Consumer groups are just beginning to grapple with the coming loss of Rep. Barney Frank, D-Mass., as a reliable advocate with a sharp wit and an equally sharp tongue. Wall Street’s doing the same.
(PICTURES: Who Is Leaving the House?)
The financial services sector did not cheer the announcement on Monday that Frank would not seek reelection in 2012. Instead, banking representatives, lobbyists, and industry analysts cast the senior Democrat on the House Financial Services Committee favorably as a lawmaker who heard alternative arguments and understood the needs of financial markets.
And indeed, they at least occasionally benefited from it.
“They might curse Barney Frank in public but I think they secretly light a candle to him every night,” said Cornelius Hurley, a former Fed lawyer who is the director of the Morin Center for Banking and Financial Law at Boston University
Frank has become best known as a lead author and staunch defender of last year’s massive Dodd-Frank financial-reform legislation. That effort in response to the 2008 financial crisis – a rewrite of the rules that govern Wall Street – has been championed as a hallmark achievement by the Obama administration in response to the worst economic calamity since the Great Depression.
While the financial-services industry opposed the law and remains almost singularly focused on eroding it, Wall Street sees Frank as a cunning legislative strategist and one of not many Democrats in a position of power willing to listen and even adopt markets-based policy arguments.
The industry benefited from Frank’s reluctance to adopt some provisions promoted by his Democratic colleagues. Edward Yingling, former president of the American Bankers Association, who was more likely to be on the opposite side of Frank on consumer matters, called Frank a “moderating influence” on everything from the controversial Volcker rule and the role of the Federal Reserve as bank and risk regulator.
“There are a number of areas where Dodd-Frank might have been worse for the industry if you didn’t have someone with his credibility within the Democratic caucus to say, ‘Wait a minute we don’t want to go too far on these issues,’” Yingling said.
Even consumer advocates – who are lamenting the coming loss of Frank’s support on issues important to them – see a benefit in the departure of a leader who, they say, had begun to side with Republicans on reforming government-sponsored enterprises and the big questions of government support for the housing market.
“New Democratic leaders on the House Financial Services Committee will be stronger on maintaining a government presence than Barney was,” said John Taylor, the president of the National Community Reinvestment Coalition. “He softened his position and was open to the idea of completely eliminating (the GSEs). We may see more support for keeping Fannie and Freddie in some type of form, with a new ranking member and I think that is important.”
Still, his decision to leave the House removes from Congress a strong advocate for the law that bears his name. With former Senate Banking Committee Chairman Chris Dodd, D-Conn., already retired, neither of the law’s top two architects will be left to defend it.
“You fight for things a lot stronger when your name is attached to it,” said Ed Mills, an analyst with FBR Capital Markets & Co.
The effort to weaken and roll back the law is expected to intensify after next year's elections, particularly if Republicans gain seats in the House, or take control of the Senate or the White House, so the stakes for 2012 could not be higher, former lawmakers and analysts said.
Mills said the outcome of the elections will be the biggest factor in Dodd-Frank implementation, but without Frank, whom he called a “master of strategy,” there will be a loss of firepower for the Democrats to direct the messaging and prevent the GOP from unwinding the legislation.
Beyond Frank and his replacement as the committee’s top Democrat, lobbyists are questioning what his departure will mean for the panel’s staff, particularly Staff Director Jeanne Roslanowick. Roslanowick is praised by both the industry and consumer groups for her longtime institutional knowledge of the issues, the members, and the industry.
Roslanowick, in an e-mail, said: “For the moment, my focus is on working with Barney Frank and the rest of his team through this Congress -- I'm not really making plans beyond that at this point.”