U.S. Rep. Frank sees finance reform by year-end

U.S. Representative Barney Frank (D-MA), chairman of the House Financial Services Committee, holds a field hearing entitled "Seeking Solutions: Finding Credit for Small and Mid-Size Businesses in Massachusetts" in Boston, Massachusetts March 23, 2009. REUTERS/Brian Snyder

WASHINGTON (Reuters) - An influential U.S. lawmaker on Monday urged the financial services industry to support efforts to strengthen the financial system or risk losing influence over the outcome of the debate.

“We invite the financial community to participate with us given what we believe is necessary and how we do it, but it’s going to happen one way or the other,” House of Representatives Financial Services Committee Chairman Barney Frank said in a speech at the National Press Club.

Those who balk at the restructuring of financial rules will be outside the debate and are inviting a harsher treatment, Frank cautioned.

The Obama administration and lawmakers are considering reforms to rules governing the financial services industry aimed at preventing another financial crisis like the one that erupted in mid-2007 and plunged the economy into the most painful recession in decades. Barney Frank, a Massachusetts Democrat, is at the center of that debate.

Banks have objected to elements of the regulatory retooling including the proposal to create an agency to oversee consumer protections for products such as credit cards and home mortgages. Industry representatives say adding new layers of bureaucracy are not guaranteed to ensure better consumer protection.

Congress can complete a regulatory reform overhaul and send it to the president by the end of this year, Frank said.

Democrats were committed to regulatory reform that protects consumers, and should use their congressional majority to ensure passage of financial rules that allow innovation but curtail abuse, he said.

“It is a responsibility for us as Democrats,” Frank said at the National Press Club in Washington. “I am giving us this responsibility because I am confident we are going to meet it.”

(Reporting by Kevin Drawbaugh and Mark Felsenthal; writing by Mark Felsenthal and Emily Kaiser)

Editing by Leslie Adler