History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance. – James Madison
Now it’s the government’s turn – but this ain’t your founding fathers’ government. – The Monster
So what’s up with Barney Frank’s, “let’s kill off private enterprise especially in the area of financial institutions” freight train. What happened to “we are trying on every front to increase the role of government” mantra? What happened to the “shareholders will be wiped out” with a look of glee in his eye? Anybody want to comment on the possible reasons behind Barney slowing down legislation to control the financial sector in new and less productive ways, or are these going to be a series of bills that are voted on in the dead of night on Christmas Eve?
Is there something more important that Barney really needs to attend to? I wonder what that could be?
Now granted, I can use the extra time to finish reading Barney’s Financial Stability Discussion Draft ,which has gone from 253 pages to 379, with all those un-American and anti-capitalist goodies in it, but I am still darn curious as to what is slowing down ‘ol marxy.
Rep. Barney Frank (D-Mass.) on Tuesday said the House would vote on a wide-ranging financial overhaul no earlier than the first week in December.
Frank, the chairman of the House Financial Services Committee, said that as part of the overhaul he is pursuing policies that would grant the federal government broad powers to break up large, troubled financial institutions and would curb the Federal Reserve’s power to prop up specific firms.
The Senate has yet to mark up any of the legislation, and most analysts predict that Congress will not send the president a bill to sign until 2010.
Senate Banking Committee Chairman Chris Dodd (D-Conn.) is drafting legislation behind the scenes, and an administration official said on Tuesday that the Senate is not far behind the pace set in the House. Dodd publicly has taken several positions that differ from the administration and Frank, most notably that he is in favor of the consolidation of the nation’s four banking regulators. The administration official said the Dodd language under discussion is an encouraging start.
Frank is currently weighing one of the thorniest aspects of the overhaul, a measure that would give the government new powers to regulate systemic risk and break up failing financial institutions that threaten the wider economy.
Treasury Secretary Timothy Geithner has said that “resolution authority” is one of the most important pieces of the overhaul. That paired with legislation that creates a new “systemic risk council” will be considered in markups that will likely last until the end of November, Frank said.
Referring to the 1930s-era Glass-Steagall Act, which prohibited banks from doing both commercial and investment bank business, Frank said he could see the new systemic risk regulator imposing “Glass-Steagall institution by institution.”
The Federal Reserve is designated in the legislation as the main regulator to oversee large, systemically important financial firms.
That would allow the government to break up institutions and reduce them by size or other measures. “The systemic risk regulator, I believe, will be given explicit mandates to step in when there is a troubled institution,” Frank said.
Separately, Frank struck a tough tone on the scope and power of the Federal Reserve. Throughout the crisis, the central bank relied on legislation dating back to the 1930s granting broad powers to the bank in “unusual and exigent” circumstances.
Once again, what you see and what you get a two completely different animals. I will explain it all in the upcoming post about the FSIA.
If you would like to see all the drafts for just financial regulatory reform that Barney is working on right now, go here.
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.” The two companies, which together own or back more than half the home mortgages in the US became “hobbled” by loan defaults. 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. 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.’” 
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.