Frank: Abolish Fannie and Freddie

Call it the New Modesty. Barney Frank suddenly can’t understand why government should push home ownership, nor why government should be involved in mortgages at all. In an interview with Neil Cavuto on Fox Business, Frank called not just for the liquidation of Fannie Mae and Freddie Mac, but also for curtailing federal government interest in home ownership:

Fannie Mae and Freddie Mac should be abolished rather than reformed as part of the Obama administration’s planned overhaul of the government’s role in housing finance, Rep. Barney Frank, chairman of the House Financial Services committee, said on Tuesday.

“They should be abolished,” Frank said in an interview on Fox Business, when asked whether the mortgage giants should be elements in housing market reform. “They only question is what do you put in their place,” Frank said.

The Federal Housing Administration should be fully self-financing and Freddie and Fannie should be replaced with a new mechanism to help subsidize housing, Frank said in the interview.

“There is no more hybrid private-public,” the Massachusetts Democrat suggested. “If we want to subsidize housing then we could do it upfront and let the budget be clear about that.”

Why does Frank see the need to stop federal home-ownership initiatives?

“There were people in this society who for economic and, frankly, social reasons can’t and shouldn’t be homeowners,” Frank said. “I think we should, particularly, stop this assumption that you put everybody into homeownership.”

That’s certainly the lesson from the collapse of the housing bubble and the secondary derivative markets. It’s also a sea change for Frank. While he nearly dislocates his shoulder attempting to pat his own back by claiming that he has said this all along, it’s simply not true. Frank, in his role on the House Financial Services Committee, played a huge part in creating and maintaining the government intervention that severely distorted the lending markets. Whether or not he ever uttered a comment along the way about overdoing home ownership, Frank’s actions helped to create and maintain those policies, and he defended them repeatedly over the last twelve years.

However, the New Modesty isn’t a reference to Frank’s self-promotion, but the way that the adherence to the free market seems to have gained traction over the last few months. Just last year, Frank and his allies were busily claiming that the free market caused the collapse, and that only government intervention could restore American prosperity. Eighteen months into the Obama administration, Frank now wants to sound like a born-again acolyte of Adam Smith, or at least as close as Frank can approximate such a pose. Modesty in government is suddenly hot, even among Massachusetts liberals.