Barney Frank: Fannie & Freddie Must Go

Housing: After years of dissembling and denial, Rep. Barney Frank has finally come out. He now says bankrupt government mortgage giants Fannie Mae and Freddie Mac "should be abolished." Better late than never.

'There were people in this society who for economic and, frankly, social reasons can't and shouldn't be homeowners," Frank said in an interview with the Fox Business Network and sounding a lot more like an elephant than a donkey. "I think we should, particularly, stop this assumption that you put everybody into homeownership."

After years of blaming heartless Republicans and Wall Street for the crisis caused by Fannie Mae and Freddie Mac - and their predominantly Democratic supporters in Congress - it's refreshing to hear a member of the Democratic Party admit his mistakes.

It's especially true of Frank, who, more than any other elected official, championed the cause of the government-sponsored enterprises Fannie Mae and Freddie Mac. Indeed, Frank is most responsible for stopping GSE reform in the early 2000s, at a time when such a move might have prevented the financial meltdown.

Maybe Frank, like so many others in his party, is feeling the heat in this November's election. Democrats' popularity is plunging after years of economic incompetence that has left America's once-thriving economy a shambles.

But give him his due: Frank's comments mark a major departure.

In 2000, when Rep. Richard Baker proposed more oversight for the GSEs, Frank called concerns about Fannie and Freddie "overblown," claiming there was "no federal liability whatsoever."

In 2002, again, Frank said: "I do not regard Fannie Mae and Freddie Mac as problems. I regard them as assets."

In 2003, he repeated himself in opposing reform, saying he did not "regard Fannie Mae and Freddie Mac as problems."

Even after a multibillion dollar accounting scandal hit Freddie Mac just a month after those remarks, Frank insisted nothing was wrong. "I do not think we are facing any kind of crisis," he said.

By 2004, Fannie had its own accounting scandal. Frank again insisted it posed no threat to the U.S. Treasury. Even if the two went belly-up, he said, "I think Wall Street will get over it."

As late as 2008, after the tide of losses and foreclosures washed away Fannie's and Freddie's remaining capital, Frank was adamant that it was all Wall Street's fault: "The private sector got us into this mess ... the government has to get us out of it."

Of course, he had it exactly backward. We've already spent $148 billion of taxpayer money on the two losers. The Congressional Budget Office estimates it will ultimately cost taxpayers $389 billion to bail them out. Even that may be too little; at least one private estimate put the final toll at $1 trillion.

No surprise here. Even today, more than half of all mortgages are funded or underwritten by Fannie and Freddie. They hold more than $5 trillion of the $10.7 trillion or so in total U.S. mortgages.

We've spent a lot of money for Barney Frank's education in financial reality. Today, he's basically saying he and his party were wrong all along.

That's a good start. But how about an apology? Or even a frank admission that his party's indefatigable support of Fannie and Freddie - which, prodded by the Community Reinvestment Act, created and funded the massive subprime market that later collapsed - was to blame for our multitrillion dollar meltdown and the loss of millions of jobs?

Others are edging in that direction. Treasury Secretary Tim Geithner this week held a conference on Fannie's and Freddie's future, and he too seems chastened. "We will not support returning Fannie and Freddie to the role they played before conservatorship, where they fought to take market share from private competitors while enjoying the privilege of government support," he said.

That, too, is good to hear. As we have advocated for years - since 1996, to be exact - Fannie and Freddie should be dismantled or privatized.

We hope actions match the rhetoric - that Geithner's "conference" on Fannie and Freddie wasn't just political window dressing before November's midterm elections.

Let's get government out of the business of encouraging homeownership, an undertaking at which it has failed miserably.

Now that the idea is dead, let's bury it once and for all.