WASHINGTON(Reuters) – The head of the U.S. House of Representatives FinancialServices Committee on Friday said investment banks should not face thesame capital rules as commercial banks, but that risk-taking restraintswere needed.
Asked in an interview with CNBC whether investment banks should facethe same capital standards as commercial banks if they have access toloans from the Federal Reserve, Rep. Barney Frank said, "No."
"There needs to be some regulations, I think, over investment banks… but its different than commercial banks," the MassachusettsDemocrat said.
Frank, who chaired a hearing on Thursday with the chairman of theU.S. Securities and Exchange Commission and the president of the NewYork Federal Reserve, also said it was important for the New York Fedto play a big role in investment bank regulation going forward.
"You need to have people who have got a degree of expertise that,frankly, it would be hard to amass in large numbers on the regularfederal civil service. We don’t have those kind of pay scales," he said.
Frank, the key architect of a massive U.S. housing rescue bill thatwould extend a government lifeline and create a new regulator formortgage finance companies Fannie Mae and Freddie Mac, said he hadconfidence, for now, in the current regulator, Office of FederalHousing Enterprise Oversight Director James Lockhart.
Asked if he had confidence in the current regulator, Frank said, "Hedoes, at this point. I’ve had some disagreements with Mr. Lockhart," hesaid.
Frank noted that Lockhart would be the interim regulator under thelegislation, but that whoever wins the White House in November would beable to nominate someone new.
"Jim Lockhart’s expertise is not in financial markets, and that’smore of an issue these days. On the other hand, the first thing thathas to happen is, the regulatory structure has to be set up … and Ithink he will be able to do that well."
(Reporting by Tim Ahmann; Editing by Theodore d’Afflisio)
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