"It's total fantasy," Frank said of allegations that the bill was passed only after Democrats had stonewalled efforts in the previous decade to address subprime mortgages.
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While a Massachusetts congressman and head of the House Financial Services Committee, Frank oversaw both the implosion of the financial system and the efforts to put it back together.
The Democrat, who served 32 years, defended his effort with former Connecticut Sen. Christopher Dodd to develop the law that bears their names, saying they made tough decisions that will help avoid future crises.
"You're not too big to fail without there being consequences that society has to deal with," Frank said during a panel discussion at the SkyBridge Alternatives (SALT) conference. "The authority that Treasury has to give money to AIG has been repealed."
The bailout of the insurance giant, perhaps the most controversial move during the crisis, helped spark public outrage and reform efforts.
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But Rove said the bill overreached and is penalizing small banks for the sins of the large ones.
The Republican political consultant, who served in the George W. Bush White House, spoke about a friend who's a community banker in Austin and fears the Dodd-Frank ramifications. Others in the business share those concerns, he added.
"Every one of them said Dodd-Frank has such an onerous amount of regulation that if you're not a $500 million-plus bank you're going out of business," Rove said. "How can ... banks cope with 30,000 pages of regulation?"
Ten banks have failed so far this year. The largest had assets of just $316.5 million, and five had fewer than $100 million, according to the Federal Deposit Insurance Corp.
Frank and Rove engaged in a shouting match that entertained the crowd but failed to shed much light on where the industry is headed.
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Rove accused Frank of ignoring the dangers of the subprime bubble until it was too late. Frank conceded that he had underestimated problems with Fannie Mae and Freddie Mac, the government-sponsored enterprises that backed many of the low-quality mortgages, but said the Republicans were behind the curve as well.
"In 2003 I thought Fannie and Freddie were OK," Frank said. "In 2005 I changed my position and supported the bill the [House] Republicans put forward. The Senate Republicans killed it."
Rove called that bill—backed by future GOP presidential candidate John McCain but not by then-Illinois Sen. Barack Obama—"mediocre and weak.
"We finally got the bill we wanted—in 2008," he said. "The cat had gotten out of the proverbial bag."