Rep. Barney Frank discusses economy

[0:23] ..." congress passed the local homeowner's equity protection act. Which led to the Federal Reserve regulate sub prime mortgages Alan Greenspan. You do don't have done correctly said -- I don't own -- smart enough. He said adjustable rate mortgages are very good"...

[5:09] ..." not regulated accurate. You're appealing character property accurate record. That entity got real estate regulated that the money they're coming in the region by her real life but not -- That totally and Reagan will get to that you. And -- and -- what happened Benoit that's one reason blight Bernanke Paulson took a Detroit man people money to provide money. -- building up the company's. Apple did and every one of these cases Fannie Mae Freddie Mac there -- the they shackled and taken it. In some cases the debt -- taking it. The problem is that"...

[0:22]" In 1994 congress passed the local homeowner's equity protection act. Which led to the Federal Reserve regulate sub prime mortgages Alan Greenspan. You do don't have done correctly said -- I don't own -- smart enough. He said adjustable rate mortgages are very good thing for all these options because it will get more people in the homeownership. And he simply refused to do it now. His successor Ben Bernanke has since I don't know that was a mistake. And he would use the authority that mr. Friedman would mute and had regulated subprime mortgages which when the good things going forward. You're not going to see the kind of irresponsible mortgage. But could not have been made to people could have taken them and and that will be out but did. Is that we got to the parliaments of the two steps. Urged. Sub prime mortgages for granted and again regulation. Don't be purple act regulation goes to groups of the originators. Make mortgages. One group -- bank a community bank is here and people particularly people like community banks. Have been very unhappy to be reading about all the -- caused this problem -- in Kosovo model. Sub prime loans. -- until about thirty years ago made by if you went to the bank and you. Probably a little bit before the bankers get home early and that he granted you alone because he. New Liu didn't pay him back and so he Frist who pretty good before giving you alone. I got to the legislature and the Japanese community affected me is our motto know your customer. You are. Then because of technology goes on money in the world. You didn't need it could thank -- human mortgages. Based on -- millennium -- about -- but -- world. Beginning twenty years ago. It was great. And he moaned again to be made by non banks mortgage finance companies. And with non deposit fund. And not only would they be making these regulation. But we got this new phenomenon of securitization. Whereby you make people money for a home what you and took the right to be repay packaged and sold it. And we lost sight of a pretty fundamental. Issue. Most people more careful with their own money in the what the money of perfect strangers. If I -- you money and you going to be paying the deterrent I put more attention in that the deployment money and pack it up a so called one of the people. So we got a proliferation of subprime loan could have been maybe we -- philosophical debate about homeownership. And I differ with them my -- Movement conservative who. In my judgment made the mistake of equating a decent place to live with -- Homeownership is very good effort but it's not everybody economically and hopefully hopefully. And we made that mistake and debate between Democrats and Republicans. -- to -- until a few Republicans when power. And that basically ended vote for him to build rent housing. And yet we had everybody home and I was critical that I would confront at one point that well. What don't you wish everybody could own -- home. I -- yes and I wish I could be more might gain weight I wish I think but acting like we're treated and always the best way to be realistic. So. Yet other people are -- money for home that they really couldn't afford that work at the longest fight it kept going up. Because you have individuals stuck at home he couldn't afford. Treaty to refinance or so ago. Then what happens it. Home prices. People and anticipated but it happened that -- of -- besides the problem with credit default -- Credit -- plugged in new phenomenon. Which according to lot of problems are in effect in current policies that people. Offer. Treatments through the net with. And credit up to misnomer in. Which we could somebody else against a default. And the security that that person book. And once again that was based on the assumption that home prices would go up and up and up and at home prices began to drop. He securitized mortgages to help. People who issued a lot of credit default swap with they would them without regulation didn't have the money to pay up. People who the current policy but these are not regulated accurate. You're appealing character property accurate record. That entity got real estate regulated that the money they're coming in the region by her real life but not -- That totally and Reagan will get to that you. And -- and -- what happened Benoit that's one reason blight Bernanke Paulson took a Detroit man people money to provide money. -- building up the company's. Apple did and every one of these cases Fannie Mae Freddie Mac there -- the they shackled and taken it. In some cases the debt -- taking it. The problem is that when these regional under oath of public money to other people. That is about to wonder if you get it downward cycle and what we have done is not. The shareholders of the entities that made it that is what we have. Paid their debt so that they don't make things work and with credit outlook to -- the problem became that. Yet sure a lot of mortgage securities. And the mortgage securities -- losing value of people thought the book and the money to pay it. And that's where we had to step it that it might of people it's you know we get the situation where people -- credit default swaps and no money to pay from. Well it's kinda like eight -- due to produce between my concurrence of vampires. -- you're -- I -- current demand by it you don't worry about preserving a lot of money. And then the -- And when the vampires and I didn't have any money for the plane that's where we are. Now we have to sub prime crisis. People take -- we shall -- being made we put down and try to stop. But he Republicans and let the regulation. What very few people's life -- the extent to which modern financial technique. The great sophistication of technology. And the global openness. And liquidity -- it. I'm out into communities should take it home. Packages. And send them throughout the system and what people did not see with the -- to a debate sub prime loan will -- Google's system. We thought they could be book contained. An education whip. Yet have a good bedside. So ago at the subprime loan and that we have these wonderful financially -- it. I don't know -- debt obligation derivative. That cookies and -- through and it makes it opposite. We have not yet found a substitute. For a restraining. Unnecessary risk for the men to bore -- The fact that they need act meant I didn't make him -- he did. Once I don't have to worry about you paying me back a consultant writes -- paying me back. We have lost something and we we thought we hadn't connected but he felt that it the rating agency. Well -- writing it quickly though even by those involved with that AAA. While it turned out they did not that we did not vote. And of any age group -- overreacted. Whether they under active in the 888. Sent to do more valuable than it more now that the tendency to -- make up but but say things and that's about it and now it. Investors who bought stuff they could look what now by the tripped up by what they could we're trying. To give them more credit that's what -- old -- was about put some money and there was some assurances guaranteeing Interbank loans. You get people. Back -- The the year the we have -- two step process. One what we do -- bent upon Malone and two what do we do about the instruments. That took it upon. The consent of the system. The -- we are today. Except we thought we were dealing with -- this credit crises Jews who makes it. Auto loans that made it couldn't have been made a lot of people getting overextended. People being too tightly. And again it has to do and play my with regulation -- take he kept. And IG has been for years a collection of insurance -- well -- profitable for America open your record companies a tightly regulated. And after awhile he's encouraged companies would generating so much profit. That people at the top got war. Without waiting -- premiums. And now this is not very creative. So the people at the top the company took the -- being generated by regulated entity. It's not speculating in these unregulated very exotic financial instrument collateralized debt obligations -- That things went wrong. The trouble because the speculation -- profits generated by the activities. Put him in trouble so what happens now with federal government the money and the regulated entities profits. Have been taken awaited them to have an issue and the going to pay off the debts incurred by the unregulated. Speculation. I mean that know what we have stopped up it up on and Bernanke whose credit has plummeted rule. -- radical hold it yet don't mind people money maker possibly pay -- back. Don't let them -- house is worth don't let the money that group to he has authored it can't possibly repay it. Don't let people have a situation where they are paying serious interest and never make an equity payment. Don't give the money if you have to Kuwait can we if everything goes perfectly. Okay but if the rules weeks ago -- punitive no reserve any of it we well -- today. When I gave him the committee which the laws these things -- senate but Bernanke's work and and he promulgate -- What we still have so hopefully we've gotten the bit upon won't going to vote. What we still have quality instruments that took the bad loans. And rocketed -- the system. Anyway look at the ultimate -- The financial. Structure with a gun got out now we've -- it once -- so well but it would be a mistake to think it won't be. Mark WB rated him."