Former Congressman Barney Frank, co-author of the Dodd-Frank Wall Street Reform Act, is not opposed to changes in the eponymous legislation, but in some cases he thinks the rules should be tightened, rather than loosened.
In his keynote address to a standing-room only crowd in the main room at ABS Vegas 2015, the Structured Finance Industry Group/IMN conference, Frank said that his main concern is housing.
“I’ve always been skeptical of the notion that our policy goal should be to expand housing,” he said. “The goal should be to ensure that people have homes, but a significant portion of the population, because of their economic situation…should live in rental housing.”
Yet he later said that his preference would be to “let [mortgage] lenders make any loans they want, as long as they have risk retention.” For those who argue that requiring skin in the game would be “fatal” to the mortgage industry, he noted that, in the 1980s, before the advent of securitization, “risk retention was 100%…banks kept all of the loans, and all of the risk.”
Frank isn’t precious about the law that bears his name.
“There are some changes coming…there should be some changes,” he said. “It wasn’t perfect the day we passed it because it was a compromised process.”
One area Frank would like to see some loosening is the way that Dodd-Frank is applied to credit cards. “There’s a provision empowering the Fed to regulate the prices charged by credit card companies to retailers for debit card use. I thought that was a great intrusion into a business-to-business transaction. I was outvoted.”
In other areas, particularly auto loans, Frank would like to see the regulation tightened. “Dealerships are very popular in their districts. It’s a misplaced notion that banks have political clout,” he said. “The political power in Congress comes from people who have natural grassroots networks: realtors, insurance agents, auto dealers. They have a degree of clout that Bank of America, Citi and Wells Fargo together don’t come close to having.”
Frank stopped short of saying that auto dealers are predatory lenders, but he said that the wrong crowd had naturally migrated to the one area exempt from the Consumer Finance Protection Bureau.
In a contentious carve-out from Dodd-Frank, most auto dealers are exempt from the CFPB supervision and enforcement. This has forced the bureau to handle suspected dealer misconduct in a roundabout way: by addressing those, such as banks, that fund dealers or otherwise engage in business with them.