WASHINGTON BUREAU — Rep. Barney Frank says insurers and other large financial institutions are running away from being classified as “systemically significant financial institutions” (SIFIs) even though being designated as a SIFI could reduce their cost of capital.
Frank, D-Mass., talked about the SIFI issue today during an appearance at the National Press Club that coincided with the 1-year anniversary of passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Members of Congress included SIFI provisions in the Dodd-Frank Act in an effort to give federal financial services regulators tools they can use to track and rein in any financial services company that appears to be important enough and troubled enough to threaten the stability of the U.S. financial system.
Some observers have suggested that a SIFI that is “too big to fail” should be able to get capital on good terms, because investors and lenders will assume the company has at least some backing from the federal government. But Frank said Congress made some progress at reducing the perception that being “too big too fail” is a good thing when it passed the Dodd-Frank Act.
“Nobody wants to be systemically significant except those people who have to be,” Frank said. “That’s except those people who have to be in.”
Also at the National Press Club, Frank said Republicans seem to be avoiding a confrontation over repeal of the Dodd-Frank Act, despite talk to the contrary.