Key lawmaker says anxious for another stimulus
BOSTON (Reuters) - U.S. Rep. Barney Frank, the influential chairman of the House of Representatives Financial Services Committee, said on Monday he will remain "very nervous" about the health of the nation's economy until Congress passes another stimulus package.
He also warned the powerful but loosely regulated $1.7 trillion hedge fund industry that he plans to impose new standards requiring more openness and that funds and banks have the money to back up any potential losses.
"Until we can get a stimulus package passed, I will be very nervous," said Frank, who played a major role in crafting the $700 billion U.S. financial bailout plan. He spoke after addressing a group of Boston business leaders.
He declined to answer a question about when the stock market rout might end, adding that no one should try to guess when the market would bottom.
But he said it was also important for the government to take action to protect Americans from home foreclosure and make it easier for U.S. state governments to avoid laying off workers and keep construction projects going, Frank said.
Both a stimulus package and action on foreclosures might help pave the way for recovery, the congressman said.
Economists fear that a growing number of Americans could lose their homes and jobs as the economy worsens. Corporate America is already cutting back sharply, with dozens of companies unveiling job-cut plans in recent weeks.
Frank also had sharp words for banks that are not lending out the cash injections they received as part of the bailout plan aimed at unfreezing credit markets.
Nine of the largest U.S. banks, including JPMorgan Chase & Co and Bank of America Corp, received the first $125 billion of capital infusions two weeks ago.
At least 19 banks have signed up for the program under which the Treasury is providing funds as part of a $250 billion bank recapitalization program.
"We are going to be pressuring them that the money made available will be turned over," Frank said, adding "If that doesn't happen, we will find a way to put pressure on them."
Frank also lashed out at hedge funds after at least two of them threatened to sue banks if the institutions renegotiated mortgages for homeowners in a way that would hurt the hedge funds' interests. Frank said many hedge funds were involved in trading securities backed by subprime mortgages and said some were now refusing to cooperate in efforts to repair the damage those loans have done.
"If that is the attitude they have, then they can expect much tougher regulation," Frank said about the loosely regulated $1.7 trillion hedge fund industry.
The Massachusetts Democrat and several other Democratic lawmakers last week asked the top executives at hedge funds Greenwich Financial and Braddock Financial to appear at a hearing his committee plans to hold next month.
Frank has previously said that he plans to regulate the activities of financial entities, including hedge funds, by demanding higher capital requirements and improving transparency.
(Reporting by Svea Herbst-Bayliss and Scott Malone, editing by John Wallace/Jeffrey Benkoe)
