To the Editor:
An article in the July 11th American Banker, and its headline ["Frank Reborn as Fan of Fed Empowerment"], substantially misrepresent my position on the powers that should be granted to the Federal Reserve Board.
Surprisingly for the American Banker, the article made one mistake by conflating the very separate issues of consumer protection and regulation of investment banks. Secondly, it inaccurately imputes to me "an about-face" on the consumer protection issue when I have instead acknowledged that the Federal Reserve has responded to the concerns I expressed.
The article does get right that "a little over a year ago" I was "openly threatening to strip some of the Federal Reserve Board's power, because of a poor record on consumer protection." What it neglects to mention is that that threat has disappeared not because of any change of mind on my part, but because of a very welcome change of position on the part of the Federal Reserve.
In two important areas recently, the Federal Reserve under Chairman Bernanke has taken two very strong consumer protection positions. One was the promulgation of rules dealing with abusive subprime mortgages. The other is the set of proposals involving credit cards.
The threat to take the power away from the Fed, since they were not using it, and give it to some other entity is no longer relevant, because the Fed has in the interim used the authority in question.
It is true also that in the hearing in question I expressed support for an increase in powers for the Federal Reserve. But the subject here was not consumer protection powers, which the Federal Reserve has under the Federal Trade Act and the Homeowners Equity Protection Act, but whether or not additional powers should be granted to the Federal Reserve to deal with investment banks.
The article says that my expression of support for the Federal Reserve as the repository of that power at the hearing "was a switch from even four months ago," when I said that I was "not sure if that power should go to the Fed." It is true that I expressed some uncertainty as to where the power should be lodged when the question of increased regulatory authority over investment banks first came up, and as I thought about it, it seemed to me that the Fed was the only possible place for it.
A movement from uncertainty when the issue is first broached to support for the Fed after some thought is not a "switch" in the usual definition.
I know journalists like to catch us in mistakes, inconsistencies, and hypocrisies, but they ought to be real ones and not manufactured just to make a story.Rep. Barney Frank
House Financial Services Committee