Could it soon be criminal to lose money for taking on too much risk? If Rep. Barney Frank, D-Mass., has his way, it might. Just don’t expect him to talk to the media about his role in the crisis.
Frank, the chairman of the House Financial Services Committee held a press conference on March 5 to announce he would hold hearings to push for federal and local statutes to prevent a similar economic downturn – but not just by imposing civil penalties, but criminal ones as well.
“I am asking very firmly the attorney general, and I’ve checked with the Judiciary committee and we have a cooperative effort here – they’ll be working on this as well,” Frank said. “But, we’re going to have a hearing with the attorney general, and the FBI, the Securities and Exchange Commission, the bank regulators, the representatives of the state attorneys general and the state securities administrators, and we have a question that they are being asked now – what are your plans to prosecute those people whose irresponsible and in some cases criminal actions help bring about this crisis that will be both criminal and civil?”
According to the 15-term congressman, this will be a measure to attempt to recover some of the losses and to gauge what sort of regulations are necessary for the future.
“We want to know what proposals there are to recover funds from people who caused this loss of taxpayer dollars and investor dollars and we want to know what kind of restrictions are on their ability to go forward and we want to know whether or not there are going to be criminal prosecutions.”
Frank said he wasn’t going after specific individuals, but he said he wanted everyone with enforcement powers in his hearing room. He insisted the only way to prevent this from reoccurring is “to punish those who shouldn’t have done this in the first place” – that is to make an example out of these individuals.
Immediately following his press conference, Frank appeared on CNBC’s “Power Lunch.” He explained all these things did happen by divine intervention, but instead as a result of “irresponsible actions.”
“Clearly people did things they shouldn’t have done – they were irresponsible actions,” Frank said. “The public has a right to know this is being looked at. This is not all God’s fault.”
Although Frank seemed very willing to take on what he purports to have instigated the economic problems, he was less willing to explain to CNBC co-hosts Bill Griffeth and Dennis Kneale what role he might have played in the economic collapse in recent months.
Frank was very involved in hindering efforts by the Bush administration to reform failed government-sponsored enterprises Fannie Mae and Freddie Mac. He was even romantically involved with a high-ranking official at Fannie Mae for a period of time.
And he has also averted accepting any of the blame. Frank, in a contentious interview with Fox News Channel “O’Reilly Factor” host Bill O’Reilly in October 2008, absolved himself, since he was not the chairman of the banking committee when the he was impeding Fannie Mae and Freddie Mac reform.
However, he did give CNBC’s “Power Lunch” an idea of some of the people he might pursue.
“I want the prosecutors to look at this,” Frank said. “In some cases it may be CEOs, in other cases it may be other people. It may be the institution. It may be that there was not so much individual culpability, but an institutional culpability and we want money to come back.”
According to Frank, any legislative action must make it punitive for irresponsible borrowing or lending to ensure this doesn’t happen in the future.
“I also want – and this is the most important thing we can do as the legislative body, we are not the prosecutors or the administrative agencies – we’re going to make it illegal to do that in the future,” Frank said. “So, if it were some combination of individual borrowers being irresponsible and a lack of the regulation of the lenders, and we’re going to go after both of them in the sense we’re going to pass rules that wouldn’t allow either or both of them – and they both have to be together – to do this. That’s our job, to stop this from happening in the future.”