DANIEL J. FORTE
Frank an ‘activist’
Rep. Barney Frank is poised to become the next ranking Democratic member of the House Financial Services Committee and, if his party takes back Congress, he would serve as chairman.
Pending a vote among Congressional Democrats to determine committee leadership, Frank is expected to assume the party’s top spot on the committee in the January session. Recently, Rep. John J. LaFalce, a New York Democrat, announced he wouldn’t seek re-election after a run in Congress that began in 1974. According to published reports, LaFalce said he plans on retiring, thereby elevating Frank’s status on the committee.
Frank is also on the House Judiciary Committee, but said even if he had the choice between becoming the ranking member in either group, he would choose financial services, saying it better addresses the “most important set of issues we deal with, [which] are economic issues.”
In the committee, Frank said, he’s able to have input on questions of globalization, the World Bank and International Monetary Fund, as well as supervision and input into the Federal Reserve’s policy and the financial services industry as a whole.
While an advocate for Massachusetts issues as well as being a federal-level politician, Frank understands the future face of banking in the global competitive marketplace, said Daniel J. Forte, president of the Massachusetts Bankers Association.
In addition to sitting on two house committees, Frank is also a member of five subcommittees, including Domestic Monetary Policy, Technology and Economic Growth and International Monetary Policy and Trade.
“Taken together, the Financial Services Committee has a much more significant economic impact and I think that’s the single most important set of things we do,” said Frank in an interview with Banker & Tradesman on Wednesday.
Industry observers say Frank has a long history of involvement with issues close to the financial services area. While he voted in opposition to the Gramm-Leach-Bliley Financial Modernization Act, Frank said he had voted in favor of different versions in the past. Frank said he favored the principle of the bill but disagreed with cutbacks written for the Community Reinvestment Act. He also believed the landmark legislation didn’t do enough to protect consumer privacy.
“I was particularly outraged at [Gramm-Leach-Bliley] allowing insurance companies to redomesticate so they could avoid paying off their mutual policy holders. That was one of the most hypocritical things probably they’ve ever done,” he said.
Free-Market Liberal
Although he is a liberal by strict definition, Frank has a reputation as an approachable advocate for competition among ethical businesses. Bankers therefore view his rise to a ranking position as a positive occurrence, especially local bankers who feel the Bay State may now have a key advocate in financial matters.
“My view is that we should let the free market work. I think capitalism currently is the best way to go,” said Frank, adding that past and very recent history proves that the free market shouldn’t go “untrammeled.” Frank said the recently unveiled pressures put on financial analysts and accountants to come up with “good” analysis proves that the industry needs regulation. “You want to protect the honest people in business from unfair competitive pressures,” said Frank.
“Clearly Barney is one of the brightest and most articulate in Congress. With his new designation I think he’ll be able to coalesce a constituency down there that begins to shape the agenda for the Democratic members of the committee,” said Forte.
“The kind of financial regulation we’re talking about is the equivalent of banning steroids from athletic activity. But in general I’ve been a free-marketer and pro-competitive,” said Frank.
Forte said Frank is an advocate for fair housing, as well as a “big believer in the Community Reinvestment Act. But at the same time, historically, Barney’s always balanced that with concern for regulatory burden in the [banking] industry and I think that’s been very important to us.”
But tempered with that belief in the free market is another Frank tenet: that some of the wealth created in the free market should be used to help the poor through, for example, the CRA “without impinging on the legitimate needs of banks,” Frank said.
Recently, the Congressman representing the Fourth Congressional District in the Bay State played a key role in negotiations surrounding the reorganization of regional offices for the Federal Deposit Insurance Corp., said Forte. Although the Boston office now comes under the jurisdiction of the New York regional office, Boston retains personnel and good communication with the FDIC thanks to Frank, said Forte.
“He’s obviously an activist in a positive sense,” Forte said of Frank’s efforts on behalf of the region.
Frank said he wasn’t happy with the result of the FDIC reorganization and may take further action, but he declined to say what it may be because it would “tip his hand.”
“I’m very disappointed in [FDIC Chairman Don] Powell. At least he did promise us he isn’t going to make further reductions in the personnel, but there’s no reason why people from Maine and Massachusetts have to go to New York. He says it’s not going to be the case but I think he’s trying to underplay the impact,” said Frank.
Frank voted against deposit insurance reform legislation for two reasons but said he’s going to take another look at the issue. “I voted against it probably because I was mad at Powell and because we already do this in Massachusetts. Massachusetts bankers felt they were going to be paying more for something they weren’t getting,” said Frank, referring to the two deposit insurance programs into which Massachusetts bankers already pay. “If we don’t resolve this issue or if it comes back up again, I will have to take a somewhat broader perspective. On this one I was acting as a Massachusetts representative without looking at the broader implications,” said Frank.
Many times, Frank said he finds himself trying to prevent unintended consequences of new regulations on Massachusetts. That’s often due to the fact Massachusetts had banks before the founding of the country and consequently has laws on the books that may conflict with new federal laws.
Floyd Stoner, a government affairs spokesman for the American Bankers Association, said Frank has been particularly supportive of industry issues like interstate banking and financial modernization. “We have disagreed with him on some issues and he is a very intelligent and effective legislator,” said Stoner. “He is always prepared. He’s just a very smart and effective legislator.”
Anecdotally Stoner added that with Frank’s ascent ion to a leadership role, a new sense of humor would be imbued into the committee. “Not that there wasn’t before and not that Mr. Frank hasn’t contributed his wit, [but] there will probably be even more in evidence.”
Some within the typically conservative banking industry view Frank as a strong ally. Michael A. Jessee, president and chief executive officer of the Federal Home Loan Bank of Boston, said he’s confident that Frank will serve the region well. “Congressman Frank has consistently been one of the leading housing advocates in Congress and a great friend to the Federal Home Loan Bank of Boston and community banks throughout New England,” he said.
“When I heard it I was pretty excited about the appointment,” said Cynthia C. Merkle, senior vice president at Eastern Bank and incoming chairman of the Massachusetts Mortgage Bankers Association. “He has had a very good relationship with a number of associations in Massachusetts.”
Kevin M. Cuff, the new executive director of the MMBA, said the association looks forward to working with Frank. “The [association’s] leadership recognizes Congressman Frank’s tireless efforts in support of low-income housing and fair lending practices,” he said.
Mortgage Bankers Association executives echoed those thoughts and said Frank is a “champion” for the consumer in the housing area, according to James M. Murphy, chairman of Boston-based New England Realty Resources and chairman of the MBA.
The 62-year-old Frank was first elected to office in 1980 and maintains the popular vote. According to Vote Smart, a nonpartisan organization, in the 2000 election he received 75 percent of the vote. Frank votes in support of his party over 90 percent of the time.
