Rep. Barney Frank (D-Mass.) speaking at a forum on national housing policy on December 11, 2006. Three weeks after making this speech at the Treasury Department, Frank became Chairman of the House Financial Services Committee.
Frank on Democrats taking over regulatory reform:
“You will see far less difference with Democrats taking over in the Financial Services regulatory area than in virtually any other area of public policy, because we did work together on things like regulatory relief and we have more to do yet in the deregulation. One of the things we did was try to reduce the reporting requirements from the banks to the financial detectives.
“Far too much has to be reported now in my judgment.”
On Fannie Mae and Freddie Mac:
“We weren’t doing anything for Fannie Mae and Freddie Mac. The issue for me was housing. We were doing something for housing. And I agreed with those who argued that because of the markets’ perceptions, Fannie Mae and Freddie Mac got this great benefit to be able to borrow money cheaply yet the benefit was not being adequately returned to the public.
“There were two things you could have done about that. You could have reduced the benefit. You could have cut back on their ability to borrow as cheaply or you could leave that benefit in place and distribute it more fairly. That’s what we chose to do with the affordable housing fund.”
On the housing bubble in 2006, two years before the housing bubble burst:
“I do want to address this thing about the bubble. I think the bubble is an entirely inappropriate metaphor. Let me just be very clear, houses ain’t tulips. Houses today even with the drop in housing prices are more valuable than tulips were however many years ago when we had the tulip business.”
On plummeting housing prices:
“I think it’s a good thing that housing prices are dropping. A few speculators get stung, that’s icing on the cake. The cake is… the cake is that people can afford to buy houses now. A 10% drop in housing prices is a good thing. Housing was over-valued.
“But let me make this distinction on why it’s not a bubble. I was just thinking about this [unintelligible]… maybe housing suffered from irrational exuberance. But bubbles in history haven’t been cases of irrational exuberance. They have been cases of exuberant irrationality. And there really is a distinction.
“Irrational exuberance means you get a little carried away with something that is basically a good thing. But exuberant irrationality is when you start thinking that tulips or some of those dumb ideas on the internet when there were some of those things that nobody in their right mind wanted to buy, those were excessive.”
On why housing prices plummeting is a good thing:
“Fundamentally I don’t think that there’s a crisis, and I do think that the end result in a 10% drop in many parts of the country will be a more rational and healthier housing market.”
And finally… Frank on his own ability to deal with “things.”
“I’m pretty good with words but I’m not so good with things. I’ve had a lifelong struggle with things. And the less I am responsible dealing with them the better off everybody is.”
Tell us something we didn’t already know.
(h/t Scott McKay)