Power Failure: Barney Frank Calls It Quits

Rep. Barney Frank did incalculable damage during his tenure as one of the most influential legislators overseeing the American financial services industry.

From his support of the Community Reinvestment Act, which was no more than a tool for local pressure groups to extract money from banks, to his denial of the risks that Fannie Mae and Freddie Mac posed to the Treasury as they consumed the mortgage financing market, Frank saw his role as that of a strategically placed siphon whose function was to direct other people’s funds to those he deemed more deserving.

The Massachusetts Democrat announced Monday that he will not seek reelection next year. He cited his age and the length of his tenure in office, saying, “By the end of next year, I will have been doing this for 45 years with one six-month sabbatical.” That tenure will have included 32 years in the House of Representatives. At 71, no one can blame Frank for looking to retirement.

My guess is that Frank is more concerned about his diminished congressional role, since the Republican takeover of the House cost him the chairmanship of the Financial Services Committee this year, than about his age or general weariness. Being a congressman is not nearly as much fun these days, especially now that the fruits of his labors are so appallingly evident.

While Frank and his cohorts like to blame “Wall Street” for the world’s financial ills, the problems in this country’s banking sector grew out of housing market, where Frank made his biggest mark. Even after it was clear that his stance on Fannie Mae and Freddie Mac was, to put it charitably, misguided, Frank insisted that he was not to blame for their eventual collapse. “The mistake I made was a nonoperational one — I wasn’t in power. From the day I became chairman, I think we did everything we could,” The Boston Globe reported Frank said.

It is only fair to note that Frank is correct that Republicans, as well as he and his fellow Democrats, played their part in facilitating the federalization of the mortgage industry. But the Republicans, who should have had more sense, were just in it for the campaign dough; Frank and his fellow Democrats were the true believers that government had a role to play in making home ownership available to people who could not afford it and who would have been better off without it.

That’s not to say Frank isn’t smart, or hard-working, or courageous. He is all those things. It took serious guts to be the first congressman to voluntarily acknowledge being gay in 1987, when Frank came out publicly. It took fortitude to acknowledge his relationship with a male prostitute and to accept a reprimand for fixing a myriad of parking tickets for the same.

When push came to shove in 2008, Frank gave vital behind-the-scenes support to then-Treasury Secretary Hank Paulson, to do whatever needed to be done to keep the banking system from collapsing. Though he and Paulson were very different, the two men developed a deep trust. In the forward to Paulson’s book On the Brink, Frank wrote that they “admired each other’s integrity and commitment to the public good, and shared a similar and natural understanding of the crisis that faced [them].” Their cooperation kept the crisis from becoming worse than it was.

But in a bizarre triumph of ideology over experience, Frank included provisions in the Dodd-Frank financial overhaul legislation that would limit the flexibility of the Treasury and the Federal Reserve in a similar crisis in the future.

In the end, Frank’s career was always about maximizing power: particularly Congressional power, and most particularly his own. I wish him a very happy, if sadly overdue, retirement.

About Larry M. Elkin 525 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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