RCP: Harvard Student Takes on Rep. Frank
WFXT-TV: Harvard student takes on Rep. Frank
The exchange is amusing. However, toward the end of the clip, Barney Frank states that he believes in making changes to the Federal Reserve Act of 1932, section 13(3) which provides that "in unusual and exigent circumstances" the [Fed] may authorize any federal reserve bank to discount notes without limit. Rep. Barney Frank stated that he thought the statute was "excessive, and should be changed". Changed to what? Less authority to do whatever they please? That'll be the day!
The Federal Reserve Act of 1932, section 13(3) is the statute that the Federal Reserve Board cited when they authorized taking over AIG with 79.9% equity stake.
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Rep. Frank is a busy guy, because he's also proposing laws to change the financial system. Rep. Frank states, "If only banks made mortgage loans, there would be no crisis".
Gee, let me get this straight. The problem is that mortgages were securitized, and that if only the banks had issued the mortgages, then there wouldn't have been a real estate bust? Therefore, the solution is to create a regulator that can forcefully examine any institutions books and restrict them if they become a "threat" to the financial system? Yeah, that's the ticket!
Has anyone informed Rep. Frank that there were real estate busts prior to this one that were only financed by bank-issued mortgages? Perhaps the problem lies somewhere else, with some other entity that has been around through the past few real estate busts that has a habit of continually expanding credit and then blaming the resulting problems on somebody else (like the private sector)? Nah, couldn't be.
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Here's a interesting story in Forbes about The Banker Who Said No. The regulators didn't appreciate how he ran his business. Good thing he didn't let the regulators and government-endorsed credit agencies "help" him.
Outsiders thought it was Beal who didn't get it. Despite its aversion to credit then, the bank occasionally had to buy mortgages to meet federal low-income-lending requirements. Jonathan Goodman, then head of loan purchases, recalls salesmen from Countrywide laughing at him on the phone when he refused to buy iffy condo paper backed by the two agencies. "Countrywide, Bank of America, Washington Mutual ... every single [mortgage seller] thought we were insane," Goodman says. "They didn't know why we cared. They thought Fannie and Freddie guarantees were as good as Treasuries."The owner of the bank, Andy Beal, says "Every deal done since 2004 is just stupid."
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