Inside Financial Services

Good Riddance, Barney Frank

The "smartest man in Congress" wreaked havoc on millions of lives

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You’ll forgive me if I don’t bother hiding my sheer joy in hearing the news that Barney Frank isn’t running for re-election and will be leaving Congress. Even as hyper-partisan liberal Democratic Congressmen go, the man has been a calamity for the country. His relentless pursuit of housing policies that we now know were insane had the effect of bringing misery to millions of Americans-and his authorship of the disastrous Dodd-Frank financial “reform” bill will help assure the misery of millions more for years to come. The man is a petty, partisan, small-minded bully. The country will be better off with him and his toxic ideas out of Washington. Good riddance.

Where to begin? First, perhaps no single individual on the planet bears more responsibility for the creation of the housing bubble and its subsequent collapse than Barney Frank does. As the ranking Democrat on the House Financial Services Committee, he had tremendous sway over federal housing policy, both when he was in the majority and the minority. And he used that sway to terribly misguided ends. In the name of expanding affordable housing, for instance, he, more than anyone else, pushed subprime mortgage lending as official government policy–even to the exclusion of basic lending prudence. In particular, he pushed the GSEs to lower the underwriting standards of loans that they would buy or guarantee, then he pushed the GSEs to grow, grow, grow. And what of the ballooning credit risk to the government that resulted from all this? He simply didn’t care about it. “I do not want the same kind of focus on safety and soundness [in the regulation of the GSEs] that we have in the Office of the Comptroller of the Currency and the Office of Thrift Supervision.,” he famously said back in 2003 as the bubble was inflating. “I want to roll the dice a little bit more in this situation towards subsidized housing.”

Roll the dice! With your tax dollars! Billions of them! Worse, Frank was oblivious to the fact that the Fannie and Freddie were hopelessly undercapitalized and posed huge financial risk to the federal government. He was willfully blind. “[Fannie and Freddie] are not facing any kind of financial crisis,” he said in 2003. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” Could he have been more wrong? For someone who was consistently voted by staffers as the brightest member of Congress, his view of the GSEs was pathetically stupid.

The result of Frank’s efforts: millions of borrowers were given loans they couldn’t hope to repay. Collectively, they lost millions of dollars in outsized mortgage payments-and then lost heir homes, to boot. Millions more are still trapped in their in their houses, now worth less than the amounts they borrowed to finance them. Thanks, Barney!

It gets worse. Once the housing bubble that Frank did so much to engineer collapsed, it was Barney Frank who led the push to overhaul the re-regulation of the financial services industry, in the form of the infamous Dodd-Frank bill. No one yet seems to know what’s in all of this monstrosity-it’s 2,300 pages long, remember-but its best-known highlights will all serve to constrict credit creation and slow economic growth generally. The Consumer Finance Protection Bureau, for example, will drive down availability of consumer debt and make it more expensive. The added layers of new regulation Dodd-Frank puts in place will make many community banks economically unviable and drive them out of business. The Volcker Rule will diminish the breadth and depth of the financial markets. The Durbin Amendment is leading to higher service charges on checking accounts as well as higher minimum deposit requirements.

It goes on and on. The likely result of Frank’s atrocity: constricted credit creation and subpar economic growth, which in turn could mean chronically high unemployment for years to come. Thanks again, Barney!

It is wonderful news that soon Barney Frank will no longer be darkening the halls of Congress. Through his over-the-top partisanship and misbegotten ideas, he’s done the country a lot of ill. The sooner he’s gone, the better.

What do you think? Let me know!

47 Responses to “Good Riddance, Barney Frank”

  1. JRB

    Alas–Maxine Waters takes over his position. We may look fondly back on the Frank era after a few months of the Waters regime. If Barney was the smartest member of Congress, she is near the other end.

  2. Parkite

    …….maxine waters??? we don’t have anyone more competent? hold on!

  3. Trader

    Think you are delusional. Whatever good/bad Barney Frank did, it is pure delusion to lump the Volcker Rule with Frank-Dodd. You belong to the same ilk of finance professionals who extol the virtues of the breadth and depth and efficiency of financial markets in the same breath that they demand that governments bail them out with taxpayer money because “to fail to do so would be calamitous for the global financial system.” Amazing hypocrisy. The Volcker Rule or some form of it is critically needed.

  4. Will

    And another leading liberal light leaves the sinking ship of Comrade Obama. Good riddance to all…

  5. Fraudster

    Alas we agree on something. How interesting Barney decision to retire coincides with the Penn State and Syracuse debacles.

  6. deliriously happy

    my name says it all – thank goodness he’ll disappear (although will probably be paid thousands as a lobbyist). Was also happy to see Dodd retire.

  7. rivvir

    If he was stupid then so were you, Tom. And so was i for listening to your advice back then. It might be better news for investors were you to retire from the investment advice business. You pick on him for expanding credit availability and you pick on him for safeguarding credit creation. This guy couldn’t win for losing in your eyes.

    The only thing i can say with any modicum of certainty, he’s a lot smarter than you who did nothing but continue to push losing positions when the crisis was rip-roaring while he at least rapidly went over to the side for more regulation. Even i abandoned much of what you were touting, and my portfolio took less of a % hit, by far, than did yours. So, ‘splain to me lucy, why should i listen to you now? Don’t tell me because you think right wingers who might go for dishonesty in lending again might take over both houses of congress and the white house this coming election. Did Frank push for lenders to practice fraud and dishonesty. How much worse did those practises make the situation? Not only simply in terms on money lent that could never be repaid but in putting even more pressure on housing prices at that time which resulted in higher prices paid by those subprimes who could’ve paid off their mortgages under normal to somewhat increased price conditions but not balloon conditions. Give up the ghost Tom, there is no justification for most right wing policies then, or now.

  8. DKDouble

    Hit the nail on the head. His reign of incompetence is thankfully over, and perhaps, just perhaps, some semblance of sanity will return– oh but wait, here comes Maxine Waters. Are you kidding me?

  9. KenGreenberg.

    I won’t miss him at all. Let’s also remember the pressure banks used to get to hold those great assets – Fannie & Freddie stock – in their portf

  10. KenGreenberg.

    I won’t miss him at all. Let’s also remember the pressure banks used to get to hold those great assets – Fannie & Freddie stock – in their portfolios. That created a double hit. To be sure, Frank couldn’t do it all singlehandedly. The liberal press talks lovingly of his departure. His sexual escapades got a virtual free pass – and he’s still there out of PCness while they torture Herman Cain. The beat goes on in D.C. Maxine: another cruel joke

  11. JimBanker

    I couldn’t agree more! It’s unbelievable how “teflon” he is. After all he caused, his district voted him back!! He is absolutely the blueprint for what’s wrong with many of the members of Congress, regardless of party. Push your agenda, push your agenda, regardless of whether or not it actually makes sense, or is good for the USA. Let’s see, would anyone of sound mind lend to a person who has none of their own money in the deal, actually wants more money than the collateral is worth, has questionable to poor credit, won’t verify their income and who can’t afford the debt service? No! But that’s what Barney championed, all in the name of “working Americans”. Well, thanks to him, there are alot less “working Americans” then there were 5 years ago. Good riddance.

  12. Milkweed

    Blindspot,

    I think you nailed the heart of the problem except I would argue the investors who couldn’t get enough of the subprime garbage were the main culprits not the banks who were only too happy to sell the garbage to them. Instead of getting their share of the blame for this fiasco they’ve somehow managed to turn themselves into the victims and are holding the country’s recovery hostage to their attempts to pawn off their mistakes to the banks with ever more outrageous lawsuits. Maybe it’s time to shine a light on these cock roaches and ask how they could possibly have spent billions on securities and not know what they were buying? Most of the culpable banking executives have been replaced by now but how many of the clowns that couldn’t buy enough sub prime MBS paid any price?

  13. Joshua Norman

    I’m just as overjoyed that Barney Frank is retiring, especially because I have the misfortune of having him as the representative of the district in which I reside. I voted for Sean Bielat last year myself. Someone should have told him that Boston is an important hub for the financial business and many people who live in the 4th District Suburbs work in Downtown Boston.

  14. Are you Kidding

    Mr Brown, Barney Frank fights for the citizens of this country and continues to do so. I have read your PRO-Bank rhetoric for years and I find it offensive. Get off your high horse. As an employee of 2 major banks during the past 30 years, I lost a lot of money in my 401Ks by believing in my employers. I blame no one but the banks and their greed and lies. You can not believe otherwise…

  15. TOM 123

    someone said it recently – – We can handle incompetence and we can handle arrogance – but with barney, he had blended them both together – – – – he is a major problem !

  16. Trader

    @GN PHX – You are unfortunately incorrect. Regulating bank leverage is indeed required but it is not enough. What would you regulate it to ? 10x ? Everyone seems to believe that 10x is very safe leverage ratio for banks. And that is probably true for t

  17. Dabooz

    Tom, you get it and Congress doesn’t. Not much to say other than…..”repeal that piece of junk called the Dodd-Frank Bill”! Thanks for what you do for us.

  18. Blindspot

    Milkweed, TH and Trader all made very good points. Unfortunately my original comment got cut short as being too long.

    Unfortunately, it appears most individuals (speculators or hypers) here think Mr. Frank is totally wrong in every way which is not the truth. But, hey, total ideology on either side of the spectrum is hard to argue through. Some indivivuals will merely not listen to reason or the truth. If the rating agencies had not been so totally complicit then investors would not have purchased so much of this gunk to obtain higher and higher returns. Just think if only domestic hedge funds, opportunity funds, pension funds, insurance companies and others had purchased the horrible MBS’s and CDO’s? If the foreign investors had not jumped on the band wagon we would be absolutely in the gutter begging China, Canada and others to bail us out. Unbelievable to think about that; that is the stuff had only been purchased domestically. The Canadians came out very good (just look at Tom’s partner in ventures, Vernon Hill selling Commerce Bank to TD Bank). The Canadians may be a little to stringent in housing finance qualifications, but hey, they are in great shape. The individuals in these commentaries who attack Mr. Frank on sexual orientation, have no basis, nor do those who attack him from the far right. Just look at Bob Livington, Newt Gingrich, David Vittar, Larry Craig (knock two times on the stall) and others who attacked Clinton on “moral” and “family value” grounds and at the same time were engaged in the same activities for years and years. (What was that about Glass Houses?). Hyprocisy get sus all no where fast except in the bad situation we (the country) are (is) in. Look at the Great Depression; Hoover was one smart mining engineer and a self made multi-millionaire who merely acted far too late because he believed too strongly in individualism (althought he chafed against the insider trading and greed of Wall St. that created the bubble on ’29 an

  19. Greg H.

    Exc ellent comments…keep up your insightful commentary…I love it!!

  20. TH

    Tom, I had to chuckle at your first paragraph and your use of the word “hyper-partisan.” This entire post could be described in the same fashion.

    Were all of Frank’s ideas constructive for the banking industry? No. There will always be winners and losers in markets – free or regulated. I feel that if our industry had done a better job of self-regulation and not just chasing the next hot buck or doing things with herd mentality as its only rationale, then the housing bubble wouldn’t have inflated. Just because Frank pushed for expansion of home ownership, I don’t think that anyone in Congress told banks to do no-doc, no verification loans. Everyone involved was at fault in the housing bubble. Uneducated consumers, laissez-faire regulators, greedy banks and investors, homebuilders, retailers and, yes, the Federal Government. You hang far too much of everyone’s negligence on one man in your argument.

    Our industry needs to stop being a bunch of sheep who follows what the “Big 4″ do (the introduction and subsequent retraction of debit card fees, as a recent example) and do things that are sustainable and responsible. Instead of finding loopholes in regulations that we can exploit, we should self-govern more and point out abuses of the banking system to our regulators. In some societies, that’s called being a “snitch” but in all societies, people would probably be better off if they helped self-regulate instead of defending the status quo in the name of self-interest. That will not only save us from repeating our past mistakes, but will keep over-reactions by regulators (read: Dodd-Frank) from being imposed upon us.

  21. gayguy

    Fraudster,

    You are scraping your hairy palms on the ground again, you Neanderthal.
    Stop equating homosexuality with pedophilia.

  22. North Left Coast

    Thanks for nothing, Barney: it is hard to find someone as egregiously wrong about the outcome of “rolling the dice” with taxpayer guarantees, and just as hard to find someone who seems to have no memory of his prior words or actions (while being touted as the “smartest guy in Congress”).
    Here’s your hat, what’s your hurry!!
    Maxine is terrible, but at least Maxine makes no claim to being smart, so the bar is set pretty low.

  23. Andy

    A very biased right wing distortion of facts. What about taking the regulators off the field, allowing banks to leverage up to +30 to1, misadventures of the rating agencies, etc. All of these actors played a roll, including Barney, but to blame him first and formost, is irresponsible. Your “vent” is what is wrong in DC today, too much partisan verbage and little desire for folks to move toward each other to improve things for the country, rather than make limited political points. We all need to move forward and stop blaming the past.

  24. SeriousDiscussionIsDeadHere

    TH nails it. Here we are, several years post-2008 and we are still being treated to foaming diatribes. Pull off the ideological blinders and look at the facts. Even Greenspan has been able to admit that he was wrong about the banks’ ability to act responsibly. Gee, anyone want to take a less ideological look at the role of government versus the “free market”? Anyone ever consider that a semi-regulated market bears no resemblance to a “free market” as found in Econ textbook? Time to get over it, and deal with the world as it is.

  25. Ed

    The ascension of Maxine Waters to the chairmanship assumes a continued Democratic majority in the House. There may be a better outcome than that next November.

  26. GN Phx

    Trader – you are the one who is trully delusional and does not understand the workings of the economy or banking system.
    The Volcker Rule is not needed – all that is needed is regulating bank leverage and capital – that was one of the main reasons for 2008, was the leveraging up 20-30x of “AAA” subprime mortgages.

  27. Bill

    Yes, Barney had his weaker days. But his “oomph” was well-minded. He wanted to prevent Wall St. scions like Tom Brown from kidnapping the U.S. economy. And yes, I’m troubled that Maxine Waters will be assuming his role–with all her conflicts of interest in the bank she sought favoritism for.

    And to the guy who posted a Hugh McColl–Until I saw your name, I couldn’t think of the worst bottom-feeder of the banking industry. You got me back on the right track.

  28. Jim McLaughlin

    You are right on target, Tom. Good riddance to Barney….may he retire to Fire Island!

  29. Blindspot

    TB makes numerous cogent points. However, left out of the equation is the fact that large wall street banks first got into the subprime market, the Alt A market, the low doc market, the no doc market, by seeking more and more loans from direct mortgage originators. The big investment banks did so through purchasing more and mor loans from the large retail banks and through large independent mortgage companies and stating just keep sending them on. The investmernt banks; (1) securitized such loans, (2) obtained investment grade credit ratings from the largest credit rating agencies (who did not drill down into these portfolios and used antiquated assumptions to evaluate true credit default risk)(and who by the way are paid by the investment banks and did not want to lose their business) (3) and then sold off the bonds to investors (insurance companies, hedge funds, domestic and foreighn banks and pension funds and others) based upon the solid investment grades credits when in fact they knew these Mortgage Back Securities were not investment grade (particularly when initial defaults started as early as the early 2000′s with the dot.com emplosion). But, the large investment banks were looking at the exorbitant fees their competitors were making by selling off all (or most of) the risk. The faster they got loans in and out the door the better and the higher the profit margins. While Fannie and Freddie are complicit, they got into the game very late and did so as a result of losing so much market share. Was this right? No! But, the big investment firms started the process and sold off all (or most of) the risk. Some of the large firms (and their principals) even started shorting (betting against) their own investments based upon the defaults they could clearly see (inside info) happening from the portfolios they had already sold off (remember the swamp land in Floida scenarios everyone has heard about in the ’20s)? Need more information read any one of the interest

  30. Jim McLaughlin

    You are right on target, Tom. Good riddance to Barney….may he retire to Fire Island!

  31. WildCat

    Who do you think you are ? The smart one ? You are absolutely wrong in everything you wrote about Barney Frank. You should be thankfull he served the country and not dehumanize him. You are a cold hearted individual and I may stop reading articles in Banknotes.com if they continue to feature contributors like you. It is a shame that there are thinkers like you still exist in America. Oh! did Barney Frank do any thing good while in Congress ?

  32. BH

    It’s insane that Frank wrote the reform bill after being architect of so many of the policies that fueled the housing bubble. It would be like if Citi had appointed Kerry Killinger as CEO of Citi to replace Prince.

  33. True Believer

    Right on. To bad the media does not understand any of this or maybe they do and are unwilling to share it. Either way, Good Riddance to BF. This is a good example of why term limits are needed.

  34. p isaac

    Bravo . Frank is receiving a sympathetic media echo chamber in his efforts to re-write history and this needed to be written somewhere.

  35. barrydemo

    Tom,
    I’ve been saying this to my friends for years. No one wanted to listen during the Housing Bubble.
    Barry

  36. Trader

    @GN PHX – You are unfortunately incorrect. Regulating bank leverage is indeed required but it is not enough. What would you regulate it to ? 10x ? Everyone seems to believe that 10x is very safe leverage ratio for banks. And that is probably true for t

  37. grover13

    Blindspot couldn’t have put it better. Fannie and Freddie share in some blame; but they got to the game late. The investment banks led the way, and the SEC all but enabled them to take down the system by expanding their allowable leverage in 2005.

    The great irony in every “it’s all Barney Frank’s fault” argument: the housing bubble and collapse was GLOBAL. A US Congressman is responsible for the bubbles in Great Britain? And Spain? And Australia? And China? REALLY?

    Frank certainly didn’t help matters any, and in some cases added fuel to the fire, but Tom, c’mon….a little perspective here. You’re wearing your elephant on your sleeve.

  38. swellesley5

    i,m a ma. resident..and i am in total agreement. loud mouth bully who ,in his shabby personal life, violated prostitution, marijuana laws..not to mention croniism…what a windbag…supported by the liberal left in newton and brookline!
    Dodd left rather thamn be indicted for being ,at least, afriend of angelo’s…..Frank left because he couldn.t stand having to “run” forpolitical ofic….now Ma. has to deal with Ms Warren….omg!

  39. Blindspot

    Yes, grover & others are right. Mr. Frank certainly did not make things any better. He did add fuel to the fire – protecting FNMA & Freddie Mac; & the bonuses those guy got are atrocious. Including those of yrs. like Johnson & F. Raines. But, the big invest. banks & the complicit rating agencies led the way by far. The invest. banks had the phone going to buy all the no doc., no income loans & securitized it & sold most of it off. Then a no. of firms & individuals shorted what they originated. How ironic it is that the right wing states they are against financial bailouts after the fact. Wasn’t Paulsen an R who came up w TARP under an R president?. Why didn’t they let it all just go down the tube? Where were those against bailouts then? Their voices only got loud after the fact. & if they are really against bailouts, why are they taking all that campaign slush from Wall St.? (That is R’s taking it —– of course just like Schumer did when he was chairing the DSCC.). Ironically Hoover & Eisenhower both chafed and ranted about the big banks in their time — both R’s. Look, baisically everyone reading here likes some sport be it football, baseball, tennis, golf, bowling, basketball, soceer. Everyone one of them has boundaries to play within the boundaries. & everyone one has referees, umpires of officials. It pure sport (even at JV level) has these things what is wrong with bus. having the same and being expected to adhere to them? ( Ironically I am a Mod to Conserv.. I just abohor hypocrisy by all D’s & R’s).

  40. Bob Main

    Well said. He’s a character right out of Atlas Shrugged and I don’t mean one of the good guys.

  41. RR

    frankly, Frank was a solid professional who understood the immense amount of greed that poured out of Wall Street ….I’m thankful that he was where he was during the past years to check the hypocritical motives of the financial sector- the same sector that almost destroyed our way of life …..

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