Financial reform push reignited by Rep. Frank

Chairman of the House Financial Services Committee Barney Frank speaks to the media after a meeting with U.S. Treasury Secretary Timothy Geithner on Capitol Hill in Washington February 2, 2009.

WASHINGTON (Reuters) - U.S. financial regulation reform, sidelined for months by the market crisis, got a boost on Thursday as Rep. Barney Frank laid out plans for legislation to overhaul mortgage financing, combat predatory lending and prevent credit card lender abuses.

Vowing to turn his focus from stabilizing the financial system to fixing it, the chairman of the House of Representatives Financial Services Committee said he plans to bring the legislation this month to the House floor.

Frank, a Massachusetts Democrat, said he will also hold hearings on creating "a strongly empowered systemic risk regulator." Hearings are set for March 17, 20, 24 and 26.

The committee will explore legislation to prevent excessive leverage in the financial system, create a way for the government to unwind failed non-bank financial institutions, and prohibit 100 percent securitization of loans, he said.

"I will be pushing for legislation that will make it illegal to securitize 100 percent of anything," Frank told reporters at a briefing about the panel's agenda.

There will also be an effort to restore more state powers in the consumer protection area of banking, he said.

In addition, Frank said, he wants to examine flexibility in mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs. But he added: "I don't think it is a good idea for Congress to legislate accounting."

The White House and Congress have been consumed for months with saving the banks and Wall Street, intervening with one multibillion-dollar program after another.

Now Frank is signaling that he, at least, is ready to begin the equally tough job of trying to fix the financial oversight system to prevent a repeat of the current crisis.

Wrongdoers will be prosecuted, he said. The committee will ask U.S. law enforcement authorities about their plans to prosecute executives and institutions that contributed to the worst financial crisis in generations.

"The American public has the right to know what enforcement actions are contemplated against those irresponsible and, in some cases, criminal actions that led to the current situation," Frank said.

FED AS RISK MONITOR

A top priority for lawmakers is to create a new regulator of systemic risk, a job that Frank has previously said should go to the Federal Reserve. Some lawmakers are concerned such duties could distract the Fed from its core role as manager of monetary policy.

At a House financial services subcommittee hearing on Thursday, Wall Street groups agreed there should be one risk regulator but were split on who should have that role.

The Financial Services Roundtable, which represents the largest financial services firms, advocates giving the Fed the responsibility for looking across the entire financial system and identifying risks. But the Securities Industry and Financial Markets Association, said it has not decided whether the Fed should play that role.

The National Association of Insurance Commissioners, a collection of state regulators, oppose the creation of one super regulator.

"Are any of you troubled with giving the Fed so much power?" asked Spencer Bachus, the top Republican on the full House Financial Services committee. Lawmakers at the subcommittee hearing also expressed reservations about rushing ahead with a plan to create a systemic risk regulator.

Credit card reform legislation has already been reintroduced by New York Rep. Carolyn Maloney, a Democrat. The bill seeks to prevent credit card companies from imposing excessive fees and high rates considered unfair to consumers.

(Additional reporting by Rachelle Younglai; Editing by Tim Dobbyn)