Financial thoughts

House Financial Services Committee Chairman Barney Frank said Congress within two weeks will pass legislation letting the Treasury take on financial companies' soured assets to help revive credit markets.

“I'm pretty sure this will be Treasury being the one that executes it because you don't have time to create a new agency,'' Frank said today in an interview on Bloomberg Television's “Political Capital with Al Hunt.''

The temporary plan is likely to include a “second stimulus'' proposal, and Congress will begin weighing broad regulation of hedge funds, private-equity firms and investment banks when it reconvenes next year, the Massachusetts Democrat said.

Federal Reserve Chairman Ben S. Bernanke, Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox met with Frank and other congressional leaders in Washington yesterday to propose steps to calm financial markets roiled by the biggest housing slump since the Great Depression. The plan would remove devalued mortgage assets from companies' balance sheets. Frank said Bernanke and Paulson told him doing nothing would mean “disaster, the financial system going into a mode of very little activity.''

The plan may cost taxpayers “ultimately not a great deal,'' because Treasury will buy “selectively,'' Frank said. The bad debt will cost “maybe double-figure billions over a few years,'' he said.

Tax Rebates

The House of Representatives will pass legislation to implement the plan by the end of next week, and the Senate will act soon after, Frank said internet payday loans. The second stimulus package may include infrastructure funds, low-income energy aid and Medicaid assistance. It won't contain tax rebates for families, he said.

“It's a lot of aid to the states and cities so they can keep spending, and on socially useful stuff,'' Frank said.

Congress will move next year to place Wall Street firms under rules similar to those governing commercial banks such as capital requirements and limits on leverage, he said.

Commercial banks “are examined and they can't make loans that are too risky,'' Frank said. “And because they have to have a minimum amount of capital, they can't get so extended to a point where they owe 30,40, 50 times as much as they can put up.''

He endorsed the SEC's decision to temporarily ban short- selling to bet on declines in the shares of financial companies. The prohibition, which covers 799 companies, is effective immediately and will be in place through Oct. 2, the SEC said today.

“They banned it some, they should go even further,'' Frank said. “This is another example of the price we are paying for the philosophy of deregulation.''

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