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.