And former Congressman Barney Frank disagree with some of Bernie Sanders’ stance of breaking up the banks and the Glass-Steagall and defended Hillary Clinton’ Wall Street reform plan. But, what I find interesting from Chris Hayes’ interview with Frank is that Congressman Frank stated that Lehman Brothers was an investment banks and Glass-Steagall would not have helped Lehman.
Yes, Lehman Brothers was an investment firm but what Congressman Frank left out from the interview is that Lehman Brothers had a subprime mortgage company called BNC Mortgage and Aurora Loan Services LLC:
Lehman Brothers took an ownership stake in BNC in 2000 and acquired the lender in 2003. Founded in 1995, BNC Mortgage had its initial public offering in 1998. Two years later, BNCM Acquisition, a group including the company’s top managers, took the company private. In 2004, one of its partial owners, Lehman Brothers, bought it. In addition to owning subprime lenders, Lehman was also a top underwriter of subprime mortgages for other businesses.
- Parent/subsidiary companies: BNC Mortgage Inc. was the primary subprime lending subsidiary for Lehman. Others included Finance America LLC (which merged with BNC in 2005) and Aurora Loan Services LLC (acquired in 1997).
And this is why the Glass-Steagall act was repealed to allow banks and investment firms to intertwine products and services together rather become separated. Unfortunately, Lehman wasn’t allow to be a bank holding company:
Timothy Geithner, then New York Fed president, now Treasury secretary, didn’t like the idea of letting an investment bank become a bank holding company — so he said no.
Yet, in 2008, Federal Reserve allowed Morgan Stanley and Goldman Sachs to become bank holding company:
The Federal Reserve, in an attempt to prevent the crisis on Wall Street from infecting its two premier institutions, took the extraordinary measure on Sunday night of agreeing to convert investment banks Morgan Stanley and Goldman Sachs Group Inc.into traditional bank holding companies.
And keep in mind that Morgan Stanley had a subprime mortgage, Saxon Mortgage and Goldman Sachs had a subprime mortgage, Litton Loans.
So, yes, Congressman Barney Frank, Glass-Steagall law needs to be reinstated to end the merging of investment and commercial banking activities.
Here Chris Hayes’ interview with Barney Frank: