Democrats & Liberals Archives

Barney Frank "Disappointed" in Banks

I was watching Andrea Mitchell interview Barney Frank on the TARP funds, and ended up sputtering and fuming over Frank’s remarks. On one hand, they were blatantly honest, and on another they were understated beyond belief.

Here is a clip of a portion of that interview (and here is the link at MSNBC to the full interview):

Partial transcription (emphases mine):

Frank: Look, we have banking regulators and their primary job is to protect the banking institutions - I understand that. We have historically given them the right to protect consumers, but that's not their primary role.

The Federal Reserve, control of the currency, the FDIC, they just have a primary focus on protecting the banks and the bank system. We think the time has come to have a separate institution that protects the individual customer - on credit cards, on bank overdrafts, on truth in lending, on all of those things. And the administration proposed it. It had been originally proposed by Professor Elizabeth Warner at Harvard Law School. We are going to put that into place so that individuals dealing with financial institutions, it will cover pay day loans. It will cover a lot of things where we have seen consumer abuse, and have an institution whose focus will be on the consumer protection rather than doing consumer protection as kind of an after thought to more important (as they see it) jobs.

Mitchell: Now speaking of Elizabeth Warren and the Harvard law professor who's also leading the Congressional oversight panel, that panel issued a report today. Saying that the Treasury is selling its stakes in banks for one-third less than they're worth. We're talking about billions of dollars here. Does that raise concerns for you?

Frank: It does. I would have to look at them. There is this point that we do want to have the banks to have some funding to be able to do their job. But I have to tell you that the banks have disappointed me some. There was a recent very good study from the Federal Reserve Bank of Boston about national issues which said that the banks are not really doing what they should be in helping us avoid foreclosure in rewriting mortgages, and again we're expecting the banks that got money from the federal government under the TARP program (as we call it) to do that. So yeah I will be looking at that because the federal government was there when the banks needed it very badly, and I haven't seen the report. I've been in that hearing all day that you mentioned until literally five minutes ago, but I will be looking at that report.

Frank tells us that the purpose of these various federal institutions and agencies is to protect the "banks." Protect them from what and for what? When did the financial institution's health get redefined as disconnected from the needs of the nation and the needs of the people? Clearly, what has been interpreted as "good" for them has been (and continues to be) disastrous for "the people." Now Frank recommends setting up an agency to protect the "customer." What kind of leverage is it going to have against the Federal Reserve, Treasury Department, SEC, etc.? Likely not much. At best, people's needs might be weighed and balanced against financial/corporate needs. Why is "what's good for monied interests" even in the equation?

We have bailed (and continue to bail) out the financial industry. Virtually no money is going to people. Instead, the foreclosure crisis continues, and the banks are not doing ... anything. So Frank is SOMEWHAT disappointed! I am totally outraged. Across the country people are losing their homes - including apartments and rentals. The banks are foreclosing like crazy. In losing those homes what little wealth the majority of people have is being stolen from them. Their life savings and dreams and stability are being stolen from them. This "crisis" and the response to it, is a massive transfer of wealth from the people to big investors.

Let's take one example. The situation in Detroit, Michigan was captured in this article - The city of $10,000 homes: Outside buyers drawn to Detroit's foreclosures:

Welcome to Landlord Nation, where foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more.

In extreme cases, homes are on sale for $1 or less, which has enticed investors to Detroit from as far away as the United Kingdom and Australia.

"In the past few months, I've picked up 10 new clients from out of state that are buying in bulk," said Mike Shannon, a suburban Detroit real-estate agent. His office specializes in foreclosures in a city that's among the national leaders.

"They're coming to us saying, 'Look, I want to buy 50, 100, 1,000.' They want to own every decent and cheap house they can find."

Despite a stagnant retail housing market, real-estate sales of foreclosed homes are booming.

This same phenomenon is happening across the country. Here we have homes worth over $100,000 that have been taken away from those who owned them (foreclosed), and are now being sold for ten cents on the dollar (or less) to groups doing a land grab. Now if the banks and mortgage companies are going to sell these homes at a 90% loss, wouldn't it have been a better idea to work with those people in their homes? Wouldn't it have been more "profitable" to renegotiate loans and terms - even if it meant a 50-80% decrease in the principal? Logic would say "yes," but finance would say "no."

How can this be? Well, if you change the mark-to-market rules (which was done) it allows the banks to value the homes at whatever they want (incentive is to value high). So if you take a $100,000 home that will only sell on the open market for $70,000, you give it full value on your books because that makes your assets and loan ratios look good. On the other hand, you can foreclose that property and sell it for a $90,000 loss and this is made up by the federal government because clearly this is a "toxic asset". So you can lower your tax burden and continue to qualify for federal bailout. However, making deals with home owners really gets you nothing on either side of the books. So what has been incentivized (and facilitated) by TARP and the Federal Reserve is a land grab and a massive transfer of wealth.

Those "investors" are buying up huge numbers of homes (1,000 at a time) in ONE city. Meanwhile, 1,000 families have lost everything.

I had a mortgage with Washington Mutual. Chase was bankrolled (by us) to buy WAMU. The mortgages went to Chase for pennies on the dollar. No one asked me (nor any other WAMU mortgagee) if we wanted to buy our own loans at this fire sale rate. But Chase got something for nothing. Likewise, those folks around the country who are losing their homes are not being offered "deals" that would make sense. They are being offered 40 and 50 year loans. The banks won't negotiate the principal, but by god they will take everything and sell it for pennies on the dollar to big monied firms.

Barney Frank is disappointed, but the system is doing just what Frank (and virtually everyone else in Washington and on Wall Street) wanted - increase their coffers and increase their death grip on valuable assets and the money supply.

This is not disappointing. IT IS DEVASTATING!

Posted by Rowan Wolf at July 11, 2009 9:52 PM
Comments
Comment #284363

Frank is a kind of huckster. He is very intelligent, grouchy and agressive, but not particularly a believer in the concept of objective truth. You cannot really trust Frank and so you cannot be disappointed when he act within his well-known character.

He is a good example of a political operator. These are the kinds of guys who run things when government runs things. If you want Frank and Co to run business, give them the power to do it. Otherwise …

Posted by: Christine at July 12, 2009 9:35 AM
Comment #284365

Rowan, thanks. You really nailed it on the head for me. I’ve never much cared for Barney he’s a big reason we’re in this mess and his non-chalance “disappointed” is equally infuriating to me. WTF?

Posted by: Cober at July 12, 2009 10:45 AM
Comment #284368

Christine, not sure where you were going with that comment. However, government run PROGRAMS are run by professionals (if politics doesn’t interfere). Hence the outcries of government running health care would be a “disaster” are outright propaganda. Medicare and Medicaid run at under 5% admin costs compared to 20-30% under private business.

On the other hand, the legislature sets the constraints. Undue big money interests influencing that stuff (like regulating the financial sector and the TARP) are a significant problem.

Posted by: rowan at July 12, 2009 12:05 PM
Comment #284369

Thanks Cober. Yeah, that comment had me spitting teeth as well.

Posted by: rowan at July 12, 2009 12:06 PM
Comment #284370

Rowan, excellent article, and truly refreshing to find a partisan critical of their own in Congress. If the D Party had 30 million more like you, it might actually become a Party worth voting for, due to its having to live up to the objective standards of supporters such as your self.

Some decisions in government should NEVER be compromised. The decision to engage and win a war should never be compromised. The decision to oversee and regulate capital and financial markets should NEVER be compromised (as it was with the passage of the GLB Act and abject failure by the FED, Congress, and WH to address the hedge fund markets and credit default swap instruments which took off after the passage of the GLB Act.

I can accept that Congress persons are human and capable, individually, of errors and flaws in judgment. But, that is precisely why the founders opted for a Congress, instead of a King. A King’s foibles can harm all. A Congress was supposed to amass the best judgment from the best leaders that the general public can muster, and therefore render the nation and public immune from the foibles and errors of any one person.

It was a great concept, until political parties coalesced after the election of G. Washington. Within 2 decades, the political parties were acting as individuals in contest with each other, with few or no dissenting members within each party. And thus, the conceptual immunization from individual bad judgments was rendered increasingly ineffective, until today, we have no immunization at all.

To save our nation and government from the short-sightedness and myopic focus on next year’s election, so that our longer term future has a chance, voters must begin to vote for challengers to incumbents in their own party and any other, until such time as the voter can finally approve of the governance by Congress.

The vote’s purpose was to give the people or legislatures the power to REMOVE incumbent King’s from seats of power, which the colonialists could not do with their King George without first fighting a revolutionary war.

Democrats should vote Democrat if they believe in the party platform, but, they SHOULD not vote for Democratic incumbents as long as they disapprove of the job Congress is doing. They should vote for Democratic challengers, instead. Only in this way, can voters hold their Congress persons responsible for the products of their labor and the dismal approval rating by the voters.

The Party was never supposed to be more important than the nation and its future. NEVER! But, it has become so, as evidenced by more than 80% of voters disapproving of the job Congress is doing while 90% and more of incumbents get reelected each and every election on average.

Only the voters have the power to change this. Incumbents will not, cannot, put the nation’s and people’s long term future ahead of their own reelection concerns and fund-raising by special interests and threats by lobbyists. Only the people can force the Congress to do that, reducing their reelection chances from 90% to 50-50. Only then will Congressional representatives acknowledge their reelection chances rest with the voters, not the lobbyists and wealthy special interests who now control the voting and legislative behavior of our representatives.

Posted by: David R. Remer at July 12, 2009 12:57 PM
Comment #284371

What’s amazing is how these scumlords get such high rent in such a depressed area that’s sad, True many are subsidised but the renter still has to pay something all these areas are turned into Pottervilles remember the movie it’s a wonderful Life , So what’s it going to be mr. Potter or George Bailey?

Posted by: Rodney Brown at July 12, 2009 1:36 PM
Comment #284372

Rowan

Government DOES interfere. Frank personally interfered. That is his record and the record of almost all politicians. Power corrupts. It is always thus. That is why you cannot give the Franks of this world too many options. Beyond that, established interests always influence government. The big guys use government as an offensive weapon against competitors. It is truly touching that bigger government advocates can at the same time complain about undue influence and then call for creating structures that will give special interests even more power to exercise undue influence.

Frank, Dodd and many others have shown that even smart and reasonably honest politicians (which both are) become tyrannical and/or influenced by special interests when they are given the power.

Government also hides its admin and overhead costs by its ability to mandate and pass costs and obligations to others. It also has access to various services not included in its official overhead.

Rodney

George Bailey was indeed a poor steward of his investors’ money. He let that incompetent Uncle Billy keep his job, for example. Uncle Billy did, indeed, lose the money. Beyond that, even after all of George’s friends chipped in their pocket money it was not enough. George was really bailed out by his rich friend, Sam Wainwright who fronted the big bucks – he haw. Is is easy to miss that if you don’t listen carefully to the wire from Sam.

Posted by: Christine at July 12, 2009 2:01 PM
Comment #284375

David, thanks for recognizing fairness. I have never been “partisan” in the usual sense of that word. I have standards and expectations of ALL of our elected representatives. I have no problem whatsoever in questioning and critiquing my own “party.”

I believe that we have a major governmental problem. That is allowing monied interests replace the people as the primary voice with our legislators. The Dems are only slightly better than the Repubs on this issue. However, the Dems still (at least on the surface) allow a broader range of voice and representations. I do not see that as any longer being true of the Republicans. When it comes to the issue of the economic crisis and our way out of it, BOTH parties have licked the boots of the financial sector (Frnak included). Those who have stood most firmly against this have been Sanders and Kucinich and a handful of others. For the “libertarians” Paul is only marginally less supportive - he wants to turn almost everything over to the private sector - and he did not support the bailout (but all of this is a much more complex discussion).

Incumbents get reelected BECAUSE of the big bucks they get from special interests. The people did not protest this shift from mandating public service from the media to buying face time with the media. Hence, whoever can buy the most time wins. I am 100% behind public financing ONLY of all elections (local to federal). NO outside money allowed - period.

It amazes me that in most of Europe the governments fear the people. Yet in the U.S. the government only nods (at best) to the people. There is something very wrong with that.

Posted by: rowan at July 12, 2009 2:30 PM
Comment #284376

People are human and do make mistakes sometimes, Mr. Potter was the real villain his greed became his downfall by snatching all that money and creating the deception and it backfired on HIM, The working folks came to the aid of George Bailey at the end, Sam Wainwright said he’d help out to ensure the savings and loan survival and the survival of the SAME community he came from and loved that’s giving back in my book! :)

Posted by: Rodney Brown at July 12, 2009 2:31 PM
Comment #284379

Rodney

It remains that Sam saved the day. Potter really came out okay (by his standards). He got that pile of free money that Uncle Billy gave him.


Rowan

Governments in Europe “fear the people” a lot less than the government in the U.S. does. That is why they can do sensible but unpopular things like raise taxes on fuel etc. Don’t mistake the power of organized interest groups for the will of the people.

What do you think the chances an outside like Obama would have in Europe? When the son of an Algerian immigrant becomes president of France, a Turk becomes German chancellor or the British PM’s father was a student from Pakistan, maybe we can talk about the relative openess of our systems.

One problem for the U.S. v Europe is that we have TOO much popular input into the decisions of government at all levels.

Posted by: Christine at July 12, 2009 3:32 PM
Comment #284381
Now Frank recommends setting up an agency to protect the “customer.” What kind of leverage is it going to have against the Federal Reserve, Treasury Department, SEC, etc.? Likely not much. At best, people’s needs might be weighed and balanced against financial/corporate needs. Why is “what’s good for monied interests” even in the equation?

Hmmm, a new agency that has the job of protecting the consumer. We could call it the Consumer Protection Agency …

http://www.ftc.gov/bcp/consumer.shtm

Now, maybe you could argue that the agency should have more power or be adjusted a bit, that’s a good conversation to have. But to float the notion that there nothing out there now is ridiculous.

Or, perhaps we need another ‘Czar’? We only have 31 now, only a few more than the Russians did at their peak, I’m sure we could use a few more, right?

Now, you are suggesting that all of these people are losing their homes. Are you suggesting it is because of actions that were not their own? That they didn’t fall behind and default on their mortage? These companies employ people, and to pay them they have to make a profit on lending money now to people who will pay them back. When people don’t pay them back, they can no longer pay their employees, so they either go out of business and those employees (who have held up their end of the contract) would end up defaulting on their loans at the expense of those who didn’t hold up their end of the contract or they have to ask the government to hand over the collateral for the loan, most times the house itself, to help pay their employees.

But more importantly, you are suggesting that the banks refi the loans at 10% of their balance so that the people can stay in their homes.

I love it! Where do I sign up? You are suggesting that all I have to do is miss a few mortgage payments, get close to being forclosed upon, and then renegotiate the loan at a 90% savings to me? I would do that in a heartbeat!

Don’t you even see how what you are suggesting is not only impractical but would cause an entire collapse of the lending/mortgage/financing business we have in the United States? Or is that really your ultimate goal?

BTW, there has been in place, for a year, a program that the federal government has in place that will help refinance their loans at a lower balance. So far, *1* person has been qualified and used this program. Most people who could use the program are using private industry options instead because the government ties too many restrictions to the program that make it less enticing than the current programs that exist. And they do exist, I get telemarketers calling me about them all of the time. You suggest that people have ‘no option’ and that is just not an accurate potrayal, many banks are using these programs and trying to get people to stay in their homes because it does help them and their bottom line, but sometimes the people are just not responsible enough and need to figure out a way to get out of the loan and rent for a while until they can learn (and display) a little more responsibility before moving on to home ownership. How is that the fault of the banks who need to ensure, in this time, that the loans that they do make are less toxic and can ensure that their employees and investors are going to be paid?

The worse part about your article is the divisive rhetoric. Them against us. The ‘big corporation’ against the ‘little guy’. I thought we were going to work against this type of divisive culture war that ‘someone else’ started? Where is the bipartisanship? The examination of the needs of both sides?

The only one forcibly taking land from someone else without it being their own fault is the government, not the banking industry BTW. No one, no matter what David Remer suggests, has put a gun to the head of anyone and made them sign up for loans and credit cards that they couldn’t afford and then not pay them.

Finally you say:

However, government run PROGRAMS are run by professionals (if politics doesn’t interfere). Hence the outcries of government running health care would be a “disaster” are outright propaganda. Medicare and Medicaid run at under 5% admin costs compared to 20-30% under private business.

If politics doesn’t interfere? If it is a governmental program, it is, by definition, influenced by politics, Rowan. Maybe that is the real disconnect. If you want a non for profit non governmental agency to run healthcare (which I would WELCOME as an actual solution) then let’s do it. But that isn’t the goal. That organization wouldn’t have the one thing that governmental agencies can have that they can’t. The ability to use FORCE against people. That is the only reason an agency has to be run by the government…

But you mention Mediaid and Medicare. You realize that the programs will be bankrupting us, right? And that people who are on those programs end up needing additional insurance, at their expense, to get fully covered, right?

The fact that the left use these failing programs as an example of what they want us all to be experiencing as healthcare is an insult, IMO.

We can, and should, demand, expect and go out and get better.

Posted by: Rhinehold at July 12, 2009 4:11 PM
Comment #284385

like i said mr. Potter or George Bailey? It’s not so black and white Christine, No George Bailey no Bedford falls Clarence showed the alternative world “Pottersville” Sam and the working class would have not even been a part of the Equation! Besides the bank examiner had a train to catch to Elmira! http://www.youtube.com/watch?v=ErrzjGCi3gY

Posted by: Rodney Brown at July 12, 2009 8:17 PM
Comment #284386

Rowan and Christine,

Most European nations have more than 2 parties, forcing shifting alliances and agendas across party lines depending on the policy issue. This means that party dogma and ideology don’t have much of a chance at becoming policy without have other merits. Which opens the door to far more pragmatism and longer term solutions as a basis for legislation. It also means the people have more choices one election day, which forces the parties to acknowledge the people as their boss, as opposed to the wealthy or corporate interests.

This one simple change in America, the rise of a third party in the Congress, would dramatically improve American legislative solutions overall. Since, with 3 or more parties, no one party can control the agenda, and 2 parties controlling the agenda in alliance represent far more voter views than one or the other of our two parties, who look to voters for feedback only around election time.

Posted by: David R. Remer at July 12, 2009 8:27 PM
Comment #284388

Christine,

You apparently missed the message of Frank Capra. No angel wings for you. I can’t help but envision you and Potter wheeling down your empty mansion halls, griping your way into old age and insanity. You need to watch the movie again. Life is a journey, not a bottom line.

David,

I’m not convinced that Europe is any more practical than the US.

Posted by: gergle at July 12, 2009 8:52 PM
Comment #284399

David

that is how it works in theory, but not in practice. Most European countries have a type of proportional representation. That is why they have more parties since it gives small parties steady support from a slice of the population and means that they do not have to cooperate or compromise as much. The “people” really don’t have so much to say as they do here. Organized groups have it, however.

Posted by: Christine at July 13, 2009 12:39 AM
Comment #284421

BTW - why don’t one of you liberals write something about the new CIA revealations? It seems the CIA thought about a program that would capture or kill Al Qaeda leaders. Congressional Democratic leaders are angry because they didn’t get a chance to leak it to the New York Times. They want to preemptively stop anything like that, kill it in the brainstorming stage.

Posted by: Christine at July 13, 2009 8:14 PM
Comment #284464

Rowan:

Nice article. Consumers need protection from the Barney Franks of the world. This idea of a new agency is sort of hogwash. It’s like some gun control arguments. When someone commits a crime we obviously need to pass yet another gun control law. Forget the fact that the killer already violated 20 or so. (making this up).

The organzations sited were created to benefit citizens (ie consumers). So Frank’s idea is to create another organzization to benefit consumers because the previous government organzations created to benefit consumers let us all down.

More government and power to the Barney Frank’s of the world is always the answer.
\
In terms of government run programs we can look at Freddie Mac, the US Postal Service, Amtrak, Veterans Administration etc, and then compare. We have a great data base to look at to compare.

When you want to send a package overnight who do you use?

Posted by: Craig Holmes at July 14, 2009 4:07 PM
Comment #284507

I use the post office Craig,Small town hospitality and nice folks working there means a lot.

Posted by: Rodney Brown at July 15, 2009 12:32 PM
Comment #284629


“In terms of government run programs we can look at Freddie Mac, the U. S. Postal Service, Amtrak, Veterans Administration etc, and then compare.
We have a great data base to look at and compare.”

Yes, let us compare these government agencies with Enron, AIG, Chase, Citi, BoA, GM and the for profit healthcare insurers.

We all know that government agencies could be run more efficiently, more professionally but, as long as the people are willing to accept a fake competitive politicial system monopolized by two political parties that care more about incumbency than they care about efficient and effective government, we got what we deserve.

Posted by: jlw at July 17, 2009 1:50 PM
Comment #284631

Government agencies are Government agencies. It’s the same all around the world. For instance when my best friend was dying in Canada from Cancer the doctor was shocked that his daughter called his home number. It was a pretty much 9-5 kinda job.

We had fun killing flies in his room and in a kitchenette down the hall. It helped kill the time while we were waiting.

Posted by: Craig Holmes at July 17, 2009 2:58 PM
Comment #284644
We all know that government agencies could be run more efficiently, more professionally but, as long as the people are willing to accept a fake competitive politicial system monopolized by two political parties that care more about incumbency than they care about efficient and effective government, we got what we deserve.

Here’s an idea, let’s get the government out of it completely so that we don’t have government backed monopolies as one solution (current) and government takeover on the other. Where actual competition exists.

Yeah, you’re right, who am I kidding…

Posted by: rhinehold at July 17, 2009 9:38 PM
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