Here is the link at MSNBC to the full interview
Frank: Look, we have banking regulators and their primary job is to protect the banking institutions - I understand that. We have historically given them the right to protect consumers, but that's not their primary role.
The Federal Reserve, control of the currency, the FDIC, they just have a primary focus on protecting the banks and the bank system. We think the time has come to have a separate institution that protects the individual customer - on credit cards, on bank overdrafts, on truth in lending, on all of those things. And the administration proposed it. It had been originally proposed by Professor Elizabeth Warner at Harvard Law School. We are going to put that into place so that individuals dealing with financial institutions, it will cover pay day loans. It will cover a lot of things where we have seen consumer abuse, and have an institution whose focus will be on the consumer protection rather than doing consumer protection as kind of an after thought to more important (as they see it) jobs.
Mitchell: Now speaking of Elizabeth Warren and the Harvard law professor who's also leading the Congressional oversight panel, that panel issued a report today. Saying that the Treasury is selling its stakes in banks for one-third less than they're worth. We're talking about billions of dollars here. Does that raise concerns for you?
Frank: It does. I would have to look at them. There is this point that we do want to have the banks to have some funding to be able to do their job. But I have to tell you that the banks have disappointed me some. There was a recent very good study from the Federal Reserve Bank of Boston about national issues which said that the banks are not really doing what they should be in helping us avoid foreclosure in rewriting mortgages, and again we're expecting the banks that got money from the federal government under the TARP program (as we call it) to do that. So yeah I will be looking at that because the federal government was there when the banks needed it very badly, and I haven't seen the report. I've been in that hearing all day that you mentioned until literally five minutes ago, but I will be looking at that report.
We have bailed (and continue to bail) out the financial industry. Virtually no money is going to people. Instead, the foreclosure crisis continues, and the banks are not doing ... anything. So Frank is SOMEWHAT disappointed! I am totally outraged. Across the country people are losing their homes - including apartments and rentals. The banks are foreclosing like crazy. In losing those homes what little wealth the majority of people have is being stolen from them. Their life savings and dreams and stability are being stolen from them. This "crisis" and the response to it, is a massive transfer of wealth from the people to big investors.
Let's take one example. The situation in Detroit, Michigan was captured in this article - The city of $10,000 homes: Outside buyers drawn to Detroit's foreclosures:
Welcome to Landlord Nation, where foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more.
In extreme cases, homes are on sale for $1 or less, which has enticed investors to Detroit from as far away as the United Kingdom and Australia.
"In the past few months, I've picked up 10 new clients from out of state that are buying in bulk," said Mike Shannon, a suburban Detroit real-estate agent. His office specializes in foreclosures in a city that's among the national leaders.
"They're coming to us saying, 'Look, I want to buy 50, 100, 1,000.' They want to own every decent and cheap house they can find."
Despite a stagnant retail housing market, real-estate sales of foreclosed homes are booming.- Advertisement -
This same phenomenon is happening across the country. Here we have homes worth over $100,000 that have been taken away from those who owned them (foreclosed), and are now being sold for ten cents on the dollar (or less) to groups doing a land grab. Now if the banks and mortgage companies are going to sell these homes at a 90% loss, wouldn't it have been a better idea to work with those people in their homes? Wouldn't it have been more "profitable" to renegotiate loans and terms - even if it meant a 50-80% decrease in the principal? Logic would say "yes," but finance would say "no."
How can this be? Well, if you change the mark-to-market rules (which was done) it allows the banks to value the homes at whatever they want (incentive is to value high). So if you take a $100,000 home that will only sell on the open market for $70,000, you give it full value on your books because that makes your assets and loan ratios look good. On the other hand, you can foreclose that property and sell it for a $90,000 loss and this is made up by the federal government because clearly this is a "toxic asset". So you can lower your tax burden and continue to qualify for federal bailout. However, making deals with home owners really gets you nothing on either side of the books. So what has been incentivized (and facilitated) by TARP and the Federal Reserve is a land grab and a massive transfer of wealth.