Interview with Representative Barney Frank

Interview with Representative Barney Frank

By John King, USA - May 11, 2012

KING: Joining me is the architect of that legislation, one of the architects, the Democratic congressman Barney Frank of Massachusetts.

Now, Congressman. Let me just start there. If you go through the many pages of Dodd-Frank, is there something in there that should have caught this is this.

REP. BARNEY FRANK (D), MASSACHUSETTS: There may well be. He is premature saying it doesn't violate the Volcker rule. You pass a complex piece of legislation. And then, there is a process by which it has to be flashed out.

The rules of the federal government call for a proposal to come out. And then, for there to be come in. So, the Volcker rule, which was part of the law, hasn't yet taken effect. It will take effect later this year.

So, technically, no. It didn't violate the rule but Mr. Dimon is pre- mature in saying it wouldn't violate the Volcker rule. It depends on the nature of the trade and the nature of the rule. And frankly, I think the fact that this is happening, is going to be an argument for tighter rule.

And Jamie Dimon too much as he said, just because we are stupid, Jamie Dimon isn't stupid. He is a very able guy and with a very well-run bank. And that's precisely the point. When one of the best run- institutions presided over by very intelligent people can make a mistake of this sort, that's a sign of why you need regulation. That's a sign of why you need a safety net. So, I think this is an argument for the Volcker rule when this promulgated.

KING: And some would say though, can you regulate that greed then combined with stupidity?

FRANK: Yes. You can regulate in this sense. You can, in the first place say, we don't want you to get so over your head that you are not going to be able to pay what you owe other people. You know, the old story is, if somebody owes you -- if you owe somebody $1,000, he can tell you what to do. If you owe him $100 million, he has to worry about you.

We do have rules that say we don't want you to get indebted to the point where they are years ago where we have to worry about your collapse, because you hurt other people. KING: As you know, this is playing out in the middle of a campaign year in which the other side, your critics -- the critics of your legislation say, not only let's have tighter legislation as you just said, they want to repeal the thing all together.

Do you think this maybe will give them pop?

FRANK: Well, I don't think it will change their opinion. There is a theological concept. I am not a great theologian. I know there is a theological concept called invincible ignorance in which a strong enough faith binds you to any facts to the contrary. I think that's where I got with some of my colleagues. But it will certainly weaken their credibility.

Let me give you one specific thing, John. The Republicans are trying to put a bill through the house who tries very hard to pack, although they have the majority, which would say that if an American institution through a foreign subsidiary engages in derivative transactions, it is not subject to our regulations. That's what we are talking about here.

JPMorgan chase and American institution doing things through a foreign subsidiary. We are saying that might have an impact. I think frankly they are going to have a harder time pushing this bill than they did before. And it just discredits their whole notion that these institutions don't need any regulation.

Again, I stress, JPMorgan chase, this isn't countrywide. This is in a rogue institution. It's a well running institution and shows you the inherent riskiness and danger in what they do.

KING: Well, people who have memories of 2007 and 2008, Congressman might be asking themselves this question.

Is it just JPMorgan Chase? Or if it is happening there, is it happening elsewhere and might be go through all that all over again?

FRANK: Well, the answer is, it may very well be happening elsewhere. But, we won't go through that all over again. Because we do have rules in place that will prevent that. For one thing, even JPMorgan chased to, the Volker rule hasn't gone into effect but requirements that they have a bigger capital base are there. That is the banks today, thanks to the rules imposed on them, are better able to withstand losses because they have more money set aside.

KING: Congressman Barney Frank, democrat from Massachusetts, I appreciate your time tonight, sir.

FRANK: Thank you. 

John King, USA

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