"I get to meet the guy that took the earnings out of banks forever," said O'Leary, in a sharp rebuke of the 2010 Dodd-Frank Wall Street and Consumer Protection Reform Act.
Frank, as House Financial Services Committee chairman, worked on Dodd-Frank with Democratic then-Sen. Chris Dodd of Connecticut. Former President Barack Obama signed it into law nearly a decade ago. Aimed at preventing a repeat of the "too big to fail" government banking bailouts of the 2008 financial crisis, Dodd-Frank subjects financial institutions to strict regulations, including higher rainy day capital requirements.
Last year, President Donald Trump signed into law the biggest rollback of bank regulations since the crisis — lifting what bipartisan supporters in Congress called unnecessarily restraints on small and medium-sized lenders when it was the big companies that created all the problems.
Critics of Dodd-Frank, including "Shark Tank" investor O'Leary, regard the tighter financial rules as an overreaction to the crisis and say they stifle lending and hurt economic growth.
Frank, appearing on "Squawk Box" with O'Leary, adamantly defended his namesake law.
"The banks are earning," Frank said to O'Leary, founder and chairman of the O'Shares investment firm. "The argument that we did in any way jeopardize the economy is going to be wrong."
O'Leary argued, "You can't protect everybody in a capitalist society."
Frank called O'Leary's view "silly" and said, "I'm not trying to protect everybody. But you want to protect nobody."
The former congressman added, "Enough money was lost, $170 billion, that it had disruptive effects on a lot of innocent people" and the banking rules needed to be reworked as a result.
O'Leary countered by saying that "$170 billion is a rounding error" in America's $20 trillion economy. "It's not that much," he said, arguing that such losses should not have triggered the onslaught of regulations that followed.
Disclosure: CNBC owns the exclusive off-network cable rights to ABC's "Shark Tank."