Five years ago, Barney Frank contended that “These two entities — Fannie Mae and Freddie Mac,” at the center of the mortgage mess and financial crisis, “are not facing any kind of financial crisis.”  He called them “fundamentally sound financially and withstand some of the disaster scenarios.

Indeed, he wanted to take a little risk with these government-sponsored enterprises:

I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. .

Now, it looks like Barney Frank’s risk is costing American taxpayers billions of dollars.

And just as the mainstream media has taken little note of Barney Frank’s past defenses of the soundness of Fannie Mae and Freddie Mac and his efforts to block Republican efforts to rein in the mortgage giants, they have also paid little heed to the Massachusetts Democrat’s past conflict of interest in dealing with Fannie Mae.

While Frank served on the House Banking Committee in the 1990s, his partner, Herb Moses, worked at Fannie Mae as assistant director of product initiatives from 1991 to 1998. The two lived together at that time, breaking up in 1998, “a few months after Moses ended his seven-year tenure at Fannie Mae.”

While Frank and Moses had “assured the Wall Street Journal in 1992 that they took pains to avoid any conflicts of interest,” others disagree. Dan Gainor, vice president of the Business & Media Institute said:

It’s absolutely a conflict. . . . He was voting on Fannie Mae at a time when he was involved with a Fannie Mae executive. How is that not germane? . . . If this had been his ex-wife and he was Republican, I would bet every penny I have – or at least what’s not in the stock market – that this would be considered germane. . . . But everybody wants to avoid it because he’s gay. It’s the quintessential double standard.

If we want our relationships treated as traditional marriage, then we must hold them to the same standards.  If a straight Congressman would have stepped down from a committee because it regulated the industry where his wife worked, so too should a gay Congressman step down when his committee regulates an industry where his partner works.

Thus, Frank should have stepped down from the Banking Committee in the 1990s. Not only would he have demonstrated integrity as a legislator, but he would also have shown his commitment to treating gay relationships the same as traditional marriage.

Instead, he wanted to have his cake and eat it too. And he still refuses to take any responsibility for the current crisis. And yet another reason why he should resign his position as Chairman of the House Financial Services Committee.

ADDENDUM:  While I do think Barney Frank holds a good share of responsbility for this mess, I don’t know if I’d go as far as Mark Steyn who, on linking the article exposing this conflict, writes, “It turns out the entire planetary meltdown is due to Congressman Frank’s sex life.”

A reader chanced upon a passage in Henry Hazlitt’s Economics in One Lesson where that celebrated economist predicted today’s mortgage crisis:

Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion.

This book first appeared in 1946. Wow how prescient was this man. Too bad we don’t have more such individuals in government. And too bad more elected officials aren’t familiar with his work.