Barney Frank is currently attempting to rewrite the rules for the US financial system in the form of The Financial Stability Improvement Bill of 2009.
Charles Rowley explains the significance of the Commercial Mortgage Backed Security (CMBS) market to the U.S. financial system. He states:
This is a very important market, because a significant collapse in the CMBS almost certainly would induce a secondary financial crisis in the United States and markedly accentuate the current economic contraction.
At issue is the level of interest, i.e., the amount of “skin in the game” the issuer/originator of these securities must retain when they are packaged and sold to investors. The initial draft set this at 10 percent, Barney Frank’s Financial Services Committee voted unanimously to reduce it to 5%, then after lobbying efforts which no doubt involved substantial campaign contribution to Barney Frank et al., the retention requirement was eliminated entirely.
Rowley says on his blog:
This ‘modification’ coupled with a renewed investor appetite for risk, will most likely prove to be the undoing of the CMBS market.
So, another financial crisis is the works, orchestrated by lots of private greed but with all the help of Barney Frank as the last one was. I wonder about the players who make deals with Barney Frank. Why don’t they understand that it is they who take the brunt of the blame and possibly be left holding the bag and not the ever protected Barney Frank.
Rowley’s conclusion is spot on the money:
Two lessons can be learned from this sorry spectacle. First, never trust the words that emanate from a politician’s mouth. Put your faith only in the actions of that politician. Second, always track the movement of money through the corridors of Congress. Congress is always completely bought out. There are no $100 bills lying unmolested on its sidewalks, to say nothing of bills of significantly larger dollar dimensions.
In a replay of the machinations of 2008, Chris Dodd is carrying the water in the Senate.
You really have to read all of Charles Rowley’s piece on this to get an understanding of it.