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Dodd-Frank reform has helped, Frank says, even without bank break ups

Former Democratic Congressman Barney Frank has practically become synonymous with the term "too big to fail."

Along with former Connecticut Sen. and fellow Democrat Chris Dodd, the co-author of the Dodd-Frank Wall Street Reform and Consumer Protection Act, wrote the law to help prevent another financial crisis. This week marks five years since President Barack Obama signed it into law.

Read MoreOp-ed: Barney Frank takes on the Dodd-Frank critics

Wall Street and a host of other critics have faulted the law for creating a cumbersome network of new regulations, without solving the fundamental problem posed by what regulators now consider "systemically important" institutions whose failure might trigger another financial pandemic.

Yet Frank, the former chair of the House Financial Services Committee, said the average American is much better off than before the rules were added.

"The single biggest cause of the terrible crisis we had was that mortgages were being granted to people who shouldn't have gotten the mortgage and couldn't repay them," Frank told CNBC's "On the Money."

"This was bad for them, it was bad for everybody on their block, it was bad for financial institutions and the whole economy," he added.

Frank said that as a result of Dodd-Frank, those "subprime mortgages can't be made anymore." That is both a consumer protection and a protection for the system, he added.

A study by the Brookings Institution found a sharp slowdown in bank lending activity since the crisis, and points out that phenomenon "could hamper future growth."

Read MoreHere's what's going on with the Dodd-Frank act

Former Rep. Barney Frank (D-MA) (L) and former Sen. Chris Dodd (D-CT) talk about their hallmark and namesake legislation, the Dodd-Frank reform law, on the fifth anniversary of the law at the Newseum July 20, 2015 in Washington.
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Former Rep. Barney Frank (D-MA) (L) and former Sen. Chris Dodd (D-CT) talk about their hallmark and namesake legislation, the Dodd-Frank reform law, on the fifth anniversary of the law at the Newseum July 20, 2015 in Washington.

However, critics contend that in some cases big banks have only gotten bigger, and that the government should have forced some of the largest to spin off into smaller entities. Frank insisted that breaking up the banks was, and still is, not a viable option.

"Anybody who thinks the answer to 'too big to fail' is to break up institutions is talking about an undoable task, you're talking about breaking them into 10 parts."

Frank added that consumers are better off with the creation of the Consumer Financial Protection Bureau. The watchdog says it has returned more than $10 billion to more than 17 million consumers over the past five years.

The "independent pro-consumer agency has been a very good thing," Frank said.

'Like the Three Stooges'

Frank also said he was watching the 2016 elections with interest. He confessed to feeling "glee" watching GOP presidential hopeful Donald Trump grow a big lead in the polls—just not for the reasons some might think.

"You always like to see the other side getting messed up," Frank said, "but it's tempered by this: He's become popular based on a meanness, based on a nastiness towards other people."

Frank said he sympathizes with Republican presidential contenders, mentioning Florida Gov. Jeb Bush, Wisconsin Gov. Scott Walker, and "my old friend and colleague" Ohio Gov. Rep. John Kasich, who served in the House with Frank. He called them "people I disagree with, but who are thoughtful people."

Trump has become an unlikely front-runner for the Republican nomination by taking a hard line on illegal immigration. Trump's tough talk has touched a chord among primary voters who are eager to see him square off against other GOP contenders.

Still, "having to be in a debate with Donald Trump is like trying to recite Shakespeare when the Three Stooges are part of the cast," Frank said.

Further, Frank said that "Republicans should be very worried as to what it is about Trump's angry, semi-coherent message that appeals to so many of their own voters."

--"On the Money" airs on CNBC Sundays at 7:30 pm, or check listings for airtimes in local markets.