Congressman Barney Frank is the author of the legislation that led to the subprime mortgage crisis. The law he wrote and sponsored required lenders – indeed forced lenders – to offer subprime mortgages to all askers, especially to minorities.
Everybody has a right to the American Dream!
Banks did as they were told to do and wrote as many subprime mortgages as they could. A year passed. Mortgage rates started going up, as subprime contracts do, and people started defaulting. (The early stories were that they were mostly illegals who didn’t understand the small print.
Our politically correct media excised this fact and never again mentioned it. Can’t go and gin up resentment against illegals – they have rights!) More and more people defaulted on their loans. Banks took a hit.
The geniuses on Wall Street, meanwhile, packaged all these mortgages and sold them off to investors all over the world. They had a AAA rating (the best, better than stuffing your mattress with Benjamin Franklins) and the $1.4 trillion in securities were bought up as soon as they were offered as ultra secure investments to hedge risks worldwide.
The subprime lenders tanked, the banks tanked, and then the bond market utterly totally collapsed. All those AAA bonds were immediately rated as junk and were soon worthless. Wall Street dropped 50%, home prices dropped 50%, and the big banks on The Street fell flat on their faces.
Meanwhile, the $1.4 trillion in bonds sold to investors all over the world cratered all the European economies. Pensions and municipalities and teacher unions and corporate pension funds that had invested in these AAA bonds lost their pants. Entire economies were wiped out. Entire cities. Tens of thousands of individuals.
We’re still seeing the fallout in Europe – Greece, Spain, Ireland and Italy are all on the brink of oblivion. All that thanks to Congressman Barney Frank.
Alas, Barney Frank is gay. He can’t be held accountable in the eyes of the bleeding heart liberal media freaks. His reputation wasn’t tarnished one iota, as the U.S. spent $1 trillion fixing the banks and sold Treasury bills or printed dollars to the sweet tune of another $4 trillion to keep the economy going.
Barney Frank was a culture hero, actually. He was coauthor of the “Frank-Dodd Wall Street Reform and Consumer Protection Act” that changed the complexion of our entire banking system. Before Frank-Dodd, banks were isolated. The five Too Big To Fail Banks on Wall Street took the worse hit because they had the highest leverage. The more conservative regional banks in Atlanta and Dallas banking hubs were unscathed as were the smaller main street banks.
Frank-Dodd spreads the risks now. If there’s another banking shock like the subprime fiasco, it will extend far beyond the TBTF banks, down to the regional and main street banks. The whole financial system will fall off the face of the earth. How’s that for “consumer protection,” y’all?
Well, here we are now, and the TBTF banks still have portfolios at 30:1 leverages, with securities obligations collectively valued at ten times the U.S. Gross Domestic Product. They’ve done quite well as stock averages have increased 100% since the financial meltdown, making a cool 3000% profit. Their books are almost balanced again.
Stocks dropped 5% right after the election. That equals 150% for the TBTF banks. If the economy slides into another recession, they’ll be hurting right away.
No matter, Barney Frank is and always will be a great American hero.
