House Financial Services Committee Chairman Barney Frank Talks About What's Left of TARP
Thursday, January 29, 2009SUSIE GHARIB: The Obama administration says the $350 billion left in the Troubled Asset Relief Plan or TARP may not be enough to support the nation's banks. A key player in deciding how that money is spent is Barney Frank, chairman of the House Financial Services Committee. Stephanie Dhue spoke with the congressman this afternoon and began by asking him if he would support more money for the TARP.
REP. BARNEY FRANK, CHAIRMAN, HOUSE FINANCIAL SERVICES COMMITTEE: My answer to them is that I will support it if they show the American people that they can administer it in a way that is acceptable. I have made it very clear to the secretary of the Treasury and we've got a bill through the House to say that. They've got to with the second $350 use it to reduce foreclosures which is both economically and politically sensible. They have to get money out to community banks. They've got to make sure that the other banks that get money, all banks that get any money, lend it out. They've got to be responsive to other concerns about abuses and bonuses. If they do that, as I believe they can and intend to, then having done that, if they need more money, I think they'll be able to get it. But at this point, neither House would vote them any more money for these purposes.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: And there is some talk about creating a bad bank. How do you do that in a way that protects the taxpayer and doesn't totally bail out the banks?
FRANK: Well, I have not fully focused on that yet. And I am waiting for the new administration to come up, you know, they really got in terms of resources, a greater amount to do that but you have hit on one important problem. To restore credit which is so important, you've got to do things that help some people who you don't want to help. That is, you can't help the whole system without some incidental benefits to people that want help. It is the reverse of something terrible that we have learned to live with, collateral damage. That's in a war. Collateral damage is when you try to shoot bad people and innocent people die. And that's the collateral damage, the innocent people. We have the reverse of this. We have something called collateral benefit. That is, you want to get the credit system functioning again, but you can't create a whole new one from scratch. You have to work with what you have got. So one effect of helping the credit system is you are going to provide some collateral benefit, literally to people you would rather yell at.
DHUE: Investors seem to think you are going to get capital on generous terms from the taxpayers without equity holders being substantially affected. Are they mistaken?
FRANK: Yeah, I don't know who thinks that, only the people that think that Elvis is alive. No, there's not going to be -- that goes back to what I said again. Yes, they may need to be capital infusions. But even under the Bush administration, there was no capital infusion without an equity stake.
DHUE: We have seen shares of Citigroup and Bank of America, for example, rally on this idea that there will be a bad bank.
FRANK: Well, that's different than saying they are going to get money with no equity stake. The capital infusions have come with an equity stake. It is true if these places ever trouble (INAUDIBLE) they may benefit some. There will never be and shouldn't be enough public money to provide all the capital you need. We need private capital as well. The role of the government is going to be to help the flow of private capital start again. If you say there are no profits to be made in that area, then you don't get to private capital. That is in nobody's interest.
DHUE: Does the bad bank idea have some appeal because the government would have more control and there would be a centralized place so you could work through these bad assets and reduce foreclosures?
FRANK: When you asked me that the first time I haven't really thought that through. And I'm not really going to comment. It is clearly necessary for there to be some public sector intervention that reduces the number of bad assets at financial institutions that keep them from functioning. How to do it I -- I have to say, I am not previously to the last few months spent a lot of my life thinking about what to do about bad assets in the banking system. And it is my job to think about it. But it's a fairly new subject. So I'm not going to come to any premature conclusions.
DHUE: We've been speaking with Chairman Barney Frank, thanks so much for joining us.
FRANK: You're welcome.
