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The U.S. House today rejected an historic $700 billion bailout of Wall Street despite legislative leaders’ appeals to rank-and-file members that the bill was needed to save the U.S. economy from possible catastrophe. The Dow immediately plunged as investors watched the dramatic House vote on television, but recovered a bit after the stunning developments. After more than three hours of debate, the legislation was rejected by a 228-205 final vote.

As congress goes back into negotiations maybe we can reflect a little on the man who helped to cause it all Barney Frank:

Better not bank on Barney Frank
He brought the (fiscal) house down

By Michael Graham

“I want [Freddie Mac and Fannie Mae] to help with affordable housing, to help low-income families get loans and to help clean up this subprime mess. Otherwise, why should they exist?” – Rep. Barney Frank, earlier this month. The Subprime Panic of ’08 and its $1 trillion (and rising!) price tag is too big to blame on any one man. But if we had to, it would be Newton’s own Rep. Barney Frank. As Winston Churchill might have put it, never before has one man done so much that was so wrong, or shafted so many on behalf of so few. Entire business sections of newspapers, including this one, have been dedicated to explaining how we got into this mess, and still the typical taxpayer is asking “So what happened?” The answer is actually quite simple: Freddie and Fannie happened. And they couldn’t have without the ferocious support of Barney Frank. Freddie and Fannie were supposed to be safe suppliers of mortgage money for relatively low-risk loans. If you could qualify for a loan, F&F would make sure the banks had access to the money to make that loan, cheap money because it was backed by the American taxpayers. But liberals like Barney Frank wanted more. They wanted the low cost of low-risk loans to be extended to higher-risk borrowers with lower incomes, fewer assets or less-solid credit. Barney and friends used the regulations of the Community Reinvestment Act to threaten lenders into making these loans. And banks, trying to meet Frank’s demands, expanded riskier lending schemes like subprime mortgages. That’s when Freddie and Fannie stepped in. As Kevin Hassett of the American Enterprise Institute put it: “They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools.” Lenders asked themselves, why should I care how shaky these borrowers are or risky the loans if a government-backed body is going to buy them up anyway? The loans were made, the housing market bubbled, contributions from F&F flowed to Democrats like Chris Dodd and Barack Obama, and everyone was happy. Until they weren’t. Without Freddie and Fannie’s reckless expansion, the housing bubble doesn’t happen. Without the implied promise behind F&F’s money, investment banks don’t dive into the derivatives market. Instead, we did it Barney’s way. Not only has Frank spent his career stopping any real reform of Fannie and Freddie, he repeatedly insisted they weren’t backed by the taxpayers. “There is no federal liability whatsoever,” Frank said in 2000. But two weeks ago, we had to bail them out with $200 billion in our tax dollars. Alan Greenspan, John McCain and others warned that F&F were taking on too much risk, but Frank dismissed these “overblown” fears as ideological attacks against his favorite cash cow. Even after Franklin Raines and Joe Johnson were caught red-handed mismanaging these institutions, Frank still insisted “we are not facing any kind of crisis.” Just how deep in the Fannie/Freddie tank was he? As The Wall Street Journal reports: “Mr. Frank was publicly arguing for an increase in the size of their combined $1.4 trillion portfolios right up to the day they were bailed out. Even now . . . he opposes Treasury’s planned reduction in the size of the portfolios starting in 2010.” Our markets have collapsed, we’re paying through the nose, and Barney Frank is still fighting to keep Fannie and Freddie on the dole. Why? Because in his mind, the point of Fannie/Freddie is taxpayer-subsidized housing for low-income borrowers – no matter how bad their credit or how high the cost. “Otherwise,” he asks, “why should they exist?” And what about us, the responsible borrowers and hard-working taxpayers stuck with the trillion-dollar tab? In Barney’s world, that’s the only reason we exist. He spends. We pay. This truly is Barney Frank’s bailout.

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