Published June 7, 2010
U.S. Rep. Barney Frank, Newton’s gay, left-handed, pugnacious Democrat, is our guest on Radio Boston. He is the leading legislator on financial reform, a fight perhaps no one else is better equipped to handle. Another fight is on the horizon: re-election.
I pseudo-live blogged his remarks here with host Meghna Chakrabarti.
Post show-update: I’ve cleaned up and clarified my notes from the interview, which is now available for listening.
Frank: We don’t want banks doing anything on their own. We want them working for their customers.
But there should be limits on regulation. Banks are the most fully regulated entities around. If you move money out of a bank into something like Lehman Brothers, Goldman Sachs, there’s less regulation.
Frank was reading "Freedom Summer" by Bruce Watson "Washington-style," which means he looked up all references to himself in the index to check for accuracy.
Derivatives have been abused, but they’re not inherently bad. You want to guard against wild variations in, for example, fuel or crop prices.
Lehman Brothers is not a bank. The problem with Sen. Blanche Lincoln’s amendment is that it wouldn’t have affected Lehman Brothers. AIG had no idea how much it was obligated in derivatives. When the Fed came to us in 2008 to say they wanted to pay $80 billion in AIG’s debt — a week later it was $120 billion, then $150 billion — AIG had no idea what it owed. The point is no matter where derivatives are traded, they need to be regulated. The price needs to be made clear upfront.
The Senate bill should be even tougher than House version. He had to get enough votes to pass it.
Banks were not too big but too interconnected, too leveraged to fail. “We are going to make them fail. The bill that we have allows them to fail, requires them to fail.”
We will not allow to let people get overextended. Won’t allow them to be so indebted they can’t pay what they owe. AIG had no regulator. If this bill passes, these companies will be monitored. Regulators will order them to stop taking on new debt if the burden overcomes revenue.
A break, and the conversation continues…
Bill from Newton, caller: If banks foreclose upon people, and if they get federal bailout money, why don’t consumers have recourse? Shouldn’t Frank’s legislative committee have jurisdiction?
Frank: We’ve tried to do that. Not enough has been done. One thing I hope to get passed in the bill is money to be lent (not given) to people who are laid off and have to pay their mortgage.
Paulson did not feel that TARP money should be used to aid homeowners. I disagreed with fiercely, but the Democrats were not in charge then. Ironically, under the law today, you can own two houses and declare bankruptcy and get out the mortgage for your vacation home on the Cape but not your primary home. Going forward, this won’t happen again. In the bill passes, there will be strict rules against those kinds of mortgages.
Caroline from Framingham, caller: How likely is campaign finance reform to happen?
Frank: I wish I could give you a better answer. Unfortunately, the Supreme Court has overturned years and years of rulings on corporate spending. Now corporations can spend endlessly according to their supposedly inalienable rights. (“I didn’t know God was the direct creator of corporations!”) Efforts to put reforms in place have been consistently stricken by the Supreme Court. Obama or future president needs to find a way to reverse this decision.
Meghna: The other day we talked with Rep. Michael Capuano, D-Somerville, about the DISCLOSE Act, to be more transparent about who is contributing to political campaigns.
Frank: I do support that and am working with Capuano. Republicans have worked to block campaign finance reform. McCain used to be for reform and has walked away from it.
Cindy from Newton, caller: Could Frank clarify or reiterate the position he took regarding Israel and the flotilla?
Frank: I did not criticize Israel. My comment about being ashamed was not about the government but about some settlers who have been engaged in violent treatment of their Arab neighbors. Look, Israel took over Gaza in self-defense. Then Prime Minister Sharon, a hawk, said, We’ll give up Gaza. No, Israel can’t be expected to allow just anything to be brought into Gaza.
Hamas kicked out the mainstream Fatah movement. If al-Qaida took over British Columbia, I don’t think you’d see American in favor of an open border with Canada.
Meghna: Some have called for an international review of the flotilla raid.
Frank: Israel has a right to be skeptical of an international inquiry. The Israeli government has a better record of self-examination than almost any other government. The Israeli supreme court has a better record than the American Supreme Court of restraining the government.
Meghna: Are you concerned about your re-election?
Frank: Keep in mind the vote in favor of Republican Sen. Scott Brown was close. That said, I am campaigning and it’s something I have always been good at.
I’ve been a target. One of the things that John Kerry or Michael Dukakis learned, no matter how implausible the accusation, they’re not self-refuting. You’ve got to refute them! Frankly, there are things said about me that are wholly untrue.
Meghna, quoting Frank in 2008: “We are at a moment now where liberalism is poised to have its biggest impact on America since Roosevelt.” Do you still believe in that?
Frank: In the House I had to fight hard to get as much as we did for financial reform. My position, including Obama administration’s position, is pretty mainstream. We’re going to restrict bad subprime mortgages, limit derivatives.
But the depths of the recession were worse than I thought they would be at that time. That interview was given in late 2008. We had not fully understood the depth of the crisis, which came as a result of bad regulation.
…And Frank is out of the studio, even before Meghna finishes thanking him. Classic Barney.
Update: An aide to Rep. Frank followed up with me to explain Frank was running late to another engagement because he was tied up with us. The man is busy these days!