Fannie, Dodd-Frank and Barney Frank

Barney Frank  won’t run for Congress after his present term expires.  This May there were news stories about his  ex-lover getting a high-paying job at mortgage finance giant Fannie Mae while he sat on the Congressional committee that oversaw the government-sponsored entity.

Regardless of what voters now think of Mr. Frank, Dodd-Frank, the behemoth financial regulation law he co-sponsored, will remain. Parts of it are already in place and various bureaucracies are busily churning out thousands of rules to implement its requirements. What the consequences will be through the years is simply unknown.

The other sponsor of the bill, Christopher Dodd, also left politics. He took a lucrative job as the top lobbyist for Hollywood.

So the financial system is being reconfigured according to a law that was pushed through Congress by two politicians who either did not care to stick around or believed that their chances for getting re-elected were not good. Republican Sean Bielat gave Mr. Frank a run for his money in the 2010 election.

The Fannie job happened in the early 1990s but did not hit the headlines then. The recent publicity it generated and the financial industry connections of his current partner might not have helped Mr. Frank with the voters.

Then again, none of this is unusual. “It is a common thing in Washington for members of Congress to have spouses work for the federal government. There is no rule against it at all,” Mr. Frank reportedly said when asked about his ex working at Fannie. He’s right.

The really frightening thing about the corruption in Washington is that it is largely legitimate. They’ve figured out how to do it so that it does not violate the letter of the law, even if it violates the spirit of the Constitution.

Notably, Mr. Frank was an outspoken defender of Fannie and its finances. Come the mortgage crisis, he changed his tune. Fannie required an immense bailout and was taken under direct government control. It remains on taxpayer support—- by contrast, the large banks paid back any money they received during the crunch.

After the crisis Mr. Frank talked the talk about the need for reform at Fannie, but he did not walk the walk. The law he helped write pays only lip service to reforming Fannie and Freddie Mac, the other government-sponsored mortgage company. While Dodd-Frank clamps numerous new rules on just about every aspect of the financial industry, it leaves unchanged the entities at the very center of the mortgage mess.

One is tempted to conclude that Mr. Frank protected Fannie for decades and through Dodd-Frank. And Fannie gave his ex a great job. This is not really affecting his career; he is of retirement age. In any event he does not have to retire. Like Mr. Dodd, he could become a lobbyist. And he should be able to get Fannie as a client, given his long-running connection to it.

I can’t imagine any ethics requirements getting in the way of the political influence and payback system. These are clever operators and they’ll find ways around formal barriers. What can be done? That’s the big question.

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