champions was not necessarily good for them, and that there were reasonable grounds for this belief. The most important reason for doubting that an increasingly successful, integrated global economy will benefit U.S. workers (and those in other industrial countries) is the weakening of the link between the success of a nation's workers and the success of both its trading partners and its companies. This phenomenon was first emphasised years ago by Robert Reich, the former U.S. labour secretary. The normal argument is that a more rapidly growing global economy benefits workers and companies in an individual country by expanding the market for exports. This is a valid consideration. But it is also true that the success of other countries, and greater global integration, places more competitive pressure on an individual economy. Workers are likely disproportionately to bear the brunt of this pressure. Part of the reason why U.S. workers (or those in Europe and Japan) enjoy high wages is that they are more highly skilled than most workers in the developing world. Yet they also earn higher wages because they can be more productive--their effort is complemented by capital, broadly defined to include equipment, managerial expertise, corporate culture, infrastructure and the capacity, for innovation. In a closed economy anything that promotes investment in productive capital necessarily raises workers' wages. In a closed economy, corporations have a huge stake in the quality of the national workforce and infrastructure. The situation is very different in an open economy where investments in innovation, brands, a strong corporate culture or even in certain kinds of equipment can be combined with labour from anywhere in the world. Workers no longer have the same stake in productive investment by companies as it becomes easier for corporations to combine their capital with lower priced labour overseas. Companies, in turn, come to have less of a stake in the quality of the workforce and infrastructure in their home country when they can produce anywhere. Moreover businesses can use the threat of relocating as a lever to extract concessions regarding tax policy, regulations and specific subsidies. Inevitably the cost of these concessions is borne by labour. The public policy response of withdrawing from the global economy, or reducing the pace of integration, is ultimately untenable. It would generate resentment abroad on a dangerous scale, hurt the economy as other countries retaliated, and make us less competitive as companies in rival countries continue to integrate their production lines with developing countries. As Bill Clinton said in his first major international economic speech as president, ``the United States must compete not retreat''. The domestic component of a strategy to promote healthy globalisation must rely on strengthening efforts to reduce inequality and insecurity. The international component must focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global- corporations. First, the U.S. should take the lead in promoting global co-operation in the international tax arena. There has been a race to the bottom in the taxation of corporate income as nations lower their rates to entice business to issue more debt and invest in their jurisdictions. Closely related is the problem of tax havens that seek to lure wealthy citizens with promises that they can avoid paying taxes altogether on large parts of their fortunes. It might be inevitable that globalisation leads to some increases in inequality; it is not necessary that it also compromise the possibility of progressive taxation. Second, an increased focus of international economic diplomacy should be to prevent harmful regulatory competition. In many areas it is appropriate that regulations differ between countries in response to local circumstances. But there is a reason why progressives in the early part of the 20th century sought to have the federal government take over many kinds of regulatory responsibility. They were concerned that competition for business across states, and their ease of being able to move, would lead to a race to the bottom. Financial regulation is only one example of where the mantra of needing to be ``internationally competitive'' has been invoked too often as a reason to cut back on regulation. There has not been enough serious consideration of the alternative--global co-operation to raise standards. While labour standards arguments have at times been invoked as a cover for protectionism, and this must be avoided, it is entirely appropriate that U.S. policymakers seek to ensure that greater global integration does not become an excuse for eroding labour rights. To benefit the interests of U.S. citizens and command broadpolitical support, US international economic policy will need to focus on the issues in which the largest number of Americans have the greatest stake. A decoupling of the interests of businesses and nations may be inevitable; a decoupling of international economic policies and the interests of American workers is not.

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.

Mr. FRANK of Massachusetts

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

Mr. FRANK of Massachusetts. May I inquire of the Chairman how much time I have remaining.

Mr. FRANK of Massachusetts. I will take back my time. First of all, I thought I heard the gentleman talk about the Community Reinvestment Act. It's been late. I keep hearing, ``I move to adjourn.'' Maybe my ears got a little curdled. I thought the gentleman said, and we'll check the record later. If he didn't mention the Community Reinvestment Act, I will apologize. But no. I for one have been saying that we should not be pushing people into homeownership when they can't handle it, and part of the problem here was killing affordable rental housing. But let's have the record clear. There is no rational way to blame the Community Reinvestment Act passed in 1977 and not cover the nondepository institutions for this crisis caused by the nondepository institutions.

Mr. FRANK of Massachusetts. A former President once unfairly characterized a leader of this House as someone who couldn't walk and chew gum at the same time. The gentlewoman from West Virginia extends, frankly, that insult to the whole House. She suggests we can't do two bills in one night. She says we should work to try to help avoid foreclosure. I agree. That's the next bill which we will get to after all of this useless temper tantrum is over, we will get to it at 3 o'clock in the morning, but we will get to it. That bill will help avoid foreclosure. I know the gentlewoman agrees. She voted for that bill in committee although a majority of her colleagues were against it. But I do not understand how anybody could argue that doing this bill now interferes with that bill later. They are totally not in conflict. So the notion that this bill doesn't keep people out of foreclosure is true. It doesn't combat global warming. It doesn't get troops out of Iraq. It won't help me lose weight. There are a lot of things this bill won't do that I very much want to do. None of them are a reason to vote against a bill that doesn't do what it doesn't say it's going to do but does what it does. What it does is to go to the aid of cities that have been victimized by the deregulation run rampant, perpetrated by this administration, which has led to the subprime crisis. We have vacant property everywhere in these areas. Now the argument that this is going to award speculators and be an incentive to do foreclosures is also flatly wrong. This is $15 billion. People will tell you it's a lot of money, and it is. Do you know how much money this is? This is half of the money that this administration made available to buy up the debts of Bear Stearns. Now, I think they had to do that. I think they were forced to do it. But I think we have to do this as well. I do think that the whole country, under this administration's calculation, ought to get at least half of what Bear Stearns got. That's all that this does. Now, unfortunately, it's not nearly enough to buy up the property that's foreclosed. So anyone who says, I'm going to foreclose today because I want to get in on this, would be nuts because there is already property ahead of them. And even when this bill becomes law, if it does, there's a 60-day wait, and I hope it will be part of the stimulus. Property that was once paying taxes because of this subprime crisis now eats taxes. It bites neighborhoods. And, yes, some of the people who foreclose may benefit here. But we are telling the cities and the States to be careful with this money. They have to buy it for affordable housing. That will put limits on what they will pay. And you can say, well, why don't the cities do it on their own? Because the very cities that need help here have lost revenue because of this foreclosure. These properties are fire traps; they attract people who break the law; they attract sanitary nuisances. They lead to water hazards.

Mr. FRANK of Massachusetts. The gentleman is wrong to say that we evaluated everybody under CRA. We have evaluated banks and thrifts under CRA. Mortgage brokers, mortgage bankers were not evaluated----

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

Mr. FRANK of Massachusetts. No. Not until I finish this factual statement.

Mr. FRANK of Massachusetts. I have said repeatedly that I did not oppose the action. And I am pointing to the hypocrisy on the part of the Bush administration. The gentleman from New Jersey, like Sherlock Holmes, unearthed the fact that I wasn't opposed to it. I said that. I think they were forced into it. So, yes, I did not sign it. As to not having a hearing right away, that is a done deal. I'm trying to prevent foreclosures now, then we will get back to looking in the rearview mirror.

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. FRANK of Massachusetts. I just want to repeat, Members seem to think they're scoring points by saying, oh, they discovered we weren't opposed to it. I've said a dozen times, I thought they did what was necessary. I am not critical of them. I do want to go back and see how we can prevent this from happening again. But there is no inconsistency on our part. We didn't say that was the wrong thing to do. The inconsistency is the administration that says yes to $30 billion to Bear Stearns and no to $15 billion here.

Mr. FRANK of Massachusetts. I always feel good when people make arguments against legislation that won't really deal with the legislation. The notion that the problem with this bill is that it doesn't help avoid foreclosure, when it was not the bill intended to avoid foreclosure, shows well, there's a dearth of arguments against it. The argument that it's going to reward the speculators, this will go to cities dealing with property that is causing them problems. Do we not trust the cities and States of this country to take this money and use it judiciously and wisely to prevent neighborhood decay? I don't understand the animus that motivates so many of my Republican colleagues that say, Oh, no, let's not have government intervention here. Well, we heard that a while ago, and people on the other side successfully blocked government intervention in regulating subprime mortgage origination outside of the banks. It was this religion of never intervening that brought us here. A limited intervention to undo the negative consequences is what this bill calls for.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I want to address both the procedural and substantive objections. First, procedurally, I understand there are some legitimate concerns about the second rule that we will deal with. But as to this rule, I will say categorically I was the ranking member on the Committee on Financial Services for 4 years. The rule today gives more scope to the minority's amendments than any rule under this committee's jurisdiction when they were in the majority. The gentleman complained about an amendment offered by the gentlewoman from Florida (Ms. Ginny Brown-Waite). There is an amendment on the subject of illegal immigrants and their benefits in this bill. There were four such amendments. One was made in order. Putting in order duplicative amendments serves no purpose. But when the Republicans were in power, we had situations where motions adopted in committee were changed by the Rules Committee, and we were not given an opportunity to vote an amendment and discuss that on the floor. That was on the GSE bill. There was never a time when, under the Republican rule, we had as much ability to offer ours. There are three substantive amendments offered here. Five were already adopted in committee. Now as to the substance. The notion that this helps lenders is bizarre. This is one that is strongly urged for mayors, Governors, police chiefs and municipal officials. Property already foreclosed used to pay taxes. It now absorbs taxes. There are fire hazards, there are nuisances, there are threats in terms of sanitation. The problem is that many of the cities that have this problem of foreclosed property don't have the financial wherewithal to buy up the property precisely because they have lost tax revenues. They are in a vicious cycle. We are offering this money, and it is a need-based formula. The money goes to where there is the most foreclosed property. Now it is true that it is $15 billion for the entire United States. We are in a terrible crisis, and this bill would provide $15 billion to elected local and State officials to buy up property. That's an awful lot of money. It is half what this administration offered to the counterparties of Bear Stearns. Now I thought that the $30 billion offer to the counterparties of Bear Stearns was an unfortunately necessary request. But how, Mr. Speaker, do people in an administration that gave $30 billion of taxpayers' money, put that at risk for the counterparties of Bear Stearns, object when half of that is made available to all of America to abate fire high hazards and to preserve neighborhoods from serious problems? The lenders don't benefit from this. In fact, we have a later bill in which we are going to be accused of not doing enough to put you into foreclosures. This bill says that when the property has already been foreclosed for at least 60 days, the cities and States may work with profit or nonprofit groups to make it available for affordable housing, to make it available for local employees. I guess when you don't have a serious argument, you just make things up. This one is totally unconnected to reality. We have been asked by local officials and worked with them. There is a great deal of property that has been foreclosed upon. By the way, to anyone who says this is an incentive to foreclose property, there isn't enough money in this bill to begin to buy up all that's already been foreclosed. No one who hasn't yet done it is going to get any benefit from this, but let's get back to the basics. Thirty billion dollars of public money has been made available for the counterparties of Bear Stearns, I think, of necessity, to avoid greater danger. But how, having done that, do you denounce half that amount of money for the whole country to cities and States to buy up foreclosed property that is blighting neighborhoods? Then the gentleman from Washington said, well, why should the rural areas be forced to deal with this when it's a city problem because there is foreclosed property in many places? But that kind of rhetoric that sets one against the other, I don't think is very productive. I guess I would say this: Why should the people of Detroit and Cleveland pay subsidies to farmers who make hundreds of thousands of dollars a year? We are going to pass an agricultural bill that's going to ask people in the cities to pay for agricultural subsidies. I don't think it is very sensible to start this kind of thing. We are going to bring forward housing dealing with rural housing. America is in a terrible financial situation brought about by irresponsible economic activity unchecked by reasonable regulation. This is one small piece of dealing with it, and it is far less expensive than other pieces these people have supported.