Barney Frank On Whether There Is A Chance The US Will Be Put Into Default: "Yes"

Barney Frank, fresh from being caught on live TV picking his nose during Bernanke's Humphrey Hawkins presentation, had a decidedly more sour outlook on the prospects for the debt ceiling. Spoiler alert: in tried and true fashion, the drama king blamed it all on the stupidity and inexperience of republicans. Asked when there is a chance the US will be put into default: "Yes. I take the freshmen republicans and people like Michelle Bachmann at their word. I don't think they're kidding. I think they fundamentally misread this situation as Bernanke, a Bush appointee after all, made clear today. I think there are people that frankly have an unreal view of the world. They believe that this is somehow a fake and that you can push a button and make a lot of these debts go away. I believe there are a substantial number of Republicans who are opposed to a huge debt and a further group of Republicans who understand why it's important to raise the debt limit, but are afraid of losing a primary to someone." Recapping Frank's view: why deal with a problem under my tenure, when very soon there will be a congressman who will replace me and he, or more likely she, can deal with the sordid mess I created. And this is not even counting the trillions in GSE off-the-books debt of which Frank was one of the key people responsible for letting it be the catalyst that blew up the credit bubble when Fannie and Freddie were nationalized just under 3 years ago.

From Bloomberg TV:

Other interview highlights:

Frank on the debt negotiations and whether there's a chance the United States will be put into default:

"I think there is a very real chance that the unrealistic view of many of these new right- wing Republicans and those who are intimidated by them could vote no."

On Bernanke's economic assessment today:

"I was encouraged by much of what [Bernanke] said. First of all, he made it clear that the economy is doing well and then he talked about that we're retarding the growth. Every one of those things are outside of the president's control. The Greek debt crisis, the Japanese earthquake/tsunami, the Libyan revolution -- these are things that are not under our control that cause problems for us."

"I was very pleased that he very thoughtfully drew a distinction between the need to have over the longer term serious debt reduction, but the danger of cutting too much into short term. He talked about the headwinds that are retarding the economy and he said excessive fiscal tightening. We have lost -- since the middle of 2009 -- half a million jobs in the public sector. Those are not faceless statistics. Those are public works people who clean the streets. Those are police officers, firefighters, etc. I thought it was important that he said, one, we have to reduce the deficit over the long term. and number two, it would be a calamity if we did not raise the debt limit. And three, separate out the importance of a longer-term binding debt reduction framework, but not exacerbating the obstacles to recovery by cutting too deeply in the next few months."

On whether he would like to see some version of a QE3:

"That's not my first choice. My first choice would be for Congress to act in a reasonable way. For example, let's provide some money in the short term to cities and towns so they can undo some of those cuts. Put people back who would provide important public services, etc…The critics of QE1 and QE2 who said it was going lead to inflation, it would cost the federal government money, have absolutely been proven wrong. If we needed a third round, I would be for it. I would hope, however, I think we have done enough with monetary policy, fiscal policy should come first."

On Dodd-Frank and critics like Jamie Dimon and Peter Wallison:

"Mr. Wallison is Johnny one-note and a one man band. He was one of four Republicans on the Financial Inquiry Crisis Commission and he would up attacking the other three. He is all by himself in thinking it was not Lehman Brothers or AIG or derivatives. As to Fannie Mae and Freddie Mac, the Democratic Congress working with Hank Paulson put them into conservatorship in 2008 and according to the Bush appointees, we are not losing money on them.

"Jamie Dimon, I wish he had measured the damage that was being done by the policies beforehand rather than our efforts to correct it."