WASHINGTON — U.S. Rep. Barney Frank didn’t miss a beat when the topic turned to the demise of once-mighty investment banks.
“The Endangered Species Act apparently does not apply to financial institutions,” the liberal Massachusetts Democrat deadpanned during a recent Capitol Hill press briefing on the Bush administration’s $700 billion plan to bail out the ailing financial industry, voted down Monday by the House.
With his trademark biting wit and his powerful chairmanship of the House Financial Services panel, Frank has vaulted into a leading role on congressional efforts to stabilize the nation’s troubled financial system.
It’s a high-profile assignment that could indelibly stamp Frank’s 27-year career in Congress — either marking a high point or making him an inviting target for critics if rescue efforts go awry.
“I think Barney realizes this is a once-in-a-lifetime moment and he wants to get it right,” said Dan Payne, a veteran Democratic strategist who worked on Frank’s early congressional campaigns.
Frank, 68, could feel the heat if there’s a bungled response to the financial crisis.
“There is a risk,” said Ron Rizzuto, professor of finance at the Daniels College of Business at the University of Denver. “Some people are just mad and saying they don’t think government should bail out Wall Street titans. Anyone involved with this will get some of that backlash.”
Conservatives cringed when Democrats took back the House in 2006 and Frank became head of the Financial Services panel. There were concerns he would pursue a hard-line liberal agenda taking aim at banking and business interests.
Frank surprised many of those critics with his willingness to craft bipartisan compromise measures. He won plaudits earlier this year for reaching out to Republicans in putting together a sweeping bipartisan housing rescue deal to ease the mortgage crisis and help 400,000 families avoid losing their homes.
Frank’s liberal bent has been tempered by pragmatism. He needs bipartisan support to pass legislation in the narrowly divided Congress.
Frank is a far cry from liberal firebrands like U.S. Rep. Dennis Kucinich, D-Ohio, who has urged the House to consider a resolution to impeach President Bush, said Pete Locke, professor of finance at Texas Christian University’s Neeley School of Business.
Locke noted the financial services industry has a strong presence in Frank’s state of Massachusetts, as well as the region, so Frank has an important stake in how they fare.
“He’s from the Northeast, and the Northeast has a lot of financial stuff going on,” he said. “They’re not going to shoot the goose that’s laying the golden egg.”
Frank, too, has forged alliances with two unlikely partners: Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Those ties, rooted more in pragmatism than friendship, have proven valuable as Congress and the administration tackle the worst financial crisis in decades.
“I don’t think it is an amicable relationship,” Rizzuto said. “It’s a collaborative relationship.”
Frank has taken the lead for Democrats in recent talks with Paulson during the fast-moving crisis, seeking to make the White House plan palatable to a skeptical Congress. Some lawmakers worried Congress was writing a blank $700 billion check with little accountability. Others balked at the prospect of the government reaching so deeply into the financial sector.
Frank urged the government to help people struggling to keep their homes as well as the big Wall Street financial firms who have lost billions of dollars through their bad investment decisions. He backed a demand from many Democrats and some Republicans to ban lucrative “golden parachutes” for departing executives at failing financial firms.
But Frank is drawing fire for failing to do more to prevent the crisis, including GOP criticisms that he resisted reforming mortgage giants Fannie Mae and Freddie Mac as their financial woes piled up.
“While Republicans called for comprehensive reform of Fannie Mae and Freddie Mac, Barney Frank opposed it,” said Massachusetts Republican Party spokesman Barney Keller. “His idea of reform was to let these companies borrow even more money.”
Frank has denied the charge, saying he and other Democrats pushed for a stronger package of reforms once they took control of the House two years ago.
Payne struck a cautionary note on the risks Frank and others involved in the financial rescue effort face.
“These kind of major reform packages are never so popular as they are on the day they are signed,” Payne said. “Afterward, it all seems to go bad. The law of unintended consequences takes over.”
But from his powerful Financial Services perch, Frank will be in the thick of crafting any new regulations or follow-up legislation down the road, Payne added.
Housing activists, workers’ rights advocates, local union members and other unhappy Bostonians rallied last week in front of the Boston Federal Reserve Bank, calling on the nation’s lawmakers to ensure that a proposed bailout of faltering Wall Street firms included aid for those in danger of losing their homes to foreclosure. More »
Sen. John McCain, R-Ariz., who only a week prior had said the economy was fundamentally sound, last week said the U.S. financial system is facing a major crisis. But he cautioned against given too much power to Treasury Secretary Henry Paulson. More »
"... Any bailout involving public funds must have a direct benefit for taxpayers," the Banner wrote in its Sept. 25, 2008 editorial. "Before approving Paulson’s proposals, Democrats in the legislature must be assured that taxpayers receive an equity interest for buying mortgages at a depressed price and that worthy homeowners who defaulted on their mortgages have relief." More »