Frank Proposes Limits To Banks Reselling Loans

Congressman Barney Frank is pushing for legislation that limits how much of their loans banks and other financial institutions can resell to investors.

Frank, the chairman of the House Financial Committee, made his proposal at Harvard's Kennedy School of Government Monday night.

Barney Frank believes that the credit markets collapsed because financial institutions packaged loans and resold them. He supports legislation that would restrict the practice.

"I believe it is important that we say you cannot securitize 100 percent of anything, that you have to retain some percentage of that," Frank says. "Because it turns out our mothers were right: people are not as careful with anybody else's money as they are with their own."

Frank also supports legislation that would prohibit compensation for financial executives if it rewards them for successful risk-taking but does not punish them if the risks turn out to be bad ones, and he wants an institution like the FDIC that would be able to take over insolvent investment banks and insurance companies.