Barney Frank is a thirty eight year career politician with NO BANKING experience, and NO PRIVATE SECTOR experience, and he is about to go down in history as the politician that gutted the financial industry. This shows you Barney’s lack of experience:
In 2003, while the ranking Democrat on the Financial Services Committee, Frank opposed a Bush administration proposal for transferring oversight of Fannie Mae and Freddie Mac from Congress and the Department of Housing and Urban Development to a new agency that would be created within the Treasury Department. The proposal reflected the administration’s belief that Congress “neither has the tools, nor the stature” for adequate oversight. Frank stated, “These two entities…are not facing any kind of financial crisis…. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”[51] The two companies, which together own or back more than half the home mortgages in the US became “hobbled” by loan defaults.[52] In 2009 Frank said that Fannie and Freddie were not in crisis at the time and many financial institutions, like Lehman Brothers, also fell into crisis from 2003 to 2008.[53] Frank also said that, “In 2004, it was Bush who started to push Fannie and Freddie into subprime mortgages, because they were boasting about how they were expanding homeownership for low-income people. And I said at the time, ‘Hey—(a) this is going to jeopardize their profitability, but (b) it’s going to put people in homes they can’t afford, and they’re gonna lose them.’” [10]
It was not Bush that pushed the banks, it was the Community Reinvestment Act and the Democrats.
I am still working on the Financial Stability Improvement discussion draft (shown below), and rest assured, it sacrifices freedom for security. After reading about halfway through, if anyone wants to invest in an American financial institution, they must have rocks in their heads because the shareholder is lower than dirt in this bill. Let’s take those Indiana pension funds that got hammered over the Chrysler deal and multiply by a gazillion. If and when I get to the section that talks about financial institutions paying for bailouts instead of us, I’ll let you know. Rest assured, I will be posting my findings and appropriate sections of this bill. In the meantime:
Barney, in his own words…
…the last piece, which we will be voting on this week, has to do with putting the federal government in charge of watching closely what institutions are likely to get into trouble, and before they get to the point where they are going to fail and cause alot of problems and ask for bailout, the federal regulators will step in and say, “you must increase your capital substantially, you have to reduce your level of exposure, you must get out of this line of work or that, and if we do have to step in it will be very painful for those companies. They will be put out of business, their CEOs will be fired, shareholders will be wiped out. You’re not going to have a situation where people can expect to be bailed out and live happily ever after.
What Barney means is mandatory/involuntary bankruptcy (Page 35, Line 18), firing of senior executives (Page 32, Line 16), and Page 34 -Line 4, and then there is the bailout:
SEC. 1109. EMERGENCY FINANCIAL STABILIZATION
16 (a) IN GENERAL.— Upon the written approval of the Board of Governors of the Federal
17 Reserve System (which approval shall be made upon a vote of not less than two-thirds of the
18 members of such Board then serving) and the Board of Directors of the Corporation (which
19 approval shall be made upon a vote of not less than two-thirds of the members of such Board
20 then serving), and with the written consent of the Secretary of the Treasury (after consulting with
21 the President), the Corporation may extend credit to or guarantee obligations of solvent insured
22 depository institutions or other solvent companies that are predominantly engaged in activities
23 that are financial in nature, if necessary to prevent financial instability during times of severe
44 DISCUSSION DRAFT – 10/27/2009
1 economic distress, provided that a credit extension or guarantee of obligations under this section
2 shall not include provision of equity in any form.
Rep Barney Frank Discusses New “Too Big To Fail” Regulations
