Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I have one remaining speaker, and since I have the right to close, I will reserve the balance of my time.

Mr. FRANK of Massachusetts. I yield myself 4\1/2\ minutes. Madam Chair, the author of the amendment, I thought, began--or it was one of the speakers. Maybe it was the gentleman from Oklahoma who said we don't need a new agency. Well, he apparently didn't get too far into the bill. On lines 7 through 10 of page 1, There is hereby established the Consumer Financial Protection Council as an independent establishment of the executive branch. So it creates a new agency--a monstrous one. It is a 12-headed council which will have its own staff assigned under this amendment by Treasury. Then within each of the 12 agencies, a new position is created--a director of consumer affairs. So you will have 12 new positions staffed by the Treasury, with no limitations on how that's done, and this new council. It is also unwieldy. One of the responsibilities of the consumer agency will be to issue rules to prevent the kind of abuse of mortgages that had such a contributing role to our crisis. This bill says, yes, there will be such rules. They will be adopted by the 12-member council. They will vote on those. The chairman of the Commodities Future Trading Commission will have a vote on setting mortgage rates. The chairman of the Securities and Exchange Commission will help set mortgage rates. Other agencies without any particular involvement there will help set mortgage rates. Now, the 12 agencies that make up this bureaucratic version of the Christmas song will include the agency that has more responsibility for consumer regulation today than any other--the Federal Reserve system. Those who have said, We don't like what the Federal Reserve does, should understand that the largest single loser of authority, by far, in the bill that the committee has brought forward is the Federal Reserve. The Federal Reserve has been the primary consumer regulator under this bill. It still will be under this amendment. The Federal Reserve will retain all of its powers because you have the council, but you also will have much of this done by the independent regulator. So, if you think the Federal Reserve has done a good job as a consumer regulator and if you don't want to diminish its powers, then you ought to vote for this bill. Our bill also doesn't just deal with the Federal powers. Frankly, we were respectful of the role of the community banks, which you have not heard from in large opposition over this. In fact, the independent community banks, until we get to bankruptcy, are going to be supportive of this bill. I understand they have a problem with that. Much of the problem we have today is with the nonbanks--with the mortgages issued outside of banks, with the payday lenders, with the check cashers, with the people who do remittances. Many of them are honorable, but it's a largely unregulated operation. We give specific authority to regulate. What this says is the status quo is fine with regard to that. Arguably, the FTC has some jurisdiction over it. It hasn't been exercised very well. So, if you want to do something about payday lenders and check cashers and remittances, then you'll want to vote for the committee version and not for this 12-member amendment. Maybe some of the new consumer directors in each of the 12 agencies will work this out, but you'll have to wait for this 12-member body to vote on these things. I do want to address one particular issue, which is: Well, what about safety and soundness? The notion that adequate consumer protection somehow detracts from safety and soundness is at the heart of some of our disagreement. In effect, what they are saying is, you know, we're going to have to water down consumer protection. If you get somebody who takes it seriously, it might impinge on safety and soundness. In fact, it has been the absence of consumer protection that has caused safety and soundness problems. It was the refusal of the Federal Reserve, whose authority is preserved in the amendment of the gentleman from Idaho--they were given authority by this Congress in 1994 to regulate mortgages with the Homeowners Equity Protection Act. They flatly refused to use it. Because they would not do consumer protection, safety and soundness suffered. It didn't thrive. There are other examples. The failure to adequately protect people in the credit card area contributes to problems. It does not diminish them. So the argument is very, very clear. Now, it is true, by the way, that the Federal Reserve began to do some consumer protection recently, which was only after we started talking about this bill. This is explicitly what is in the bill. Implicitly what they are saying is: Keep consumer protection subordinated to bank regulation, and you will perpetuate the current problem.

Mr. FRANK of Massachusetts. I first yield myself 1 minute to say, we agree, no more bailouts. The Republicans cannot accept the fact that we have a bill that bans them. It specifically does not allow what happened. Last year, Bush administration officials decided to use section 13(3) of the Federal Reserve to provide funds for the creditors of Bear Stearns and for AIG itself. That would not be legally possible under the bill we put forward. Similarly, we have funds that come not from the taxpayers, but from an assessment on large financial institutions which can be used explicitly, not for any failed institution, but can be used when that institution is being put out of business in case it is necessary to prevent that failure from having negative destabilizing effects. The Republicans don't want to do that. He said that the major difference is--another difference--we have a number of provisions in here to make it less likely that that will happen. Yes, if a big institution gets overly indebted and fails, it ought to be allowed to fail and we will have to deal with the consequences. But it would also be better not cavalierly to say, Let 'em fail. Let's try to stop it. I now yield 2 minutes to the gentleman from Illinois (Mr. Gutierrez).

Mr. FRANK of Massachusetts. I yield the gentlewoman an additional 30 seconds.

Mr. FRANK of Massachusetts. Since I am the one and final speaker, I continue to reserve the balance of my time.

Mr. FRANK of Massachusetts. Madam Chair, I rise to claim the time in opposition.

Mr. FRANK of Massachusetts. Madam Chair, I now recognize a strong advocate of a responsible policy towards the business community, the gentlewoman from Illinois (Ms. Bean) for 2 minutes.

Mr. FRANK of Massachusetts. I claim the time in opposition.

Mr. FRANK of Massachusetts. I now yield 2 minutes to one of the most thoughtful members of the Financial Services Committee, whom we will greatly miss when he retires, the gentleman from Kansas (Mr. Moore).

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. In the 12 years of congressional Republican rule, they didn't do a thing about Fannie and Freddie. We did pass the bill the Bush administration asked us for in 2007. It was too late. But learning from that, we have language here that did not previously exist that bans the use of taxpayer funds, that bans the use of any funds to keep an institution going. So, yes, unlike the Republicans, who did nothing about Fannie and Freddie in that 12 years, never passed a piece of legislation, we passed a piece of legislation and it was too late, but we've learned from it. And there is binding language here that directly contradicts everything the gentleman from Texas says, but he is not easily fazed by that language.

Mr. FRANK of Massachusetts. The gentleman from Texas really doesn't have anything to say against this amendment, but his instinct overcomes that, so he has to say negative things. Among them, though, the most outlandish is his continued effort to blame unemployment on President Obama. President Obama inherited from President Bush a very serious recession. It turns out now the worst since the Great Depression. And it was begun officially by those who certified, the nonpartisan entities that do that, in December of 2007, after many years of Republican rule both in the House and the Senate and in the White House. Unemployment is decreasing now, and you don't go from very bad to perfect. But this effort to evade responsibility for the Republican policies that caused this recession is, as I said, one of the great examples of blame shifting. I have to say again we suffered a great disease outbreak on January 21, 2009. Mass amnesia hit the Republican Party. The huge deficit, the lack of regulation that had brought about our financial collapse, the millions of jobs lost. The administration with the worst job record recently is the Bush administration. And the Obama recovery is slower than I wish it would be, but it is clearly on the upswing. Secondly, the gentleman, to win his partisan points, will lash out at anything. Social Security, he announces now, is going bankrupt. Social Security, credited with all the money paid in, is sound for another 25 years or more. Frightening older people by the false claim that Social Security is going bankrupt is an example of partisanship run riot. What we also have is this reluctance to accept the fact that we have language that says nothing here can go to perpetuate these institutions. He's right. Fannie Mae and Freddie Mac, which the Republican Party----

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. FRANK of Massachusetts. Is the gentleman seriously advancing the argument that it was because the Democrats took over in 2007 that that was why we had a recession?

Mr. FRANK of Massachusetts. Would the gentleman yield?

Mr. FRANK of Massachusetts. Madam Chair, we keep hearing about these studies. They were commissioned by organizations ideologically opposed to this. Surprise, surprise, they got back the answers they wanted. I haven't seen them. No one has produced them. They are not worth anything. They are simply quantifications of ideology which are entitled to no weight. I understand that there are people who do not like consumer regulation. What we learn is that in its absence, abuses can proliferate that become systemic problems, but it's especially relevant when we are dealing with the elderly. We know there are people who preyed on older people. There are people eligible for this program in their eighties who had lives of hard work that did not include sophisticated involvement with financial instruments. There have been problems of abuse. We, in fact, adopted, I think, without any opposition, a piece of legislation that said you cannot be the one that sells somebody a reverse mortgage and then becomes his or her investment adviser, because of abuses. Protecting the elderly against abuse shouldn't be controversial.

Mr. FRANK of Massachusetts. I would just say no one can dictate to anyone, but if there were to be a ``no'' on the voice vote, I think that would be a reasonable end to this particular discussion and we could then continue on the level we talked about.

Mr. FRANK

Mr. FRANK. Yes.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I thank both of my colleagues. And the ranking member is exactly right in the concerns he has expressed, and that is why at the committee, the chairman of the subcommittee--Mr. Kanjorski and I tentatively agreed to this--we later heard some questions raised, in particular, someone I think for whom we all had an amount of respect, Denise Floyd Crawford, who's the longtime Texas securities administrator who really goes back four or five Texas administrations in a bipartisan way. And on behalf of the North American Securities Administration Association, she raised some concerns. And they were worried that this might, at some point, be too much of a delegation and therefore--and I appreciate the gentleman's comments--we agree with him that we do want to--our goal is to buff up investor protection. Clearly, there's a role for FINRA. I think we may have gone a little too far in what we accepted in committee. But we're not talking about getting rid of it altogether. So I appreciate the reasonableness of what the gentleman from Alabama has said. It will be our role next year, if this bill passes, to monitor the SEC. I look forward to oversight hearings to make sure they're using their authority. And particularly, how best to allow the SEC to draw on the resources of FINRA will be high on our agenda.

Mr. FRANK of Massachusetts. Madam Chair, I am very appreciative that two of the most constructive members of the committee, the gentleman from North Carolina and the gentleman from California, have been working together on this. We have a mix here of policy difference, but then also some technical questions. Clearly, there was a difference on whether or not auto dealers should get some kind of exemption. The majority of the committee felt that the auto dealer situation was such--I would think particularly because of the stresses they have unfairly been recently subjected to by the chaos of the auto industry--that they did deserve some. Once that question was resolved--I was in the minority on that, but it was resolved that they did--there were then technical issues about how to work it out. I am very pleased that two of our most thoughtful members are continuing a collaboration on this. The manager's amendment had some improvement in this situation that was mutually agreed to, and there is room, I believe, for further conversation and refinement. And so I just want to express, first, my appreciation, and secondly, my willingness, to the extent my role as Chair of the committee would be relevant, to try to effectuate what they work out.

Mr. FRANK of Massachusetts. First, I would say to my friend from New Jersey, I very much agree with what he said about credit rating agencies. For the record, I would like to make an assertion I know he agrees with, that when he talks about our agreement on the CRAs and the role of the CRAs, we are talking about the credit rating agencies, not the Community Reinvestment Act, the other CRA with which we deal. Sometimes people don't pay full attention, so I don't want to get anybody too agitated. Yes, he is exactly right. He and I, in fact, collaborated on the legislation to remove the statutory assertion. And I think he is also correct, we fully agree--I think there is virtually unanimity on it-- with the purpose he articulated, tell the average investor to pay attention on your own, don't rely on the rating agencies, don't subcontract your judgment to them. Frankly, I am frustrated. I would hope that people out in the economy would take advantage of the full legal rights they have to create some buy side rating agencies. I think that would be very helpful. We checked. There are no obstacles to doing it. I had some frustration that we weren't able to do more. I think we have done as much as anybody could think of. I've seen some newspaper articles that said, Why didn't you do more? But they were, not surprisingly, absent of any suggestion. So, yes, I think it would be better if we had buy side rating agencies. In the interim, we have at least told people, use your own judgment. But as the gentleman acknowledged--and I think we can work this out-- going forward, the problem we got was from a number of States and private institutions that have imbedded in their statutes the old language. And I am pleased the gentleman said let's work together. I think it would mean meeting with various State agencies and the pension funds to see if there is some legislative fix we could adopt short of going back to the old name, because I agree with him as to the purpose of changing the name so that we can alleviate this problem there. So with that, I would be willing to say there is no need for the amendment, given that we have an agreement. We will ask our hardworking and very creative staffs that can often work very well together to meet with those who have raised this issue to see if there is something else we could do that would meet their concern so they wouldn't have to all amend their statutes, et cetera. And with that, I think we have come to a conceptual agreement. And as is often the case, we, the Members, will come to a conceptual agreement and the staff will do all the hard work of making it a reality.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I yield the gentlewoman an additional 15 seconds.

Mr. FRANK of Massachusetts. I sympathize with the loss my Republican colleagues feel that we don't give a bailout for them, but this bill clearly repudiates it. First, they just today, as they did yesterday, made an issue out of the fact that we do include some bankruptcy, but their whole issue was bankruptcy. As the gentleman from Colorado said, there is nothing in their bill that prevents this from being extended ad infinitum under bankruptcy. Technically, we do have some time limitations, but that's part of bankruptcy. Here is what we do say. If, in fact, the FDIC would decide with a failed institution to keep it going, it would do it without any funds. On page 397, there is established a separate fund to facilitate and provide for the orderly and complete dissolution of any failed financial company that poses a taxpayer threat. Page 399, the fund shall be available to cover the costs incurred by the corporation as a receiver, repay such funds, cover the cost of systematic stabilization actions, not for the entity. Then in 288, the corporation, such action--they shall only get involved if they think it's--they can only spend the money if it is necessary for the purpose of financial stability and not for the purpose of preserving the covered financial company. Yes, we are saying that in some cases, in a very complex institution, you may not be able to wipe it out in a year. That's what was pointed it to us. If you wiped it out prematurely, you may find yourself costing more money, not to the institution, in severance pay and other things for employees. This is very clear. By the way, as to the permanence of this, the authority to borrow here is sunsetted in 2013. Yes, there will be a fund of assessment from private financial institutions. I know the Republicans do not want us to discommode the major financial institutions for this. We levy on them for money that can be used. If a major institution fails, then the money can be used to manage that failure in a reasonable way. The biggest difference is that we try to stop the failure and they do nothing to try to stop it.

Mr. FRANK of Massachusetts. Madam Chair, I demand a recorded vote.

Mr. FRANK of Massachusetts. Madam Chair, pursuant to section 4 of House Resolution 964, I request that amendment No. 11 be considered out of order. If I may elaborate, it is for the purpose of en blocing some amendments.

Mr. FRANK of Massachusetts. Madam Chair, I yield myself just 10 seconds to say that one of the Members whose business experience and general good judgment has been a very major asset for us is that of the gentlewoman from Illinois (Ms. Bean). She has had a very significant and positive impact on this bill. I will now yield her 2 minutes.