MSNBC INTERVIEW WITH REP. BARNEY FRANK (D-MA)
SUBJECT: ECONOMIC STIMULUS PACKAGE INTERVIEWER: ANDREA MITCHELL
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MS. MITCHELL: Joining us now live from Capitol Hill, Democratic Congressman Barney Frank, chairman of the House Financial Services Committee in charge of today's CEO hearings.
Thanks for taking time to talk to us about how it is going so far. You've heard little snippets that we chose from this extensive hearing this morning. Are you satisfied with the answers?
REP. FRANK: Well, yes and no, Andrea. I think they have over- told us what they did. I think that things are not as rosy as they said, but I don't mind that, in fact, I'm happy with it because here's the point. The fact that people feel the need, in some ways, kind of almost burnish what they did shows they understand they better do more in the future.
Look, this hearing inevitably talks about the past, but our goal is to try to make things better for the future, you know, you announced earlier criminal investigations by the FBI or prosecutions by the special inspector general who we created in this bill. Those are appropriate. That's their job. We're the legislative branch. Our job is to make policies.
The purpose of this hearing in my mind primarily is to put as much pressure on them as possible so that going forward they'll cooperate in diminishing foreclosures, in lending more money and not doing stupid things in compensation and I do think we're making serious progress on all three.
So I think they didn't lie, but I think they may have told the truth a little selectively, but that doesn't bother me given that it's in the context of their committing themselves to do more in the future.
MS. MITCHELL: Now, how well we know whether it's working and whether it's actually increasing lending and stimulating the economy so that there is job creation, which is the bottom line here?
REP. FRANK: Well, there are two separate questions, both important ones. We will know better whether or not this is increasing lending or by how much because the Obama administration in contrast to the Bush administration will try to find out. You know, there was kind of a split in the Republican Party. Some of the Republicans said the majority in Congress don't do anything; this is a problem and let it work itself out. George Bush, his Secretary of the Treasury and others said, no, no, we have to provide them more resources, but they consciously did it in a way that said, but we're just going to give them the money and we're not going to try to put any limits on them.
The Obama administration, I think, has it right and they say, look, we need to put resources in there because we have no option, we've got to get credit flowing again, but we're going to put some restrictions on it.
The Bush administration refused to even to ask them how they were spending the money. Now, the special inspector general is in the process of asking and going forward, Secretary Geithner very importantly said yesterday, any new infusion of capital that goes to the financial institution will be after there's an agreement as to how it will it be used.
So we will measure in the future and we will be measuring much better because the Bush people didn't even try.
MS. MITCHELL: One question that comes to mind is whether or not Tim Geithner's plans, your plans, to move forward are hindered somewhat by so much anger over the way the TARP was handled, that first $350 billion? Was there so much public anger and, frankly, these kinds of hearings, obviously, with people on the hot seat contribute to more public anger? Is it difficult to get the public now to go along with more public money for these institutions?
REP. FRANK: We're having the hearing today. We had the ones yesterday with Mr. Bernanke talking about the nearly $2 trillion the Federal Reserve has lent out. No, I don't think they will add to public anger. Look, you don't deal with anger by ignoring it. I think it was important that they be there and they be asked these questions and it wasn't the most comfortable moment for any of them. I think if people listen they will see that things are not as good as the CEOs said, but not as bad as some people had thought. But the other part of your question is absolutely. There is no question that public anger is a constraint and what I've told Secretary Geithner, I tried to get this across to Secretary Paulson and I failed. Secretary Paulson's unwillingness to force them to do something about foreclosure, to be explicit about increased lending, to curtail the compensation abuses that were under his control. That led to a degree of anger.
So what I've made it very clear and I think others have to Secretary Geithner and to President Obama, if they do not alleviate public anger and you can't do that by word tricks, they've got to do it by real progress, by people getting loans, by foreclosures diminishing, by house prices not collapsing as rapidly as they have been. If they are unable to do that, there will be no more resources. Now, I think they believe that this crisis is bad enough so they will need more resources, but they are on notice and until and unless they show the public that there is something in it for them, they don't get it.
Here's our dilemma. We need to get the credit system functioning again. Credit is essential to the economy. There's no way we can go and create a whole new system; it's just not practical. So we have to use some of the existing institutions and we have to do things that, frankly, have some benefit for the people who many people are angry at, but there's no alternative because you can't just throw the whole baby out with the bathwater, therefore, it's especially incumbent and I told this to the CEOs and to the Secretary of the Treasury, they have to be very careful with regard to all these things, compensation, showing that they're making loans, reducing foreclosures.
They have got to lean over backwards almost, not to make bad loans, but to make it clear that they're making them or else the public will shut them down.
MS. MITCHELL: Well, you had an immediate reaction to the Geithner plan yesterday. You said, I'm concerned that $50 billion to reduce foreclosures understates the amount that we will need and we need some assurance that assuming this works as we hope it will there will be more money available. Secondly, the Secretary said the administration would present details of their foreclosure reduction plan in a few weeks, that's too much time.
While you're calling for more money for foreclosures and more requirements on the bankers, we understand from The New York Times yesterday that Geithner won a battle against perhaps David Axelrod and others in the White House who were arguing that there should be more pressure on these institutions and Geithner won out to have less of a regulatory hand while he tries to bring them to the table.
REP. FRANK: The Times' stories haven't always been accurate there, and certainly with regard to whether or not they require new lending, I thought they were too pessimistic, but the Treasury isn't the only factor here. Look, we did not have the power to force Paulson to do anything because they were going out of office. With regard to Mr. Geithner, we can't legally compel him to do things that have already been with money already voted, but he's going to have to come back and I think if we are able to use the $50 billion well and there are still opportunities to diminish foreclosures that are out there, I predict we'll get them more money because he will be made to understand as I think he does that that's a condition from getting more money.
So I am putting him on notice, use the first $50 billion and I don't want to commit to an arbitrary number until we know it will work, but I believe if they do this right, it will work, we will reduce foreclosures and we will have an ability to use more and at that point, I think, they understand they have got to work with us to get it or they get shut down.
MS. MITCHELL: There's a letter that was released today by the New York state attorney general Andrew Cuomo to you asking you to look into to help provide more information into his investigation into the Merrill bonuses. Is there action on that front?
REP. FRANK: Yes, in fact, Congresswoman Carolyn Maloney asked Mr. Lewis, Merrill is, of course, out of business and I have to say that the people of Merrill Lynch, including John Thain who had been the CEO really behaved very badly and they appeared to engage in manipulation because they knew they were being looked at to push these bonuses in.
What Mr. Cuomo raised was the question as to whether or not Bank of America knew this. Bank of America, in fairness to them, decided --
MS. MITCHELL: Which took over Merrill --
REP. FRANK: And then the federal government said, please go forward with this, we don't want them to collapse. The question is: At what point did Bank of America know this? They say that they did not know it until they couldn't do anything about it, that's being further looked into.
MS. MITCHELL: Let me ask you just before I let you go about the stimulus package as well and the negotiations. I know you've been very busy on the financial sector, but overall, what kinds of jobs is going to come out of that stimulus package? How is it actually going to work down at the level of towns and states?
REP. FRANK: Cities and states all over America are in the process of having to lay people off because this financial crisis for which they were not responsible is causing a reduction in taxation, and therefore, they can't continue. I have people because by their state constitutions they can't have unbalanced budgets. There's no question that the recovery package is providing them funding that will avert layoffs and that's a very important thing to do. Unfortunately, some of those Senate Republicans tried to cut that back some, I hope it will be restored and by the way when you avert the layoff of a teacher or a cop or a sanitation worker or a firefighter, you're also helping the quality of life.
So I'm very enthused about that. There are also some things in there that I will tell you from the affordable housing area where I have a lot of work to do, there were projects ready to go forward, ready for construction to start and they were threatened with stoppage, we put some money in to keep them going and that will give us affordable housing and that's very important for this reason.
One of the causes of the crisis we've had in subprime lending was the Republican view that you shouldn't do anything about rental housing, that the only good housing for people with home ownership. So they pushed a lot of people into owning homes who shouldn't have been able to own homes, who weren't able to own homes and shouldn't have been pushed into it and cut off rental housing.
One of the ways that you avoid this in the future is not to make the bad subprime loans to people who really can't afford them and instead to have decent, affordable rental housing and that's going to be part of this recovery package. It will both create some jobs in the field of construction, but also provide homes.
MS. MITCHELL: Thank you so much, Chairman Barney Frank. Thanks very much for taking a break and coming over.