Rep. Frank Pushing For Changes To Financial System

STEVE LEBLANC

CAMBRIDGE, Massachusetts (AP) — Rep. Barney Frank, the House of Representatives Financial Services Committee chairman, said Monday he's pushing legislation he said will create the kinds of regulations needed to help avert a repeat of the country's financial meltdown.

Frank said the regulations address some of the central problems brought on by the subprime mortgage crisis, including allowing financial institutions to bundle mortgages without taking on the risks if those mortgages failed.

The legislation would prevent people who can't afford mortgages from obtaining home loans, one factor that fueled the mortgage crisis.

It would also clamp down on bonus systems for the heads of financial institutions. The systems created "perverse incentives" by rewarding executives who took risks that paid off but failed to punish those who took risks and failed, Frank said.

"Why did people make those bad loans? Because they could," he said. "It's heads they win, tails they break even."

The plan, which Frank said could be voted on by the committee during the first week of May, would also bar financial institutions from securitizing 100 percent of their loans, create a "resolving authority" to help wind down failing institutions in a more orderly way, and ensure no institution becomes so indebted that it threatens the entire national financial system.