House Financial Services Committee Chairman Barney Frank says he sees a “happy ending” to the nation’s economic woes within several years, has “a lot of confidence” in the Obama administration economic team, and argues that most of the money being spent to revive US banks “is going to be repaid.”
Both real and psychological problems
“We are in a terrible mess,” Rep. Frank, a key Congressional voice on economic policy, said Friday at a Monitor-sponsored breakfast for reporters. But, he argued, “it will have a happy ending in the sense that this is a very productive country.” Frank said one reason for his optimism is, “because I think our problems are at this point both real and psychological and I am hoping the psychology will begin to abate.”
Government policy will change as a result of the nation going through tough economic times, Frank said. There will be “a renewed appreciation for the importance of the government setting rules,” he said. “You will get a new, systemic-risk regulatory regime.”
Stock market as nervous hysteric
When Treasury Secretary Timothy Geithner rolled out the Obama administration’s Financial Stability Plan to attack the credit crisis on Tuesday, the stock market sold off sharply. “Over any considerable period, the market is a pretty good allocator of resources,” Frank said. “On any given day, it is a nervous hysteric not to be paid attention to.”
Confidence in the Obama team
Despite the market’s reaction, “I have a lot of confidence in Geithner and [Lawrence] Summers,” who heads Obama’s National Economic Council, Frank said. He agrees with critics who said Geithner's speech on the Financial Stability Plan was light on specifics. But when Geithner releases more details next week, “I think the details on the [home mortgage] foreclosure part are going to be good," Frank said. And on the issue of troubled bank assets, "there is no right answer to that and I think he will do something good,” Frank said.