Frank to lobbyists: Don’t block reform

Rep. Barney Frank (D-Mass.) expects Congress to pass wide-ranging legislation to revamp the financial system before the end of the year and warned financial companies not to resist the overhaul outright.

“We invite the financial community to participate,” Frank said at a speech at the National Press Club. “But it’s going to happen, one way or another.”

{mosads}Frank, chairman of the House Financial Services Committee, intends to pass a single bill through the House by September or October that includes several major changes to the system. The Senate would consider legislation later in the year.

The Obama administration and Congress are weighing legislation that would empower the Federal Reserve with new authorities over “systemic risk,” create a new Consumer Financial Protection Agency, consolidate banking supervision and set up new rules on financial derivatives and executive compensation.

Financial industry groups are ramping up their opposition to key parts of the overhaul. Frank had intended to pass legislation on the consumer protection agency before the August recess, but delayed those plans last week amid strong opposition from industry as well as Republicans on the committee.

The consumer agency would oversee products such as mortgage loans and credit cards and gain the consumer protection responsibilities currently housed at the nation’s financial regulators.

Frank took aim at the financial lobby on Monday and said that if it did not participate constructively in the process it would find itself “outside the debate.” Moreover, he criticized some in the banking lobby for forgetting the government’s role in bailing out the industry and supplying essential capital at the height of the financial crisis in 2008.

“I think some of them have forgotten that,” Frank said.

But industry lobbyists are not the only ones who have criticized key planks of the administration’s proposal. The Federal Reserve, Federal Deposit Insurance Corporation and other existing regulators also oppose pieces of the administration’s plan. Treasury Secretary Timothy Geithner on Friday said that was to be expected with regulators seeking to protect their regulatory turf.

Regulators have opposed the consumer agency plan in particular and are seeking to retain their consumer protection authorities. Frank dismissed those efforts and called the regulators “born-again consumer advocates.”

Frank mentioned several additional efforts that have received less frequent attention, including a provision he says would encourage international cooperation.

Lawmakers will write legislation with “instructions” for the Treasury Department and Federal Reserve to deny access to the American financial system for companies based in countries that serve as “escape hatches” from the new regulations, Frank said.

“Everybody understands it would be fatal if you have these kinds of escape hatches,” he said after the speech. Frank said that Geithner believes such a provision is a “good idea.”

Frank also said that Congress would not support the government maintaining a list of large financial institutions, or “Tier 1” firms, that are systematically significant and subject to tighter regulation. Having such a list of firms that are too big to fail would encourage firms to grow large enough to be included, Frank said.

“There will be no such list,” he said.