Former congressman Barney Frank calls the Senate bill that reduces Dodd-Frank regulations on smaller banks "mostly" reasonable.
"I like a lot of that bill," he told CNBC on Friday. Frank, the former Democratic U.S. representative from Massachusetts who co-authored the Dodd-Frank banking reforms after the financial crisis a decade ago, said the new legislation, Senate bill 2155, has many "positive elements."
"This bill, as it passed the Senate, does not in any way weaken the rules, the problems against derivatives, which were a major part of the problem," Frank said. "It does not in any way weaken the restrictions against people making mortgage loans and then securitizing them. And it was the combination of those two: bad loans and then being put in securities packages and being bounced around," Frank said, that caused the financial crisis between 2007 and 2009.
On Wednesday, the U.S. Senate voted 67 to 31 in favor of the bill, which is now headed to the U.S. House of Representatives. If passed, it would be the first rewrite of the Dodd-Frank reform law. Provisions in the legislation would benefit all but America's largest banks.
Problems with the bill, Frank said, include the amount at which a bank is considered risky and subject to harsher oversight. The new bill increases the threshold five times, from $50 billion to $250 billion.
"Fifty [billion dollars] was wrong," Frank said. "It was too low. … But I think above 125 [billion dollars] was a mistake."
Meanwhile, some Republicans want to ease regulations even further, while others worry this could upend negotiations.
"If they try to broaden this bill and get into more serious erosions of Dodd-Frank, it will not pass the Senate," Frank said.
"The question now is on the Republicans," he said. "Will the ideologically most conservative and the ideologically most driven Republicans undo this?"
Frank, who served as chairman of the House Financial Services Committee from 2007 to 2011, said a major problem during the crisis was that the "legislation then on the books" didn't safeguard the financial system from a crisis.
"We were working really hard to put the tools in place before the next failure," he said. "Unfortunately, the next failure, which was Lehman [Brothers], the next crisis came before we could get that in place."
Frank said former U.S. Treasury Secretary Henry Paulson warned him at the time that more crises were coming but that "nobody saw it as bad as it was."
"I spent that spring and summer dreading Friday afternoon after the markets closed, because I would get a phone call from Hank Paulson every other week with some new disaster," he said.