What Barney Frank Really Said About HR 1207

Here’s an updated transcript of what Barney Frank really said about Ron Paul’s HR 1207 (also see Misinformation Alert: Barney Frank Never Said That HR 1207 Will Pass In October).

Audience: Okay, hi, Mr. Frank, thank you for coming. I was just going to mention of something that I’ve noticed people and blogs talking about on the Internet, that these banks all across the country are overvaluing their assets, their mortgages that they hold on their books, and I’ve actually been to a few foreclosure auctions and I noticed banks are buying back houses for themselves in order to prevent themselves from having to mark down the value of these assets.

And they’re basically lying to us about their solvency. And this is only possible by the Federal Reserve lending money to these institutions. And I just want to ask you, when will you put HR 1207, the bill to audit the Fed, up for a vote in the Committee. Thank you very much.

Barney Frank: […] while I really disagree that the Fed is the cause of this but yes, I have been pushing for more openness on the Fed, back when the Democrats were in power, and Henry Gonzalez, and we did get some of it. […]

I want to restrict powers of the Federal Reserve in a number of ways. First of all, they will be the major losers of power if we are successful, as I believe we will be, in setting up that financial product protection commission. The Federal Reserve is now charged with protecting consumers. They were supposed to do subprime mortgage restricted. Congress in 1994 gave the Federal Reserve the power to adopt rules to ban bad subprime mortgages. Alan Greenspan refused to do it. He said that was too much market intervention.

They had the power to ban credit card abuses. They had the power to […] overdrafts. They under Greenspan did nothing. Under Bernanke they started do things but only after Congress started. When I became Chairman of the Committee they began to act on these things. Subprime mortgages, credit cards, overdraft, and in every case after we started the […], so that’s one of the reasons why in the new consumer protection agency, we will take away from the Federal Reserve the power to do consumer protection.

Secondly, they have had since 1932 a right, under Herbert Hoover and the Democratic Congress combined, the right, that they had to use it until recently, to intervene in the economy almost whenever they thought.

Last September, the Federal Reserve came to us and said that they were going to advance $82 billion to AIG. I was kind of surprised and said, “You have 82 billion dollars, Mr. Bernanke?” He said, “I have 800 billion dollars.” Under section 13.3 of the Federal Reserve Act they can lend money to anybody they want. We are going to curtail that lending power. We are going to put some restraints on it.

Finally we will subject them to a complete audit. I have been working with Ron Paul, who is the main sponsor of that bill. He agrees that we don’t want to have the audit appear as if it is influencing monetary policy because that would be inflationary. Ron and I agree on that.

We also […], one of the things the audit will show you is what the Federal Reserve buys itself. And that will be made public, but not instantly, because if that was made instantly you would have a lot of people trading off of that and it would have too much impact on the market. […] agrees with that, so we’ll probably have that data released after a time period of several months, enough time so it wouldn’t be market sensitive. That will be part of the overall federal regulation that we are redacting.

Audience: By the end of the year?

Barney Frank: The House will pass it probably in October.




  • Chris Huff

    You guys missed a bit of the transcripting.. I’ll fill in each of your discernible […] spots:

    “[…] while I really disagree…” (applause is too loud)
    “…and we did get some of it. [Here’s what we plan to do:]”
    “They had the power to [deal with] overdrafts.”
    “…in every case after we started [the Fed did.]”
    “We also [think,]”
    “[Again Ron] agrees with that…”

    Feel free to go back and fill those in.

  • sean

    Everybody look! NATE has the POOREST understanding of the constitution!!

    Nate believes that the congress MUST use it’s powers and doesn’t understand that constitution allows the government to use certain powers, such as.. coining money, taxing people, going to war, borrowing money, and provide common defense and general welfare.

    • Nate Y

      What on earth? You’ve completely lost your mind.

      • sean

        So do you believe that the constitution says that only the congress can create money, that of gold and silver?

        • Nate Y

          No. It is not a question of belief. We can simply read exactly what the Constitution says. That Congress has the power to COIN money and that only gold/silver are to be legal tender in payment of debts.


          • sean

            “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.”

            The key word is “state.”
            That means that the states can’t write laws of tender unless it is based on that of gold and silver. The states didn’t write our legal tender laws, the federal government did.

            This law prohibits the states from enforcing their own currency upon the people, unless it is of gold and silver. We have gone over this. I even showed you where the author of the constitution says that states shouldn’t be able to create their own money because it would lead to unfair commerce and trade between states. Therefore, if the states are going to make money, it must be of gold and silver to make fair trade.

          • sean

            The only thing the STATES can make legal tender is gold or silver. The FEDERAL government can make whatever legal tender.

          • Nate Y

            Incorrect. Completely incorrect and it clearly demonstrates your absolute ignorance with regard to the Constitution.

            Seriously dude, why would the framers of a constitutional REPUBLIC grant unlimited monetary powers to the central (federal) government? The whole point of a constitutional republic is to check and limit central authority. The founders very well knew the destructive consequences of such a power and drafted the Constitution in a manner so as to prevent it. Unfortunately, the people have been complacent instead of vigilant and others (like you) have abused the language of the Constitution so severely that it has essentially lost all meaning.

          • sean

            The government doesn’t have unlimited monetary policies. 98% of all money comes from banks, not the fed. It comes from promissory notes. Maybe your mind can’t comprehend that.

            The fed borrows money that the congress votes on. The fed also makes money from interest rates to keep for reserves if a bank were to fail. That was the reason why they were first created. The federal reserve doesn’t create money. They print money for the banks to use but paper money is chump change compared to digital money.

          • sean

            There are only a fraction of actual dollar bills in our economy. That is all the Fed is responsible for.. 2%

  • Nate Y

    It appears Matt is attempting to trap those of us who believe in sound money and the Constitution in a Catch-22 situation. If we demand strict adherence to the Constitution, we propose a system that is unworkable given today’s conditions (because the Constitution has been so thoroughly debauched over time). If we propose an alternative and transitionary solution, we are guilty of being unconstitutional.

    Anyone else see this absurdity?

    • Matt

      You call it a ‘Catch-22’ I call it ‘hypocrisy’.

      “We have to follow the Constitution to the letter, except when we don’t have to.”

    • VR

      Logic is probably the least useful tool for debating a tool.

    • sean

      Nate, you are misunderstanding the point that matt and I are trying to make. The congress does NOT HAVE TO COIN MONEY. That is a power granted to them. They do not have to use that power. The congress doesn’t have to use any power given to them.

      The free market does create money. BANKS CREATE MONEY thru promissory notes. Do you know that is? You have no clue do you nate? Promissory notes are not outlawed by the constitution. They account for 98% of the money created.

      So nate, do you really think the federal reserve creates all the money in circulation? That is a huge misunderstanding you have about our entire financial system. The federal reserve BORROWS money, they don’t create it.

      • sean

        The constitution says “powers of congress,” not “duties of congress.”

        The congress is not obligated to coin money.

        • sean

          Powers of congress..
          To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

          Each one of these remarks is a different power, the congress is allowed to coin money. The congress is allowed to regulate the value of money. The congress is ALLOWED to fix the standard of weights and measures.

          Throughout history, the congress have used all of these powers separately. The congress does not have to use all of these powers at the same time.

          During the free-banking era, congress allowed private banks to create money BUT they fixed the proper weights and measures. During the revolutionary war the congress created paper money but failed to regulate the value. etc.
          The government is not obligated to do any of these things.

          The congress has the power to collect taxes on commerce. That doesn’t mean they have to tax them. The congress has the power to start a war, that doesn’t mean they have to fight.

          • sean

            I can’t believe nate thinks that the powers granted to the congress are forced upon them to use.

            The congress has the power to to borrow money.. Our government isn’t in debt because the constitution forced them to use their powers.

          • Nate Y

            I can do nothing but laugh at this complete and utter nonsense.

            Why do you keep replying to yourself? It’s gotta be one of the strangest things I’ve ever encountered on a board/forum. Usually that stuff is banned or at least very much frowned upon.

            Anyway, keep torturing the constitution, the words of the founders, and logic in general.

          • sean

            lol!!! great response!

            That is so funny! You actually believe that the congress is forced to use their powers.

  • Nate Y

    Matt says:

    “If this is one of the specific, and limited, powers granted to it, and Congress cannot delegate this responsibility, wouldn’t allowing free markets to issue and determine the relative value of currency (which you constantly propose) be unconstitutional? I mean, Congress, and Congress only “shall have Power…To coin Money, regulate the Value thereof,” right? What am I missing?”

    You’re missing a couple things. “To coin money” means “to strike coins of gold/silver” and “regulate the value thereof” means “to make regular the weight of gold/silver which comprises the monetary unit”. “Regulate the value thereof” does not mean Congress can simply decree how much a dollar is worth at any given moment.

    • Matt

      So then, if only congress can coin money, how does the free market ultimately arrive at a point where there are competing currencies, if there is only one issuer of currency?

  • Nate Y


    Yes, the road back to The Constitution would, in the strictest sense, be unconstitutional. However, this should not worry us. The Constitution was gradually destroyed, so it must be gradually restored.

    It’s like a man who was once in prime health because he adhered to specific and sound principles of diet and exercise who has now let himself become unhealthy and fat beyond recognition. He comes to realize the error of not exercising and only consuming soda, grain alcohol, pizza, ice cream, etc. (all items and habits forbidden by his past principles) and wants to get back on track. Well, he can’t just instantly go back to his former strict diet and exercise routines. It would be too much of a shock to the system. His new bloated body wouldn’t be able to perform the lifts and runs. Should he just abandon his noble goal? Nope. Should he criticize himself because he’s not immediately back to his prior standards of diet and fitness? No way. He just needs to realize that a transition period is necessary. Repealing legal tender laws and letting gold/silver (and other market selected commodities) compete freely with government funny money is an important aspect of finding our way back to economic health.

    • VR

      Funny Money …. Funnier Money
      reminded me of this:

      Dollar Is Funny Money in Push for World Currency

    • Matt

      Gotcha, so we adhere to the Constitution… Except when we think we know better, don’t want to, or make an arbitrary decision as to when we shouldn’t. Gotcha. The Constitution says Congress (not free markets) have the power to coin. But you apparently know better. Looks like the Constitution isn’t the be all and end all after all? Interesting.

      The analogy used to justify this hypocrisy makes no sense. Absolutely can someone who is unhealthy immediately go back to exercising and eating correctly. It is not a ‘shock to the system’ that would prevent them from doing so.

      You are basically saying ‘an alcoholic cannot just quit drinking as it would be too much of a shock to the system, they need to realize that a transition period is necessary and gradually drink less and less every day’.

      • Nate Y

        Okay then, if that’s how you want it. Let’s do the monetary equivalent of going cold turkey and running a marathon after a decade of drug abuse and no exercise.

        Personally, I would be just fine if it was announced that we are now going to instantly and fully honor the Constitution and only gold/silver are money. In fact, I would immediately benefit relative to most everyone I know. My silver bullion/coins would explode in value and federal reserve notes would become instantly worthless.

        Interesting to learn you’re such a strict Constitutionalist.

        • Matt

          Interesting to learn we shouldn’t always do exactly what the Constitution says.

          I have no idea where you are going with this marathon thing. I mean, what you are proposing – a free market system that values currencies is, and always will be, unconstitutional. Go ahead, run your marathon and come back. In the end, Congress, and Congress only has the power to coin and regulate the value of money.

          How is there any room for free market activity in the constitution? Right, there is not. If the argument is that Congress cannot delegate this responsibility then you sure cannot delegate this to Free Markets.

          • Nate Y

            Again, “regulate the value thereof” means “make regular the weight of gold/silver that comprises the monetary unit”.

            But let’s take your advice. Let’s immediately go right back to the Constitutional mandate of only gold/silver as money. I’m down.

          • sean

            No nate, the constitution doesn’t say regulate the weight of “gold/silver.” It says regulate the value of the coin, which can be any type of metal like pennies, quarters, dimes, nickels, whatever.

            We have had paper money throughout the history of the united states. There has not been a time when we have not used paper money. Dollars represent coins. So many coins = so many dollars.

            Powers of congress..
            To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

          • Nate Y

            Oh you’re right. I forgot about the metals called penny, quarter, and dime.

            You continue to do a fine job making yourself look foolish. Keep at it.

          • sean

            Great argument!

            Okay, i’m sorry let me correct myself.. We can use metals like copper and different alloys to create money.

  • What is wrong with tmartin?

    It is obvious the subject was HR1207 and BF said it will be up for a vote, Alan Grayson said he spoke to BF on a radio show “The GUETZLOE report”. BF said HR1207 will pass. The Wall Street Journal reports that Ron Paul said BF will pass it. http://online.wsj.com/public/article/SB125167261849670795.html
    Grated Bf will try to change it but that is another issue. This article contradicts itself. The transcript ends with “The House will pass it probably in October.”-BF

  • Sean

    The bill IS going to be watered down, but like Barney Frank said, “Finally we will subject them to a complete audit.”

    This is what I have said before. The watered down bill will consist of a full audit and we will see the entire bookings of the fed, but… Like i said before… This bill isn’t about the bookings of the fed. It’s suppose to overturn the Humphrey-Hawkins Act which allows the fed to report monetary policy twice a year instead of a full review before monetary policy is decided.

    • Sean

      Humphrey-Hawkins Act.

      Explicitly states that the federal government will rely primarily on private enterprise to achieve the four goals.(full employment, growth in production, price stability, and balance of trade and budget.) If private enterprise is lacking in power to achieve these goals, the Act expressly allows the government to create a “reservoir of public employment.”

      Instructs the government to take reasonable means to balance the budget.

      Instructs the government to establish a balance of trade, i.e. to avoid trade surpluses or deficits.

      Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth, minimizes inflation, and promotes price stability.

      Instructs the Board of Governors of the Federal Reserve to transmit an Monetary Policy Report to the Congress twice a year outlining its monetary policy.

      Requires the President to set numerical goals for the economy of the next fiscal year in the Economic Report of the President and to suggest policies that will achieve these goals.

      Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy.

    • Nate Y

      How in the hell can a bill calling for a complete/full audit be watered down and still result in a full/complete audit?

      It’s like I go to a restaurant, order a full glass of wine. I can’t wait to have my proper glass of wine. I’ve been waiting for it. But then they dump out some, water it down, and still have the gall/stupidity to say it’s a full glass of wine.

      • Sean

        You will be able to see all the bookings of the fed with a watered down audit. You will see where all the money went. You will get a full audit of PAST decisions.

        You just wont be able to see the research and studies that the fed makes for FUTURE decisions. According to the law, the fed has to report twice a year on monetary policy. As HR 1207 stands, the congress would be able to see what decisions the feds are making before they act. Congress could review monetary policy anytime they wanted instead of twice a year at scheduled hearings.

        It really takes power away from the congress and gives it to the president to complete his economic objectives.

        • Sean

          According to the law, monetary policy has to be connected with the presidents economic policy, not the congress.

          • Nate Y

            Not according to The Constitution. Which is the supreme law of the land.

            How is it you have advanced knowledge of the particular actions of particular people? How do you know the ways in which the bill will be watered down? You don’t know because you can’t know.

          • Sean

            Well the congress can delegate its powers.. I do believe the congress should be able to review monetary policy, so please don’t jump my ass.

            Why do I know all of these things? Because I pay attention, and because I read. I read about 50 news stories a day and watch cspan for hours at a time. These are things I’ve said months ago. I knew the true purpose of the bill. I know about the history of congress’s ability to review monetary policy and the back and forth debates on the subject.

            I watched this whole two hour barney frank town hall meeting when it happened weeks ago. I came on this website and said that Barney Frank was going to pass HR 1207 a week before any national news media did.

          • Nate Y

            And yet for all your attention paying, you show no understanding of economics, our Constitution, etc.

            The true purpose of the bill is exactly what it says. It’s author puts high importance on plain language and honesty.

            Also, Barney Frank does not pass bills. Sure, he can tie them up but the authority to pass bills lies squarely with Congress as a whole. Not with Barney Frank.

            Indeed Congress has delegated it’s power to the Fed. But no where in The Constitution is this authorized. It is constant example of a group of people ignoring the written principles they are supposed to honor and uphold.

            No one here jumps your ass. They merely point out your consistent errors and misunderstandings.

          • sean

            First of all, the constitution doesn’t say that ONLY the congress can make money. In that case, it would be unconstitutional to have an uncentralized true free-market economy. The constitution says that the congress “Has the Power” to create money. They can choose to or choose not to use that power. Or they can delegate it to someone else.

            That is a huge error and misunderstanding you have about the constitution..

            This is the true purpose of the bill. Even ron paul said it was the most important part of it. Keep talking.

          • Nate Y

            Go ahead and find us the article of the Constitution where it states Congress “Has the Power to create money”. No where in the Constitution does it say this. Yes, Article I, Section 8, Clause 5 states…The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

            We’ve already explained the difference between the words “coin” and “create”. We’ve even explained what was meant by “fix the Standard of Weights and Measures”. That is, just as an inch is a consistent measure of length, a dollar is supposed to be a constant measure of weight of gold/silver.

            As Article I, Section 10, Clause 1 states…No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

            Remember, the way the Constitution is written, the Federal government can only do what the Constitution says it can do. The Federal government has specific and limited powers granted to it by the States. The Constitution does not state that the Congress can delegate it’s authority to another body (for example, a central bank). Hence, Congress has no Constitutional authority to do it and the Fed is unconstitutional. The Constitution specifically forbids the states from emiting paper bills of credit and it does not grant this power to the Congress. Thus, paper bills of credit (Federal Reserve Notes called “dollars” by most people today) are unconstitutional.

            This is where you start abusing and torturing the language of The Constitution, The Articles of Confederation, and the written words of the Founders in a vain and pathetic attempt to support your untenable position. Have at it.

          • sean

            Powers of Congress
            “To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”

            Can you read??

            It says the congress can write whatever law to carry out it’s duties. It can create the IRS, bureaucrats, or the federal reserve. Do you even own a copy of the constitution?

          • longshotlouie

            The teacher’s son is still having trouble with English?

          • sean

            The constitution says the STATES cannot create bills of credit. THE STATE GOVERNMENT, which is different than the FEDERAL government.

            James Maddison, the author of the constitution, says it is legal for the FEDERAL government to create bills of credit.

          • sean

            The constitution says that the congress can coin money, which is to produce money on metal.. Pennies are metal, Nickels are metal, Dimes are metal, Quarters are metal, and paper notes can be exchanged for coins. The constitution DOES NOT SAY that the money CONGRESS makes has to be of gold and silver. It does say that the money the STATES make have to be of gold and silver.

          • sean

            Besides, the federal reserve does not issue bills of credit, the banks do. There is no law saying that banks cannot issue bills of credit.

            The federal reserve BORROWS money for the government, which is a power of congress that has been delegated.

            Section 8 – Powers of Congress
            To borrow money on the credit of the United States;

          • sean

            Do you even know what bills of credit are? They are promissory notes that banks make when we purchase a loan. They make up 98% of our money in circulation. There is no law forbidding this in the constitution.

          • Matt

            So Nate, when you talk about your ideal state in which the free market dictates having private currencies competing with each each other, aren’t you espousing an unconstitutional principle?

            So going forwards, should we just immediately dismiss any reference you, or any other Ron Paul supporter who makes mention of an ideal state where free markets dictate the value of competing currencies as “blatantly unconstitutional”?

          • Nate Y

            Yep. There you go abusing the language right on schedule.

          • VR

            Nothing is wanting to the perfect strength of the truth, that the constitution put an end to paper money in all the United States and in all the several states; and yet a lawyer, who, but for his own refusal, would twelve years ago have become chief justice of the United States, in the line of succession from Ellsworth, further “finds in the legislative history of the country affirmative authority of the highest kind”: “No suggestion of the existence of a power to make paper a legal tender,” such are his words, “can be found in the legislative history of the country. Had such a power lurked in the constitution, as construed by those who ordained and administered it, we should find it so recorded. The occasion for referring to it has repeatedly arisen; and had such a power existed, it would have been recognised and acted on. It is hardly too much to say, therefore, that the uniform and universal judgment of statesmen, jurists, and lawyers has denied the constitutional right of congress to make paper a legal tender for debts to any extent whatever.”


          • Matt

            Nate Y says: “The Federal government has specific and limited powers granted to it by the States.” “The Constitution does not state that the Congress can delegate it’s authority to another body (for example, a central bank).”

            If this is one of the specific, and limited, powers granted to it, and Congress cannot delegate this responsibility, wouldn’t allowing free markets to issue and determine the relative value of currency (which you constantly propose) be unconstitutional? I mean, Congress, and Congress only “shall have Power…To coin Money, regulate the Value thereof,” right? What am I missing?

          • VR

            The abolition of private property, market competition, and market-generated money-prices for the society’s scarce factors of production eliminates all capability for any rational economic calculation of the opportunity costs concerning the application and use of resources, labor, and capital.

          • Matt

            I have no idea what that has to do with the hypocrisy in ideology between the Constitution ONLY allowing Congress to coin money and the RP followers’ belief in free markets dictating money.

            Really, you believe there is no market competition in the United States today and that has “eliminate(d) all capability for any rational economic calculation of the opportunity costs concerning the application and use of resources, labor, and capital.”

            Maybe you can’t figure out opportunity costs, but good thing there are tens of thousands of private companies today that are doing this very same thing – and doing it profitably. The world is not as chaotic and government-controlled as you make it seem. There are many privately-controlled market forces at work that the government does not manipulate, in addition if you want to start a private business there is nothing preventing you from allocating your resources in a cost-effective manner.

            Additionally, for every action the government or the Fed makes, there are ways to bet against it – and people do. The market does listen.

          • VR

            Matt must be under the impression that he started this thread and that all replies must speak to him. Not hard to imagine from one that thinks that the tip of his nose is the center of the universe.

            Read more from Matt @ http://www.itsallaboutme.com

          • VR

            Truth in the Coin Shop

  • We must hold our elected officials accountable for their actions. It is time to say goodbye to special interests in Washington and hello to the people’s interests.

  • Hal

    Thanks for posting this. I was a bit shocked this morning when I saw what was originally reported. I just couldn’t believe it of Frank. Not with out some power grab scheme in mind anyway. I really wish someone would audit Fannie and Freddie and his dealings with them.