Former Rep. Barney Frank (D-Massachusetts), who co-authored the 2010 law that established the Consumer Financial Protection Bureau (CFPB) Act, also known as also known as Dodd-Frank, said Monday that he has objections to the Senate’s plan to reform.
“Substantively, I am torn between support for much of what the proposal does and opposition to two of its specific provisions,” Frank said in commentary reported by CNBC.
Frank’s first objection to the proposed amendments is the raising of the asset floor for automatic Financial Stability Oversight Council inclusion to $250 billion, calling this a “major mistake.”
“Since prudent planning must take into account the failure of more than one financial institution in a crisis situation, it is relevant to note that the collapse of three $250 billion banks puts us at the asset level of the triggering event of the 2008 crisis—Lehman Brothers,” Frank said.
As for community banks, Frank said since many of the statutory prohibitions against irresponsible loans will stay in place under the proposed bill—e.g. no negative amortizations—allowing then to make some currently restricted loans if they keep them in portfolio is socially responsible.
“But the logic of this change offers no rationale for the 1,000 percent increase in the exemption the bill gives to banks from the Home Mortgage Disclosure Act—allowing 500 mortgages a year per institution instead of 5 before this important has tool in fighting racial discrimination must be deployed,” Frank said.
What Frank suggests are further moves in to ease the way for the local banks—specifically, flexibility in the thick set of laws aimed at terrorism financing, drug smuggling, and sanctions evasion.
“There are many other provisions of the bill which I support, a few with which I disagree, and some on which I am seeking information,” Frank said. “I look forward to the debate on these ahead, but the last point I want to make here deals not with the substance of that discussion but its tone.”
By tone, Frank explained that while most of what Congress has been considering in 2017 has been about the fundamentals of public policy—whether or not we should as a society be fighting climate change or providing health care to each other or—as in the bill which passed the House-return to the days of a dangerously unregulated financial system.
In the end, the question to be answered in the debate on the legislation is whether the government can differ about the specifics of how to achieve agreed upon goals without “impugning each other's motives or grossly exaggerating differences.”
To view the full commentary, click here.