Barney Frank, chairman of the House Financial Services Committee, is giving a speech today in Boston. Will he announce his resignation, out of shame and sympathy with Eliot Spitzer? Well, the smart money says “no.”
This speech is likely to spell out his full position on the economic crisis, presumably touching on his views on the Bear Stearns execution, and commenting on Helicopter Ben’s performance. Bernanke began his four year term in January 2006. It seems likely to me that the new president, whoever he is, will likely replace him at the first opportunity, if not sooner.
Congress has to trot out new legislation. This is what Congress does. Barney will most likely outline what he will propose.
In my view, congressional legislation passed in response to an economic crisis is wrong-headed more than half the time, as witness Sarbanes-Oxley, and a lot of the New Deal legislation. In this case, however, I must reluctantly conclude that a seminal event leading up to this point was the repeal of the Glass-Steagal act. I think we need to put it back.
At a stroke, the repeal of Glass-Steagal set the stage for the long-running huge inflation of the money supply. Prior to Glass-Steagal, brokerage assets were not M2, could not be the basis for lending, other than mortgage lending. Repeal has set the scene for the case now where we are facing bank failures in the next wave, due to their illiquid positions in securities.
Listen carefully to Barney. Think to yourself: do you want to amplify his proposals by electing a ratsocrat president? I don’t pose this facetiously. Though I kid Barney over his prostitutional ventures, he’s not a stupid guy, and he may sort through this mess and have a useful take.