News & Events
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–Frank 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.
“By the time Lehman Brothers was in trouble there was nobody left to take it over and absorb it,” he said. “The problem was that the reaction of the world to the failure of Lehmans was devastating. When Lehman Brothers couldn’t pay their debts, it mushroomed and people got scared. The next day, people stopped loaning money.”
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.
“This makes people much less concerned about whom they lend to,” 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, “To what level? And then how do you break them up? They’re not amoeba…”
There are many provisions in Dodd-Frank, a few that need to be tweaked, Rep. Frank acknowledged. As for President Donald J. Trump’s threats to repeal the legislation, he said there aren’t 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’s current political state, Rep. Frank was, as always, up front.
“My hope is that the responsible conservative Republicans… will take back their party. But as long as the Republicans in congress are elected in primaries by very right wing people I don’t see this happening.”
The event was sponsored by the Louis M. Ricciardi College of Business. (Story by John Winters, G ’11, University News & Media)