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Lucas Takes Stand in Financial Crisis

By Chris Casteel

October 27, 2008

WASHINGTON — Minutes before the House voted this month on a $700 billion rescue plan for the nation’s financial system, Rep. Frank Lucas was on the phone with Federal Reserve Chairman Ben Bernanke.

It was as "intense” a discussion as Lucas has had with anyone in recent memory, the Oklahoma congressman recalled.

But Lucas, R-Cheyenne, voted no on the bill, and he said last week that — as concerned as he was about what was happening to credit — he never could get comfortable with the approach the administration and Congress were taking. Moreover, he was being deluged with calls from constituents opposed to it.

Lucas was the only one of Oklahoma’s five U.S. House members who ultimately voted against the rescue plan. He’s also the only member who serves on the House Financial Services Committee, which oversees the banking, real estate and insurance industries that have been at the root of the credit crisis.

Critics have said Congress and the administration failed to rein in the excesses in lending and investing that led to the current problems, and Lucas doesn’t dispute that lawmakers could have and should have done more.

TEARING DOWN WALLS
Lucas has been on the Financial Services Committee for 14 years, and he’s familiar with many of the actions taken and not taken by lawmakers in regard to the financial services industry.

In 1999, he backed a bill — supported by an overwhelming majority in the House and Senate — that tore down the traditional walls in the financial services industry and allowed banks to offer investments and insurance.

Some contend now that legislation amounted to dangerous deregulation, and Lucas said, "I wasn’t sold from day one on the concept.”

But he said that it may be too soon to assess the role that bill played in the current mess.
"I think the property boom would have occurred anyway,” he said.

Lucas said he doesn’t remember any discussions in the committee about regulating financial "derivatives” such as credit default swaps that proliferated as protection for mortgage securities and helped cripple AIG.

According to media accounts, Clinton administration officials pressed lawmakers to keep them unregulated, arguing that people using them would prudently manage the risk.

LET THE BOOM CONTINUE
For Lucas, two major players in the property boom bear much blame for the damage done to the financial sector: Fannie Mae and Freddie Mac.
 
Fannie Mae and Freddie Mac buy mortgages from banks and other lenders, allowing those lenders to issue more mortgages. Lucas thought the two government-sponsored enterprises were going too far in their mission to help low- and moderate-income people buy homes. And he said they were encouraging other lenders to approve too many sub-prime borrowers.

Five years ago, Lucas sponsored a bill to increase regulation over Fannie Mae and Freddie Mac.

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