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Frank: Fed would not have new power

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Steve Chiotakis: The Senate continues debate over financial regulatory reform. Now we’re getting a clearer picture of how the Federal Reserve would play into any proposed legislation. The House passed its own version of financial reform late last year, and anything that comes out of the Senate will have to be reconciled with this bill from the House. Representative Barney Frank is chairman of the House Financial Services Committee. He’s with us now from Washington. Congressman, good morning.

Barney Frank: Good morning.

Chiotakis: We’ve been hearing about the debate over giving the Fed more authority over these large banks, the really big ones. Is that appropriate given the Fed’s role in parts of the crisis itself?

Frank: Well, if you were going to say that no one could have authority over the financial system who hasn’t done it well, we would have no authority over anybody. When you talk about giving authority here based on past records, you have to invoke the wisdom of an old philosopher named Henny Youngman compared to what. I do think that the Federal Reserve makes the most sense to continue to do the big banks. But it wouldn’t be new power. The new power would go to a council of financial regulators — all of the regulators — who will be charged in both bills with monitoring things to see that nothing gets out of whack. What the Senate has been proposing to some extent, which seems to be very much a mistake, was to enhance the Fed’s powers in consumer areas. The Federal Reserve over the years was given the major power to be the consumer regulator; it’s done that job worse than anything else it’s done. And in the House, we push for an independent consumer regulator. There’s been talking in the Senate of subordinating that to . . .

Chiotakis: Yeah, I mean how do you reconcile, Congressman, if the Senate version doesn’t include the Consumer Financial Protection Agency?

Frank: Well, we’ve been doing that for 200 years in America, because the founders set up . . . you know, we have in America the only genuinely bicameral legislature. And I have a proposal here: We used to have — and I’m going to insist on it again if people want to open this — a House-Senate conference. The House has passed, I think, a pretty good bill. The Senate, I know Senator Dodd has similar views, but he may have to concede too much to the Republicans. And we’re going to get, I am going to insist on a House-Senate conference. We will sit there, a certain number of House members, a certain number of Senate members, and we will negotiate this out. And the way it works in the American system, given that two independent legislative bodies, somebody is going to have to compromise. I understand that we can’t get everything we want, but we’re not going to submit to any substantial weakening of the fiduciary responsibility for brokers or of the independence of a consumer agency.

Chiotakis: All right. Congressman Barney Frank joining us from Washington. Congressman, thank you for being with us.

Frank: You’re welcome.

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