Frank pushed for loans to be made to people who did not have enough money to secure those loans and that is why we have this problem to begin with.

“New Agency Proposed to Oversee Freddie Mac and Fannie Mae,” The New York Times, September 11, 2003:

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

 Take a look at this video clip below.

Mark Calabria from the Cato Institute on Financial Regulation

Reuters reported on March 21, 2011:

Corporate whistleblowers are getting bigger and bigger payouts for reporting fraud, sparking a fresh debate about whether the rewards are justified.

Whistleblowers have collected billions of dollars since the late 1980s by suing government contractors under the False Claims Act and other federal laws. The new Dodd-Frank financial reform law could lead to more payments, something plaintiff attorneys say will provide checks on businesses but companies fear will circumvent their own internal anti-fraud systems.

Awards for reporting fraud hit a record high of $385 million in the 12 months ended Sept 30, 2010, Justice Department data showed. The total rose nearly 50 percent from the previous year and was the third increase in a row.

The Dodd-Frank law calls on the Securities and Exchange Commission to pay awards to people who report violations leading to at least $1 million in sanctions.

Workers should have to report problems to internal company monitors as well as to the SEC, some business groups say. Some want the agency to limit payouts if the worker did not try to solve matters internally first.

As proposed SEC Dodd-Frank rules are written, workers would have an incentive to circumvent their companies’ compliance systems in hopes of getting a big cash payout, chemical maker Huntsman Corp wrote in a comment letter to the SEC.

Employees “have been deputized and promised huge riches to bypass their companies and report to the government” under the new law, said David Baris, head of the American Association of Bank Directors.

But Steven Kohn, executive director of the National Whistleblowers Center in Washington, said internal company programs often fail to fully investigate wrongdoing. He said employees should have a choice where to raise concerns.

Big payouts are the price of getting good information from people who risk their careers to report problems, he said.

“If you want to get the big fish, you have got to pay the big award,” Kohn said.

Kohn has made a career representing people bringing False Claims Act cases. The Civil War-era law was changed in 1986 to give individuals up to 30 percent of recoveries from government contractors. Since then, fraud settlements and court judgments rose to $3 billion in 2010, up from $176 million in 1988.

GROWING RECOVERIES

False Claims cases are “qui tam” lawsuits, a Latin phrase meaning a plaintiff is suing “for the King as well as for himself.” A record 573 new qui tam cases were filed in fiscal 2010, up from 433 the year before.

In October, a former GlaxoSmithKline employee was awarded $96 million, the largest payment ever in such a case. Her reward was part of the $750 million the drugmaker paid to settle a manufacturing fraud case.

False claims cases in state courts also are up. Lawsuits against Bank of New York Mellon contend it overcharged pension funds in Florida and Virginia for foreign exchange services. The cases resemble one pending against State Street Corp in California. Both banks deny wrongdoing.

Various groups have called in the past for caps on these awards, but those arguments have found little traction. For instance, a 2009 proposal by Arizona Republican Sen. Jon Kyl to cap whistleblower awards at $50 million was defeated. Another Republican, Iowa Sen. Charles Grassley, has been a chief defender of the rewards as a way to root out waste.

Critics have gotten an ally, however, in Skadden Arps attorney Michael Loucks, who until 2009 was a top Justice official prosecuting fraud cases. He won settlements from companies including Serono Labs, now part of Merck KGaA, based on whistleblower claims.

In a recent paper in trade journal Health Care Fraud Report, Loucks argued that Congress should cap payments under the False Claims Act to $2 million. That would vastly increase recoveries to taxpayers, he argues.

Of the 14 largest settlements since 2008, whistleblowers received $650 million — $622 million more than if the cap were in place, he wrote.

(Reporting by Ross Kerber, editing by Matthew Lewis)

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It is interesting to me that people like Barney Frank who is responsible for this mess in the first place, are in charge of cleaning up this. Frank pushed for loans to be made to people who did not have enough money to secure those loans and that is why we have this problem to begin with. Take a look at this article below. 

Mark Calabria wrote the excellent article “Financial Reform Bill Won’t Stop Next Crisis,” National Review Online, June 25, 2010. Here it is:

The House and Senate will soon vote on a finalized financial-regulation bill, one that was mostly hammered out in a closed-door conference between the two chambers. Legislators will have a stark, simple choice: support a bill that gives us more of the same flawed banking regulations, or reject it in the hopes that new congressional leadership next year will address the actual causes of the financial crisis.

Perhaps it should come as no surprise that Sen. Christopher Dodd and Rep. Barney Frank, the bill’s primary authors, would fail to end the numerous government distortions of our financial and mortgage markets that led to the crisis. Both have been either architects or supporters of those distortions. One might as well ask the fox to build the henhouse.

Nowhere in the final bill will you see even a pretense of rolling back the endless federal incentives and mandates to extend credit, particularly mortgages, to those who cannot afford to pay their loans back. After all, the popular narrative insists that Wall Street fat cats must be to blame for the credit crisis. Despite the recognition that mortgages were offered to unqualified individuals and families, banks will still be required under the Dodd-Frank bill to meet government-imposed lending quotas.

While apologists for government-mandated lending are correct in pointing out that much of the worst lending was originated by state-chartered lenders, such as Countrywide, and not federally chartered banks, they either miss or purposely ignore the truth that these non-bank lenders were selling the bulk of their loans to Fannie Mae, Freddie Mac, or the government corporation Ginnie Mae. About 90 percent of loans originated by Countrywide, the largest subprime lender, were either sold to Fannie Mae or backed by Ginnie Mae. Subprime lenders were so intertwined with Fannie and Freddie that Countrywide alone constituted over 25 percent of Fannie’s purchases.

While one can debate the motivations behind Fannie and Freddie’s support for the subprime market, one thing should be clear: Had Fannie and Freddie not been there to buy these loans, most of them would never have been made. And had the taxpayer not been standing behind Fannie and Freddie, they would have been unable to fund such large purchases of subprime mortgages. Yet rather than fix the endless bailout that Fannie and Freddie have become, Congress believes it is more important to expand federal regulation and litigation to lenders that had nothing to do with the crisis.

The legislation’s worst oversight is to ignore completely the role of loose monetary policy in driving the housing bubble. A bubble of such historic magnitude as the one we went through can only occur in an environment of extremely cheap and plentiful credit. The ultimate provider and price-setter of that credit was the Federal Reserve. Could anyone truly have believed that more than three years of a negative real federal-funds rate — where one is essentially being paid to borrow — would not end in tears?

As the Federal Reserve’s monetary policy is largely aimed at short-term borrowing, the Fed also drove the spread between short- and long-term borrowing to historic heights. This created irresistible incentives for households and companies to borrow short — sometimes as short as overnight — and lend long. Many households chose adjustable-rate mortgages that would later reset as interest rates rose, increasing monthly payments. For banks, this spread provided an opportunity for handsome profits by simply speculating on the yield curve.

Avoiding the issue of loose monetary policy may well be the result of Congress’s possessing almost no understanding of it. The first obvious step toward building such an understanding would be to have the GAO audit the Fed’s monetary policy. Yet Congress continues to ban the GAO from examining the issue. It is as if Congress does not even want to understand the causes of the crisis.

Nor has there been any discussion in Congress about removing the tax preferences for debt. Washington subsidizes debt, taxes equity, and then acts surprised when everyone becomes extremely leveraged.

Until Washington takes a long, deep look at its own role in causing the financial crisis, we will have little hope for avoiding another one. And the Dodd-Frank legislation, sure to be heralded as strong medicine for perfidious financiers, is actually not even a modest step in the right direction.

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