Frank calling in FBI for financial hearing

House Financial Services Committee Chairman Barney Frank (D-Mass.) will press state and federal authorities this month to ratchet up their criminal and civil investigations in the financial crisis.

Frank said he is intent on pushing for legal action to re-instill public confidence in the government’s actions to bail out the financial system with trillions of dollars in loans and guarantees. Frank said he did not think there would be public support at the moment to grant more money to President Obama for the financial system should the president request additional resources.

{mosads}Frank didn’t give the name of who he wants to see prosecuted, but did call for a March 20 hearing with the FBI, the Securities and Exchange Commission (SEC), the Office of the Attorney General, bank regulators and state authorities to identify law enforcement’s intentions to investigate those involved in the financial crisis.

“One way you prevent a recurrence is to punish people who did what they shouldn’t have done in the first place,” Frank said on Thursday.

Stock markets continued their decline on Thursday, with the Dow Jones Industrial Average plunging nearly 300 points by mid-afternoon to its lowest level since 1996. Banking and automotive stocks plummeted, with shares of Citigroup, the second-largest recipient of government bailout money, falling below $1. Auditors for General Motors Corp., which has received more than $13 billion in loans, raised “substantial doubt” about the company’s viability.

Frank is moving forward on new legislation and taking up bills from the previous session of Congress while the Obama administration continues to flesh out proposals to shore up financial markets. Frank said his committee will turn to legislation regulating subprime loans, predatory lending and credit card policies, while also pursuing a rewrite of broader financial laws.

Frank explained the efforts were needed to show the public that Washington is not merely bailing out banks and Wall Street firms seen by some as bringing on the financial crisis.

“Yes, we have to respond to the need to restart the financial system, and that includes being nicer than a lot of people would like to some of the people in the financial institutions,” Frank said. “That cannot, however, be allowed to be the only thing people see us doing — banning subprime loans, pressing the authorities of prosecutions both criminal and civil both to talk about sentencing people who committed crimes and also to recover funds that should be recovered.”

Frank noted that two banks said they would return money from the $700 billion Troubled Asset Relief Program (TARP), including $1.6 billion from Northern Trust and $6 billion from U.S. Bancorp.

Frank also fleshed out his vision for a systemic risk regulator, one of the top priorities for his committee, which began holding hearings on the subject with financial industry officials on Thursday.

“I will be pushing for legislation that makes it illegal for anyone to securitize 100 percent of anything,” Frank said, meaning that banks or lenders must hold some share of the loan instead of passing the loan off entirely to investors with no relationship to the actual borrower. Frank did not specify a percentage of risk that lenders would have to retain.

The systemic regulator, Frank said, would also be empowered to prevent people from being over-leveraged, to unwind any systemically important institution and to review or oversee executive compensation rules.

Frank also supported looking into an optional federal charter for life insurers. “Life insurance has increasingly become a financial product,” Frank said. “Yes, we will have to think seriously about whether or not to do an optional federal charter for life insurance.”