Listening to Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, we get a sense of the "new capitalism" that our new Democratic leadership tells us America needs.
Frank recently praised Bank of America chairman (now ex-chairman) Ken Lewis for acting in "the public interest" for caving in to bribes and threats from former Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke regarding B of A's takeover of Merrill Lynch.
Lewis wanted to back out the deal last year when he discovered the massive scope of Merrill's losses. But Paulson and Bernanke decided that Merrill shouldn't fail, so they bribed Lewis with $20 billion of taxpayer funds, instructed him to conceal the agreement from his shareholders, and told him his job would be on the line if he didn't play ball -- which he did.
These sordid details have come to light in an investigation being conducted by New York State Attorney General Andrew Cuomo.
So if such behavior is what Barney Frank calls economic patriotism, what might constitute subversive behavior?
When Congress moved last year to politically engineer changes in terms of existing mortgages in the name of bailing out distressed homeowners, Bill Frey, who manages a fund that holds mortgage-backed securities, protested.
Frey told the New York Times, "Any investor in mortgage-backed securities has a right to insist that their contract be enforced."
Contracts? Private property? That's the old capitalism.
Frank fired off a letter to Frey saying he was "outraged...that you are actively opposing our efforts to achieve diminution in foreclosures by voluntary efforts." Frank then clarified his idea of "voluntary" by summoning Frey to testify in Washington, noting that "if this cannot be arranged on a voluntary basis, then we will pursue further steps."
The House has passed legislation, which is now in the Senate, containing Frank's idea of "diminution in foreclosures by voluntary efforts." It amounts to -- what a surprise -- taxpayer funded bribes to abrogate existing mortgage contracts and provisions for legal protection for doing so.
Frey and others managing funds for investors holding billions in mortgage-backed securities are fighting back. We're not talking Bernie Madoff here. We're talking about funds that have invested in these securities on behalf of pension funds and 401Ks.
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