'This Week' Transcript: Rep. Barney Frank and Rep. Marsha Blackburn

The fact is that the debt is being driven by the Bush administration's decision to go to war twice, with five big tax cuts for the wealthiest. I am trying very hard -- and many of us are -- to cut this.

Look, the Wall Street Journal said that the Republican budget Ms. Blackburn voted for was a good budget because it protected the military against any cuts and made that up by cutting Medicare and Medicaid.

STEPHANOPOULOS: I want to get...

FRANK: So we're not just talking about whether you reduce spending, but how you spend, and the deficit is being driven to some extent by their tax cuts for wealthy people and excessive military expenditures, which I'm trying to stop.

STEPHANOPOULOS: OK, I want to get to one more economic issue. This is JPMorgan this week posted a massive $2 billion loss from a bet on the kind of derivatives that helped precipitate the financial crisis. Here's what the CEO, Jamie Dimon, had to say about that.

(BEGIN VIDEO CLIP)

DIMON: In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed, and poorly monitored. The portfolio has proven to be riskier, more volatile, and less effective as an economic hedge than we thought. But it's obvious at this point that we've -- there are many errors, sloppiness, and bad judgment.

(END VIDEO CLIP)

STEPHANOPOULOS: Congressman Frank, he also said that the regulations you helped author, the Dodd-Frank rules, which were supposed to stop banks who get federal help from betting their own funds in this way, he says that it wouldn't have violated the Volcker rule, which is not finalized yet. Is he right about that?

FRANK: I hope he won't be. That is, the Volcker rule is still being formulated. It's a complicated thing. Part of the problem, frankly, is that the Republicans, while they have plenty of money to spend on international military adventures that haven't worked out well, have reduced the funding that we've asked for, for the agency that's supposed to regulate derivatives, the Commodity Futures Trading Commission, and we're talking about an additional $100 million, where they'll spend billions in Afghanistan and Iraqi police effort that they now want to get rid of. So the fact is that the CFTC has been slowed down to do that.

I hope that the final rule will prevent this. There were other factors in the rule that are going forward. Years ago, what happened was, agencies, entities like JPMorgan Chase, made bets on derivatives and then couldn't pay for it. We now have rules that say, no, you can't get yourself in that position.

Let me give you one specific example. This was done by JPMorgan's London affiliate. The Republicans in the House are trying to get a bill through, which we're trying to stop, which incredibly to me would say that if an American institution's foreign subsidiary engages in derivative transactions, it will be subject to no American regulation. Now, that's an effort to weaken the financial reform bill we passed. The Republicans passed out of committee, they tried to get it through the House under a quickie. We said no.

So we are very much still in the process of trying to decide whether or not we will have the rules in place that will -- and, by the way, we're not trying to stop banks from losing money. We have stopped trying them -- stopping them from losing money in ways that would cause damage to the rest of the system.

STEPHANOPOULOS: Your response?

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