Barney Frank says “no right answer” to Merrill sale problem

April 28, 2009

Barney Frank indicated he isn’t as disturbed as some other lawmakers by revelations about the pressure that was brought to bear on Bank of America CEO Kenneth Lewis to complete the takeover of Merrill Lynch in the face of indications that Merrill’s financial position had deteriorated dramatically. Frank told the Reuters Global Financial Regulation Summit in Washington that “there was no right answer” over whether the government should have intervened to make sure the deal was done.

Last week, senior Republican Senator Richard Shelby joined House Democrats in seeking more details after New York’s attorney general said Lewis had testified he was pressured by former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to do the merger, or lose his job. Shelby even brought up the question of possible securities fraud over the controversy.

Frank, who is the powerful chairman of the U.S. House of Representatives Financial Services Committee, said that while there may be some disclosure problems over Bank of America’s failure to keep investors informed he didn’t believe it was as simple as saying that Paulson and Bernanke shouldn’t have intervened. If they had allowed Merrill to fail it could have led to disaster, said Frank, who had a less combative and brusque manner than he is sometimes known for in today’s 50-minute Q&A with the Reuters news team.

Frank’s way to avoid such problems in the future is to create an authority that can seize and unwind large institutions that are failing and creating systemic risk for the entire financial system.

3 comments

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Barney:

Do us all a favor and RETIRE because you and Nancy are totally CLUELESS. Just like your off the cuff comment that TARP funds will be repaid in one year. The taxpayers will be lucky to see 10 cents on the dollar from the likes of Citibank, B of A, AIG….who are you fooling you senile old man!

Posted by david | Report as abusive

Mr. Frank is one of the principle people involved in the crisis. It is his failure that allowed the industry to essentially regulate itself. He puts the blame on the bankers, but we know they will always seek to get around the rules and work in their best interests. It is Frank’s job to work for the best interests of the people. In that regard he may actually be the biggest failure of the whole crisis. I would like to see him testify under oath about the role he has played in this mess. I assure you he will come across worse than Dick Fuld.

Posted by dcb | Report as abusive

Barney Frank is on the right track, but I am unsure if seizing failing institutions is the answer. Perhaps something a little less drastic would be a better approach. For sure, the major financial institutions need oversight.

I admire Frank’s backbone in dealing with the complicated problems related to the financial crises. His past press conferences have made it abundantly clear that he won’t let media, opinion polls and special interest groups make government policy.

“…Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke [pressured Lewis] to do the merger, or lose his job.”

So what? The U.S. impeaches politicians for mismanagement and misuse of public trust. Financial institutions have held a lot of political clout since the Great Depression. Replacing someone in a high position in a huge financial organization (one which influences domestic policy as well as domestic finance) may not be such a bad idea. After all, it was the financial institutions that got us into this mess. If the Institutions’ Boards of Director won’t police their own and act in the public interest, some other entity must do it. Granted, Banks and investment groups are in business to make money. However, they must work in the public interest if they expect to continue to make money with investors’ money. Too much is riding on the proper management of the flow of American money.

Posted by Mike Fulton | Report as abusive