Rep. Frank on the bailout and stimulus
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TEXT OF INTERVIEW
Kai Ryssdal: Congressman Barney Frank has been leading bailout negotiations with the current White House, and with the next one. He also chairs the House Financial Services Committee. And if this past fall is any guide, he’s going to be at the table as the Obama administration’s stimulus package is put together too. Congressman, welcome to the program.
REP. BARNEY FRANK: Thank you.
Ryssdal: The Secretary of the Treasury, Henry Paulson, said today that he’s going to leave it to the Obama administration to figure out how to ask for the second half of the TARP — that $350 billion that’s still out there. What’s your answer going to be?
FRANK: I hope it will be yes, but there will be certain conditions. If we can get it established that a large chunk of the money has to go for renting foreclosures, if we can make sure that money that is invested in banks is re-lent, if we can make it clear that there will be money available to help with auto loans, that it will be able to help with municipalities and stuff, then I think it you can get it. So, we are in conversations now with the Obama people and our intention is, frankly, to put a bill on the floor of the House next week.
Ryssdal: Once this bailout package does get approved, if your negotiations with the Obama administration work out, you’ve got lots else on your plate. No. 1 that comes to my mind is regulating the financial industry. What can we look for there out of your committee?
FRANK: Well that’s going to be a very high priority for us. There are a couple of things. First of all, we will put in moves that will keep you from making loans to people who shouldn’t have gotten the loans and who can’t repay them. Secondly, we have this problem that there’s a whole new set of unregulated activities that grew up — collateralized debt obligation derivatives and credit default swaps. So the No. 1 priority here is to pass rules that don’t allow anybody in the economy to make the kind of loans and to get to indebted that they can’t pay back and they can cause systemic failure. So, we need to create a risk regulator in the federal government that covers hedge funds and private equity and investment houses and everybody else, so that we don’t have Bear Stearns or we don’t have a Lehman Brothers coming up again.
Ryssdal: Who should that be? Should it be somebody brand new or should it be, say, the chairman of the Fed?
FRANK: I think it should be the Federal Reserve. This isn’t easy stuff. It’s not automatic, there are complexities. There’s a degree of expertise, I think, available at the New York branch of the Federal Reserve in particular, that it would be hard to duplicate elsewhere in the federal government. So we are inclined to believe, I think, those of us here in the House, that the Federal Reserve should be the systemic regulator. Now there are other factors that we’ll need to do. For instance, it’s now clear from the Madoff thing that the Security Exchange Commission has not been nearly as effective as it should be in protecting investors. And so, while we create a systemic risk capacity, we also want to beef up the role of the SEC and protect the investors from fraud.
Ryssdal: I wanted to touch on the stimulus package that Congress is going to be taking fairly soon. Are you satisfied with what the president-elect is proposing? Do you think he’s doing enough?
FRANK: Oh, I think he will do enough overall. I have some difference because I think they may be doing too much tax cutting and not enough direct spending from the standpoint of immediate job creation.
Ryssdal: There have been a couple of big profiles of you in the press lately, given your prominence in the bailout negotiations, and there was a great quote from you. You said, you know, the recovery is going to start right before the 2010 election and then Obama’s going to be set and the Democrats are going to be set. You still buy that for a recovery date?
FRANK: I think the recovery will begin later this year. And I think the advantage the Democrats are going to have, frankly, is that Obama’s taken office with an economy in the dump and by the summer of 2010 I think we will have gotten back to normal. That’s the optimum, from the political standpoint, although that’s not what anybody is trying to do. The sooner the better.
Ryssdal: Barney Frank, Democrat from Massachusetts. He chairs the House Financial Services Committee. Congressman, thanks a lot for your time.
FRANK: You’re welcome.
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