BLOG VIEW: Say whatever you may about Barney Frank, but there is one accusation that will never stick to him: He is not boring.
In the face of the efforts by the House Financial Services Committee to terminate funds for a quartet of federal programs that are supposed to aid homeowners facing potential foreclosure, Frank has taken it upon himself to revive these programs with a new source of funding. Rather than stick the U.S. taxpayers with the bills for these unsuccessful programs, Frank wants to keep them going by having the nation's largest financial services companies foot the bill.
‘I don't mean to demonize,’ Frank said on the floor of the House. ‘But I think Goldman Sachs and Wells Fargo and Bank of America and Citicorp and Morgan Stanley and the large hedge funds – I think they can pay for this.’Â
One of the programs in question has a $1 billion budget. ‘They can afford this billion dollars,’ Frank said of the financial services giants in his viewfinder. ‘Their bonuses alone would pay for these programs.’
Frank's gambit is fairly crass at multiple levels, not the least being his talent for thinking of grand new ways to spend other people's money. The financial institutions that Frank wants to invoice have been quiet on this proposal. But considering how these intended cash cows are viewing the milk bucket being pushed forward by the state attorneys general as part of the settlement on the servicing controversies, I suspect that this proposal will not be welcomed with any degree of enthusiasm.
Yet if anything good can come out of this very bad idea, it would be the possibility of revisiting one of the most controversial federal policies designed to use private-sector money to fund public policy: the Community Reinvestment Act (CRA). Last year, the Federal Reserve held hearings around the country to discuss the possibility of modernizing CRA – a good idea, considering the 1977 legislation is conspicuously antiquated in today's lending environment. However, the hearings produced a lot of interesting talk but no feasible results.
So where do we stand today on CRA reform? It appears that we have nowhere to stand. I obviously do not expect Frank to step forward with ideas on updating CRA – if anything, he will probably imagine new ways of expanding it deeper – but I am surprised that the Republicans running the House have all but ignored the subject.
Part of the Republican leadership's shunning of CRA reform might be considered politically expedient – after all, the GOP hierarchy is still trying to shuck off charges that it is more sympathetic to Wall Street than to Main Street. And, besides, CRA has been around since the Carter administration, yet it was never dislodged during the years when Republicans occupied the White House and ran both houses of Congress.
Today's Republican leadership is much more comfortable with picking easy fights that are clearly designed to fail – such as the attempts to eliminate federal loan modification programs, which will obviously not sneak past the Democrat-controlled Senate, let alone the presidential veto stamp. Their anti-Obama seething will ensure that they follow every path that could possibly be used to discredit the president's economic policies – in this case, highlighting big-ticket programs that produce minimal results.
CRA reform, in comparison, will require a great deal of time and careful discussion, which does not quite mesh with a political environment that is more interested in sneering sound bites than bipartisan cooperation. That is not to say that reaching across the aisle is utterly impossible – Rep. Scott Garrett, R-N.J., and Rep. Carolyn Maloney, D-N.Y., have recently teamed up to introduce the Covered Bond Act of 2011, which would push forward a new solution that could help the economy substantially. But this act of intelligent bipartisan cooperation seems more like an aberration than the shape of things to come.
Frank's absurd proposal to stick the big banks with a new bill is not going to gather traction, but that is no surprise. Yet the failure of the House Financial Services Committee to address CRA reform is more than just disappointing – from a public policy perspective, it is just plain foolish.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
