Congress Should Take Up $90 Billion Bank Tax, Frank Says

Representative Barney Frank
Representative Barney Frank, a Democrat from Massachusetts and chairman of the House Financial Services Committee, waits to start a House-Senate financial overhaul conference in Washington. Photographer: Andrew Harrer/Bloomberg

U.S. Representative Barney Frank, an architect of the financial-overhaul bill lawmakers sent to President Barack Obama yesterday, said he wants Congress this year to take up the White House plan for a $90 billion bank tax to recoup government bailout funds.

Frank said Treasury Secretary Timothy F. Geithner had urged him not to look for bank fees, which Frank had sought to help pay for the legislation, because the administration plans a major push for a broader tax.

“I don’t understand how members can say they’re for reducing the deficit and then let Goldman Sachs and JPMorgan Chase off the hook entirely. They were the major beneficiaries of the intervention,” Frank, the chairman of the House Financial Services Committee, said today in an interview on Bloomberg Television’s “Political Capital With Al Hunt” airing this weekend.

Frank, a Massachusetts Democrat, also said he plans to begin writing legislation in September on a system to replace housing finance companies Fannie Mae and Freddie Mac.

The structure of Fannie Mae and Freddie Mac as companies with private shareholders that have a public mission “doesn’t work,” Frank said. Fannie Mae and Freddie Mac have been under federal conservatorship since September 2008 because of their losses.

“I’m more on the side now of trying to separate out this hybrid thing,” Frank said. “I believe we should go out of here with a version of what’s going to replace it.”

Confidence in Regulators

On the overhaul bill, Frank said he was worried that if a Republican wins control of the White House in 2012, the provisions could be weakened. He said he was confident existing regulators, including Federal Deposit Insurance Corp. Chairman Sheila Bair and Securities and Exchange Commission Chairman Mary Schapiro, would be able to resist efforts by banking lobbyists to dilute the rules because they helped shape the bill.

“They will all be people who have a commitment to make this thing work the way it was supposed to and who helped draft it,” Frank said.

He said he supported appointing Elizabeth Warren, chairman of the congressional panel overseeing the Troubled Asset Relief Program, as the first leader of the consumer financial protection bureau the legislation creates at the Federal Reserve.

Frank dismissed a call by House Republican Leader John Boehner of Ohio to repeal the bill as “right-wing rhetoric.”

He also rejected criticism the legislation would restrict lending, saying that some forms of credit, including subprime mortgage loans, should be constrained.

Less Credit

“Will there be less credit? I hope so,” Frank said. “We are going to restrict the amount of leverage that can go out there.”

Frank praised former Federal Reserve Chairman Alan Greenspan’s comments this week that George W. Bush’s 2001 tax cuts should be allowed to expire at the end of this year.

“I think Alan is being an intellectually honest conservative here,” Frank said. “I honor Alan Greenspan for breaking with the right-wing, knee-jerk ideology in saying so.”

Frank said yesterday’s settlement by Goldman Sachs Group Inc. of U.S. regulatory claims it misled investors in collateralized debt obligations linked to subprime mortgages was “clearly an acknowledgement by Goldman that they had done some things they shouldn’t have done,” Frank said.

Goldman Sachs agreed to pay $550 million and change its business practices to settle the matter.

Frank said “it’s possible” he’ll schedule hearings in his committee to examine the SEC settlement.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE