(CNSNews.com) - House Financial Services Chairman Barney Frank (D.-Mass.) said yesterday that an unregulated “private market” in the financial industry caused a lot of problems that the Democratic Congress now needs to fix.
Frank also suggested that Americans now “hate” banks and that helping people stave off foreclosure on their mortgages, government scrutiny of executive compensation, higher taxes, and prodding banks to lend more money may all be part of the solution to what ails the U.S. economy.
“Well, there is no very good approach because, frankly, a philosophy of let the private market do whatever it wants, don’t regulate capital, keep capital--keep the, the government out of it--Alan Greenspan acknowledged, the leader of that philosophy, it caused a lot of problems,” said Rep. Barney Frank (D-Mass.) on NBC’s “Meet the Press. “And we now have to try and fix them.”
Frank said that a top priority for future use of the $700 billion in bailout money that the Congress appropriated last fall for the financial industry should be to reduce foreclosures on home mortgages.
“First of all, the most important thing to do--and there's an enormous contrast here between the Bush administration and the Obama administration--is reduce foreclosures,” said Frank. “To our great disappointment and in defiance of congressional language, the Bush administration, in the first $350 billion, refused to do anything with that money to reduce foreclosures. A major part of what you're going to see from the Obama administration is an effort to put substantial money into reducing foreclosures both because they are damaging socially, but even more important because, macro-economically, until you reduce foreclosures you don't begin to get out of the problem.”
David Gregory, host of NBC’s “Meet the Press,” played a videotape of Frank saying that Americans now hate banks and are beginning to hate Congress because of Congress’s association with banks.
“People really hate you, and they’re starting to hate us because we're hanging out with you,” said Frank on the tape.
Frank also said on “Meet the Press” that raising taxes on financially successful people had preceded an economic upturn during the Clinton years.
“In fact, Bill Clinton--the most successful economic period we've had recently in America was after Bill Clinton got many of us to vote to raise taxes on upper income people,” said Frank. “And in fact we did that in '93, and no Republicans voted for it. We didn't get any bipartisan help then. We, in fact, had a very successful economy for, for the, for the rest of his term.”
Noting that his committee has been looking into the issue of executive compensation in the banking industry, Frank argued that the system of financial rewards for bankers created incentives that caused them to take imprudent risks.
“But 2006, the Democrats in the House Financial Services Committee began to look at this question of executive compensation,” said Frank. “The problem with compensation is not just that it's large, but it gives a perverse incentive. They pay themselves in ways that say this, this: ‘If I take a risk and it pays off, I get extra money. But if I take a risk and it loses money, I break even. Heads I win, tails I break even.’ It's going to--encouragement of people to flip too many coins, and that's--we--one of the things we have to do is, is that.”
At the same time, backing a point made by his colleague on the program, Sen. Claire McCaskill (D-Mo.), Frank said the government needs to push bankers to loan money that they currently are reluctant to lend.
“Secondly, as Senator McCaskill said, we have to push them to lend more, not irresponsibly,” said Frank.