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Now With Alex
updated 5/29/2013 8:49:18 PM ET 2013-05-30T00:49:18

Former Congressman Barney Frank discusses the effects of the Dodd-Frank financial regulation, three years on.

On Wednesday’s NOW with Alex Wagner, former Massachusetts Democratic Congressman Barney Frank joined Alex and the panel to give an update on the Dodd-Frank Wall Street Reform and Consumer Protection Act, almost three years after it was signed into law by President Barack Obama.

“Yes, I am somewhat disappointed,” Frank said when asked by Alex Wagner if he was upset by recent efforts by conservatives and financial industry lobbyists to gut parts of the bill. ”On the other hand I think there is more progress being made, I think, than people sometimes realize and I am confident of this–we will have a good set of rules in place.”

Two recent magazine articles in The Nation and Washington Monthly have shone a spotlight on the efforts of industry lobbyists to scale back regulatory efforts.

When Alex Wagner noted that the banks are now bigger than ever before–the top four U.S. commercial banks: J.P. Morgan Chase, Bank of America, Citigroup and Wells Fargo own $7.8 trillion in assets, or about half the size of the entire U.S. economy–Franks said the size isn’t what mattered.

“Yes, they have gotten bigger, but in fairness to them they have gotten bigger in part because the government asked them to,” he said, noting that the Bush administration pushed for J.P. Morgan’s acquisition of Bear Stearns and Bank of America’s takeover of Merrill Lynch during the 2008 financial crisis.

“The critical statistic here is not how big they are, but how well regulated they are and how well capitalized they are,” he said. “ They are much better capitalized than they were before.”

Video: Financial industry stands at a crossroads

  1. Closed captioning of: Financial industry stands at a crossroads

    >>> as the country approaches the three-year anniversary of dodd /frank, many of the laws designed to ensure a safer financial system are under siege.

    >> passing this bill was no easy task. to get there we had to overcome the furious lobby of an array of powerful interest groups. a a partisan minority determined to block change. that doesn't mean or work is over. for these new rules --

    >> the hurdles are only getting bigger. the financial industry to date has spent over a billion trying to kill dodd /frank. last year the number of wall street lobbyists looking to gut the law's provisions outnumb bert consumer protection lobbyists by 20:1. is the banking are larger than ever. the four biggest hold 7.8 trillion in assets. half the size of the entire u.s. economy . this month the house financial services committee quietly passed five bills. the "new york times" reports that one of those bills was written almost entirely by citigroup. citigroup's recommendations reflected in more than 70 lines of the house committee 's 85-line bill. two crucial paragraphs were copied nearly word for word. lawmakers changed two words to make them plural. all of which led the gray lady to conclude three years after the most comprehensive overhaul since the depression, wall street is finding weight a fredlier place. today roughly two thirds of the rules have yet to be put into effect. a testimony to the strength of the financial industry lobbying power. in the meantime banks continue to sell the very same risky mortgages and loans that went back during the recession. speaking to the nation, john parsons , a senior lecture you are summed up the current state of affairs -- it's like a horrid or movie. you can't be too triumphant just because the first blowing had the beast weakened. joining us is former congressman and co-author of the dodd / frank wall street reform and consumer protection act barney frank . thank you for joining us.

    >> you're welcome.

    >> congressman, i have to ask, after all the work put into dodd /frank, are you satisfied with how implementation is going in congress?

    >> no, but it is doing better than frankly, you said, they are not selling the same products. the single biggest problem we had in the earlier period we are mortgages being sold to people who couldn't possibly repay them because the mortgages were sold and then securitized. the bill specifically prohibited that. that's being enforced. you do not have the kind of irresponsible mortgages going forward. there's much greater capital. i am disappointed and there are two factors that don't often get mentioned. we did not anticipate when we passed the bill that the republicans were going to take over the house of representatives . the agency that got the greatest increase in power under our legislation -- well, the one that got the greatest increase was the consumer financial protection bureau, which we set up, which is working well, and that agency is doing a very good job and is totally resistant to efforts to undercut it. the derivatives, a serious problem leading up to the crisis, we gave great power to regulate them to the commodities future trading commission. unfortunately when the republicans took over in 2011 , they refused to fund that adequately, the commodity futures trading commission has the major source of new power over former derivatives called swaps. they have been doing a good job. gary gensler is a tough, effective regulator. he's making progress, but the progress has been slow, because the republicans have refused to fund it. by the way, we're talking about amounts in maybe $100 million. not amounts that have a tremendous budget impact the way syrian intervention would, back to your last comment. secondly the people have read that the president is trying to get judges appointed to the district of columbia srkt circuit court . that's the court to which all cases challenging federal laws go. the filibuster has been used to keep president obama from appointing judges there. so you have the agencies in a double bind. first they don't get enough money, not because they're trying to save money, but because they're trying to cripple the regulation. secondly this very conservative courts tells the agency oh no, we don't like this rule, you have to go back and do more work. one example, the agency under the power in our bill said we want to stop speculation, so they put a limit on how many of a commodity you could buy through a derivative if you didn't use it. you know, oil companies have to buy oil. airline companies have to buy fuel. there's a limit on the extent to which you can buy. the court ruled it out. they said the legislature didn't mean it, but we did mean it. so i'm somewhat disappointed. i think more progress is being made, and i'm confident of this. we will have a good set of rules in play. all this is not going anywhere. so i think it's been slowed down by an ideological activist court . ironically the conservatives don't like activism unless they practice it. there's a lot to unpack there. first, the d.c. circuit court , just yesterday they were accusing the president by simly trying to fill rakances.

    >> i'm a great believer of -- i -- if i could ban some things, i would ban that kind of outrageous misuse of language. parking the court is when roosevelt sought to expand the number of justices. what the president is doing is doing a constitutional job. you the problem, of course, is -- so they're -- i'm glad you cited that, they are illegitimately trying to use the filibuster, and i hope they overrule that, as they're entitled to do, that they say we're going to confirm judges. in the first place they're not giving enough money to go through the rules and the, with more work and they don't have to do it. you know i want to bring in the folks we have in new york. josh, the cftc. the nation talks about how wall street has defanged -- and they're among the noisy -- to soften the driverty rules. which brings to mind a larger question about regulation, and oversight, and any kind of reform here.

    >> i think it's inevitable. whenever you have something complicated like financial reform, elf this dance, where a lot of the people who know the industry and can figure out how to regulate it are people with experience in the industry. gary gensler spent 16th years result goldman sachs and generally is well respected.

    >> you see that as a necessary precondition to actual regulation?

    >> can i give an example here? from franklin roosevelt got congress to set up the securities exchange commission , similar problems, similar complaints. he picked to be the first head of the s.e.c. a man who had been deeply engaged in the industry and whoic a knowledged he had been engaged in the practices that were being banned. he was picket precisely because he would be effective in stopping them. he said, i know all the tricks, and his name, by the way, was joseph p. kennedy .

    >> i think you look at that standards, the four largest banks, holding 7.8 trillion, and we talked about too big to fail. i think that's a terrifying prospect. in fares they got bigger, because the federal government asked them to. it was the bush administration that said to jpmorgan chase , please don't let them fail, that had cause a problem, take them over. secondly, the critical statistic here is not whether they're big, but how well regulated they are. they are much better capitalized than they were before. finally, and this is it is most important point, we changed the law so the federal government cannot now provide aid to these institutions if they are in trouble and keep them alive. sarah palin was half right. we put in death panels for large financial institutions . under the law, no money can be used to help pay off the debts of these institutions until they're first abolished.

    >> barney, you and i have debated this issue before. i agree that dodd /frank has clearly helped and made things better for now. my great worry is if and when, and there will be a when, when a bank gets into trouble. it's likely at some point, i'm not saying tomorrow. when that moment happens, what worries me most is in washington when the markets are falling apart, your death panel, if you will, won't be used, meaning people will say, we never tried this before, we don't know if it actually works and therefore we'll throw money at the problem all over again. that is my great worry.

    >> i have to say, i have never heard a more serious misreading of the american political move. i don't know what it will be like 20 years from now, but if a bank failed now, i don't know that there would be any support. one of the great regulator we ever have, they have experience, but what happens is some of the -- so the debts get paid.

    >> but they're supposed to be paid by the other banks.

    >> they will be.

    >> when the you know what is hitting the --

    >> no, it does not mean that. two mistakes there. first of all, it does not necessarily mean they will all go under at the same time. if in fact, step in and stop it with one, it may start with the other. secondly they are paid back over time with institutions with more than $50 billion in assets. no congressional action is needed. they pay some of the debts and then over time he's empowered.

    >> congressman, i'm so sorry, we really do have to leave it there. i invite you back on many, many more times, as many as you will come on. this is obviously a continuing conversation. the three-year anniversary is this summer, we would love to have you back. thank you.

    >> maybe with more time.

    >> next time you can have the whole show. we'll have more after the break. i

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