STEVE LEBLANCCAMBRIDGE, 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.
Frank made the comments during remarks at a forum held at Harvard University's Kennedy School of Government. He said part of the reason the country finds itself in its fiscal crisis is a shift from traditional bankers, who made loans but found themselves on the hook if the loans went bad, to complex financial deals that allowed mortgages to be combined and then sold ¿ with little financial risk to those making the loans. "If only banks made mortgage loans, there would be no crisis," he said. Part of the solution, he said, are new regulations and public policies intended to rein in the worst excesses of that system. He acknowledged that part of the problem were individuals who took out loans even though they should have known they had no reasonable expectation they could pay them back. But Frank said a large part of the blame also goes to those making the loans, who also should have taken the time to figure out if the people they were lending the money to could repay the loans. Besides the bill aimed at the mortgage and financial crisis, Frank also said he's pushing legislation to help beleaguered credit card holders by barring companies from raising interest rates retroactively, particularly if a card holder runs into a dispute with another financial institution. The bill would also crack down on late fees by giving debt holders more time to pay.
"I am convinced they watch me and when I go on vacation, they mail me the bill," he said.