NU Online News Service, Dec. 01, 12:00 p.m.EST

WASHINGTON—Rep. Barney Frank, D-Mass., today defended theDodd-Frank Act, and said it is unlikely it will be reversed byRepublicans.

At the same time, Frank used the bailout of AmericanInternational Group Inc. (AIG) as a means of defending provisionsof the law that eliminated the ability of the Federal Reserve Boardto bailout out troubled institutions, like AIG.

Frank cited overwhelming public support for the Dodd-Frank Act(DFA), adding that even Republican legislators highly critical ofit, acknowledge that it was necessary.

Frank announced earlier this week that this will be his last term in Congress. He opened his remarks in his typicaltongue-in-cheek fashion by saying that he felt his retirementannouncement Monday was not the reason for the strong stock marketrally this week.

In his comments on AIG, Frank implicitly touched on draftlegislation unveiled at a hearing of a Financial Services Committeesubcommittee Nov. 16 seeking to weaken the DFA by limiting theability of the Financial Services Oversight Council (FSOC) tomonitor insurers and have them pay the costs of the failure of a"too-big-to-fail" institution, like AIG.

Frank made his comments as keynote speaker of the ConsumerFederation of America (CFA) 24th annual financial servicesconference.

In his consumer federation appearance, Frank also criticizedefforts by Republicans to weaken enforcement and implementation ofthe DFA.

He said Republicans are doing this by attempting to attachriders to appropriations bills that limit implementation ofcontroversial provisions, and also by reducing funding of the U.S.Securities and Exchange Commission and the Commodity FuturesTrading Commission in order to limit the agencies from writing therules needed to implement the law, as well as enforce itsprovisions and intensify oversight of market players.

He said that the so-called "too-big-to-fail" provisions used topass the act has been replaced by provisions which allow a troubledlarge financial firm to "die," but allows federal regulators thepower—without the need to consult Congress—to provide funds thatprevent "contagion" stemming from the losses of the failedinstitution from affecting the overall economy.

He said that when the problems of Lehman Bros. and AIG came upin September 2008, members of Congress were told they would eitherhave to protect all debt holders and equity holders, or let theinstitution fail.

"Neither policy is appropriate," Frank said. He explained thatunder DFA, regulators have the power to pay off debts of thefailing institutions deemed necessary to prevent systemic problems,but not all debts, or, he explained, "pick and choose."

Furthermore, he said, under DFA, it is the private sector, notthe government, that must pay back the funds loaned to prevent thefailure of the institution from affecting the entire economy.

Insurers are especially concerned about these proposals.

At a recent hearing of a subcommittee of the House FinancialServices Committee, property and casualty insurers and the Councilof Insurance Agents and Brokers, look to limit FSOC authority.

One proposal would end the authority of the FSOC to subpoena therecords of insurers, and to ask them directly for financialdata.

Under one draft, the FSOC would have to work through theNational Association of Insurance Commissioners (NAIC) to get thisdata. Industry officials privately point to the decision of theFederal Reserve Board to limit the authority of MetLife to raiseits dividend as one reason for justifying such legislation.

Another would "explicitly and entirely" exclude insurancecompanies, including mutual insurance holding companies from theFederal Deposit Insurance Corporation's "orderly liquidationauthority" for troubled large non-banks.

The third would "preclude" the Federal Reserve from establishinghigher prudential financial standards to troubled insurancecompanies it would oversee as ordered by the FSOC.

The draft bill would also prohibit the FDIC from obtaining alien on an insurance company's assets without the written consentof the insurance company's state regulator.

Another proposal would prohibit the FDIC from counting insuranceassets, liabilities, or revenues in its assessments on financialfirms to pay for shortfalls when the assets of a failed firm areinsufficient to pay for the failed firm's resolution under theFDIC's "orderly liquidation authority."