Former Congressman Barney Frank visited campus to deliver a lecture on how the financial crisis of 2008 happened and the effects of the legislation that bears his name.
The Dodd鈥揊rank Wall Street Reform and Consumer Protection Act was signed into law in 2010 in response to the financial crisis of the previous years.
Rep. Frank said that by the summer of 2008 he knew trouble was coming. It seemed every week there were takeovers happening amongst the biggest players on Wall Street.
鈥淏y the time Lehman Brothers was in trouble there was nobody left to take it over and absorb it,鈥 he said. 鈥淭he problem was that the reaction of the world to the failure of Lehmans was devastating. When Lehman Brothers couldn鈥檛 pay their debts, it mushroomed and people got scared. The next day, people stopped loaning money.鈥
According to Rep. Frank, the roots of the problem were traceable to the early 1980s, hitting full stride by 2005. During this time, money was becoming available from outside the banking system (primarily from foreign sources). This led to something called securitization, which allowed lenders to make loans and then sell the rights to a third party to be repaid.
鈥淭his makes people much less concerned about whom they lend to,鈥 he said.
This combined with other factors led to the great recession.
To those who believe the big banks should have been broken up, Rep. Frank asked, 鈥淭o what level? And then how do you break them up? They鈥檙e not amoeba鈥︹
There are many provisions in Dodd-Frank, a few that need to be tweaked, Rep. Frank acknowledged. As for President Donald J. Trump鈥檚 threats to repeal the legislation, he said there aren鈥檛 enough votes on Capitol Hill to do so.
Asked by host Dr. Elmore Alexander, dean of the Louis M. Ricciardi College of Business, if he had any thoughts about the nation鈥檚 current political state, Rep. Frank was, as always, up front.
鈥淢y hope is that the responsible conservative Republicans鈥 will take back their party. But as long as the Republicans in congress are elected in primaries by very right wing people I don鈥檛 see this happening.鈥
The event was sponsored by the Louis M. Ricciardi College of Business. (Story by John Winters, G 鈥11, University News & Media)