‘Death Panels’ Loom for Wall Street

God bless Barney Frank. The chairman of the House Financial Services Committee showed both of his talents as a legislator this week: a willingness to modify proposals to accommodate critics and a propensity for provocative language.

On Tuesday, the Massachusetts Democrat sent his colleagues a revised version of legislation creating a Consumer Financial Protection Agency. The revisions address many of the concerns that have been raised about the proposal.

Under the revised bill, the new regulator wouldn’t require banks to offer government-proscribed “plain vanilla” financial products—such as a 30-year, fixed-rate mortgage—as an option to consumers. Critics said this requirement would give the government too much power and stifle innovation.

Frank also said his bill would make it clear that the agency wouldn’t have the authority to regulate small businesses that let their customers run a tab instead of paying immediately.

That means the U.S. Chamber of Commerce will have to come up with new ads in its efforts to stop the creation of the new regulator. A current ad features a butcher standing in his shop in front of a bunch of sausages. Because the butcher lets some of his customers pay later, he would be under the thumb of a “new government bureaucracy with sweeping authority that goes far beyond consumer protection,” the ad claims.

On Wednesday, Frank addressed the issue of what to do with nonbank financial institutions whose failure would wreak havoc on the financial system at large. His legislation would create a mechanism for the government to “put them out of their misery” in an orderly fashion, he said.

“There will be death panels enacted by this Congress, but they will be for nonbank financial institutions,” Frank said.

Somewhere, Sarah Palin winked.

“I won’t use the chairman’s language,” said Treasury Secretary Tim Geithner, but he endorsed the concept.

“We will give the government the capacity, as it has now for banks and thrifts, to dismember or unwind major financial firms in an orderly fashion with less collateral damage to the system,” Geithner told Frank’s committee. Losses by these firms would be borne by its stockholders and creditors, not taxpayers, Geithner said.

Frank, meanwhile, told his committee members to be ready for lots of work on financial regulatory reform legislation in the coming weeks. The committee will begin hearings on the bill next week, and then will begin marking up the legislation in stages. All of those pieces will then be combined into one bill and sent to the House floor for a vote in November, Frank said.

“This is going to be a very time-consuming committee,” the chairman said.

And when Frank talks, people listen. Because you never know what he might say.