E-mail a friendRep. Barney Frank
airdate April 20, 2009
Massachusetts Rep. Barney Frank was first elected to Congress in '81 and is known on the Hill for his expertise on the issue of housing—in particular, rental housing for poor people. A Harvard College and Law School grad, he previously served eight years in the state legislature. In '07, he became chairman of the House Financial Services Committee, which oversees the housing and banking industries. He's published numerous articles on politics and public affairs and taught at several Boston area universities.
Chair of the House Financial Services Committee comments on the recent success of some banks this past quarter. (1:02)
Full interview. (10:00)
Rep. Barney Frank
Tavis: Barney Frank is the chair of the House Financial Services Committee, the man at the center of Congressional efforts to rescue the nation's ailing financial system. He joins us tonight from Washington. Congressman, an honor to have you on the program, sir.
Rep. Barney Frank: Thank you, Tavis; I'm looking forward to it.
Tavis: Let me start by asking what you did today, relative to low income housing, and I'll go from there.
Frank: Well, I got to speak to one of my great passions, and that's the need for us to do more to provide affordable rental housing. People haven't fully understood - one of the causes of the terrible crisis we had over the last few years which has given us today's problem, it came from people being pushed into buying houses, taking out loans that they couldn't afford. Part of that was a conservative view that rental housing was a bad thing.
I had been trying, with a lot of others, to try and continue programs to build decent rental housing for people. What we had were people in power who didn't like that and they said, "No, no, we'll help them become homeowners." Well, people were pushing home ownership who shouldn't have been there. So what I did today, because we have now in Barack Obama a president who understands this, that if you are low income in America, if you're poor, you probably are not going to be able to afford a home.
People have said to me, "Well, wouldn't you want everyone to own a home?" Sure, I'd like to eat more and not gain weight. But you can't be unrealistic about what's going to happen. So I met with a group of people today who are very responsible advocates for building decent, affordable rental housing.
Tavis: But how does that - I hear the point and I'm glad you're on the case there, Congressman, but how does that ultimately lead to home ownership? Because you can't tell me you want to sell these folks short on the American dream?
Frank: Well, it may not lead to home ownership. I don't want to sell them short. I want to recognize, though, Tavis, that they may come up short. Pretending people can do something they can't do is no favor for them. I wish we could do something about income and equality in America, and I'm for that. I would like to get better education all up and down the social sphere so people can earn more money. I'd like to bring down the cost of housing.
But the point when people are making, frankly, $30,000 or $40,000 a year in much of this country, they're not going to be able to afford a home. And if you pretend that they can, you get them into trouble. The right kind of rental housing is appropriate. Now, there may be ways we can work out for people so that they can rent, and the rent gets built into eventual ownership, but prematurely pushing people who can't afford it into ownership doesn't do anybody any favors.
Tavis: This is inside baseball, and you know this better than I do, but it's worth bringing up, since you went there. In my own research - and again, I'm not the chairman of a powerful committee like you are. But when I start looking at this problem I find that many of these persons that you were talking about earlier, Congressman, who made these loans, somewhere down the line, if you dig deep enough, they're partly owned by a bank.
Frank: Some of them are owned by banks. Some of them are owned by other financial institutions. But in any case, though, what's happened is that people who made the original loan were the ones who were able to sell the right to be repaid and they weren't responsible. Now, some of the banks were dumb, and some banks bought loans they shouldn't have bought.
But the initial problem was this - they said people made loans and they planned to sell them and not be the ones repaid. I'm not saying the banks are - well, it depends, too. Some of the bigger banks - Countrywide, Washington Mutual, some of those major nationwide banks - they were awful and very irresponsible.
On the other hand, the local neighborhood banks generally stuck to their basic pattern of lending your money if they knew you, because they would get paid back.
Tavis: What do you make of the news of late that some of these major banks you just referenced have shown profits in the last few days, over the last quarter?
Frank: Mixed emotions. They aren't always our favorite people because they made mistakes. On the other hand, we need them to function because we need credit. I take some pride in the fact that I think the efforts that we've made are working some.
You know, we have this frustration, Tavis, and you pointed it out. Some of the people in the bank business were irresponsible; a small number were even criminal. Unfortunately for the irresponsible ones, we can't just throw them all out and start over again. So to some extent, you have to work with some of the people who caused the problem.
We're trying to be tough on them and we're putting some restrictions on their compensation, but the fact that some of them are now making a profit, I regard that as a sign that we're getting some success and until they make a profit, given our economy, things aren't going to get back to a good level.
Tavis: So Geithner, the Treasury secretary, is headed up to Capitol Hill tomorrow to talk more about these TARP monies. The thing that really made most Americans upset in the first place, giving all these institutions money and not having the right kinds of controls over how that money was spent. What do you expect he's going to say tomorrow, and how do you think that TARP process is moving along now?
Frank: He's entitled to take some credit, because again, there's a difference in administrations. The Bush administration did not put any restrictions of the kind we wanted on the recipients. We've done that now. In fact, we've gotten tough enough on them with regard, for instance, to compensation - restricting what they pay each other - and also required (inaudible) that some of them are now saying they want to pay the money back.
And my answer is fine. In fact, I changed the law, with the aid of my colleagues, earlier this year to make it easier for them to pay the money back. So I think we now do have controls, because if you listen to the banks now, they are complaining that we're being much too tough on them, and my answer is fine, if you don't like that, you give us the money back.
Tavis: Give me your sense of what's going to happen in the short term here with the auto industry. We're obviously all watching GM to see if they're going to be able to restructure in time to take advantage of more government money. But just give me your overall read right now of the auto industry.
Frank: Well, it's not something the committee I've been working on has been deeply engaged in. There were two things - one of the things we are trying to do in the short term, frankly, is to get credit flowing. Part of the problem the automobile industry had was long-term - apparently not making the cars in the American industry that people wanted to buy as much as they should have - but part of it was short-term.
There's a problem for all automobiles because automobiles in particular, people buy cars on credit. I supposed there are a few people buying them for cash, but they generally want bulletproof windows and special pockets to hide things. (Laughter) Most of us, we have to pay credit for the car.
We are hoping to fix that. But in terms of longer-term, I honestly don't know. It does look to me as if you're going to see a merger between Chrysler and Fiat, which may be helpful. As to General Motors, there's a game of - well, chicken is unfair, because this is a serious game.
You've got the people who lent money to General Motors. Now, when you lend money to people, you're at risk. And some of them seem to be thinking that they can get more money out of General Motors than the federal government's willing to put up. So I think a lot of it has to do with whether the people who lent money to General Motors get realistic and understand that look, they made bad decisions and they're going to have to live with the consequences.
If they don't do that, they may wind up pushing it into bankruptcy, in which case everybody, including them, will be worse off.
Tavis: So finally, a few minutes ago, you said that you take some pride in the fact that these numbers indicate, at least tentatively, that some of these banks are doing better, beyond the persons who are jumping on that, those signs, those numbers, as signs that we're starting a recovery, what does Barney Frank, what's the powerful chairman looking at to suggest to him that we are starting to turn the corner on this financial malaise that we are in?
Frank: Well, it would be economic activity in general. Unfortunately, the thing I would most like to see turn around, Tavis, is going to be the last thing to turn around, and that's unemployment. Because the way the business community works, the last thing they're going to do is to hire those people back.
So sadly, that human tragedy is going to be there, and that's why I was so supportive of President Obama's recovery plan improving unemployment compensation, because we can't lose sight of the need to alleviate the unjustified human suffering. But I think it's general commercial activity. The housing market is going to start to come back because house prices are so cheap and interest rates are so low people are going to buy. But I'd be looking at broader economic activity - essentially, what we need is for consumers to go back and start buying.
When we see people being confident enough to start buying again, that'll be the good sign.
Tavis: You're a great opening act for Hugh Masekela. Thank you, sir.
Frank: Oh, that's a great honor. Thank you.
Tavis: (Laughs) Barney Frank, out of Massachusetts. Nice to have you on, Congressman.
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