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As the one-year anniversary of passage of the Dodd-Frank Act nears, Rep. Barney Frank, D-Mass., expressed his views on Monday about how the law he co-authored with former Democratic Senator Christopher Dodd is being implemented.
During a press conference at The National Press Club in Washington, Frank said that as the July 21 anniversary draws near, it’s time to “make some judgments” about how the law is progressing. After a year of “study, examination, criticism and advocacy,” he said, Dodd-Frank is “holding up pretty well” with “very few calls for substantial amendments” to be made to it.
The real “strength” of the Dodd-Frank Act, Frank said, is that it “sets forth some very important principles, but gives the regulators the ability to apply them in practice.”
Frank did comment several times as to his frustration with the lack of funding given to the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) by his Republican counterparts. The GOP, Frank argued, are “using the deficit crisis to under fund the SEC and the CFTC.” Republicans “want to turn the SEC into a profit center,” Frank continued. “The SEC will bring in more money through its regulatory system than it will be given to run it.”
This lack of funding is creating a “catch-22,” Frank said. First, “deny the SEC and CFTC adequate funding; they, in turn, are not able to deal with the rulemaking requirements they have, and because they haven’t been able to move as quickly on the rules, [Republicans] will announce that the rules must be abolished.” This attack on these agencies’ funding, Frank continued, is coming from the “ideologues” in the Republican party.
Frank did concede, however, that House Republicans’ call for more cost-benefit analyses of Dodd-Frank rules are “reasonable.”
Frank also criticized House Republicans’ efforts to undermine progress on developing rules to regulate derivatives, noting legislation passed by Republicans to postpone any new derivatives regulation until October 2012.
There is also an “attack” on risk retention, Frank said, “which is the single most important piece of this” Dodd-Frank Act. “We now have no unregulated mortgage lenders. Risk retention is a market-based incentive—there needs to be a down payment requirement.” He went on to say that there were “loans made without adequate assessment of risk,” and these bad loans “ricocheted all over the world.”
Dodd-Frank also created another “very important innovation,” Frank said, which is the Consumer Financial Protection Bureau (CFPB), which still lacks a director. Frank argued that there doesn’t need to be a Senate confirmation to appoint a CFPB director; rather, he said, “a recess appointment will do it.” The good news, he said, is that “we don’t have a lot of bad mortgages being made now because people are still shell shocked.” A “good director of the CFPB,” he continued, “will mean that a lot fewer bad mortgages will be issued, i.e., mortgages with a very low chance of repayment. And consumers will find they are treated much more fairly.”
On the international front, Frank said that he believes “things are moving well.” America, he said, “is in the lead for pushing for an international set of standards that are better.” As the financial crisis was unfolding in 2008, Frank said it was likened to another Great Depression. He warned, however, that “I think it could have been worse than that…because now everything is interconnected.”