Dodd-Frank could be more vulnerable without Barney Frank
After Barney Frank’s departure, Congress will lose one of its biggest champions of the Wall Street reform legislation that bears his name. With Republicans set on repealing Dodd-Frank, whose biggest components are still being put into effect, Democrats will be forced to fill the void to keep the legislation intact after the Massachusetts Representative retires in 2012.
Having served in Congress for 30 years, Frank has a long-standing reputation for being both a wonkish expert and an outspoken, sharp-tongued debater who frequently grabbed the spotlight — skills that he deployed in full force to push through the biggest financial overhaul in a generation. “There was no greater champion for Wall Street reform than Barney Frank,” says Michael Greenberger, a University of Maryland law professor and former official at the Commodity Futures Trading Commission.
With the departure of Sen. Chris Dodd in 2010, Frank has become the primary public face for the legislation in Washington, playing a significant role in an implementation process that’s taken far longer and become far more complicated than many had expected. “You lose a great, strong voice … the best advocate for meaningful financial reform,” one Democratic Hill staffer told me. “We are going to be nervous to the extent that there are going to be efforts to repeal or peel back little layers of bills. We’re going to be looking for someone to be that voice. I don’t think we have it in the House.”
Next in line for Frank’s leadership seat on the House Financial Services Committee is Rep. Maxine Waters (D-Calif.), who hasn’t been closely involved in developing or defending the major pieces of Dodd-Frank. Waters, in fact, is currently under investigation by the House Ethics Committee for intervening on behalf of a bank requesting bailout money in 2008, which could cast a shadow over her new role if she takes up the reins.
The Democratic staffer, who spoke on condition of anonymity because he was not authorized to speak to the media, added that Frank’s retirement also marks a loss of institutional memory and knowledge — a key component in defending the legislation from being repealed or watered down by the scores of lobbyists who are trying to weaken its regulations. “The memory here is 30 seconds long, staffers go all the time,” said the Hill staffer. “You lose Dodd, and you lose Frank — there go two people who can say, ‘the reason we did this was because … we’ve heard this argument before and our response is. … You lose some of that historical perspective.”
Although Frank’s departure might worry the Democratic defenders of the legislation, the financial services industry — among the players lobbying to shape Dodd-Frank — points out that they’re also losing an expert who understands both the intention and limitations of the law.
“He’s laid out what Congress believes it intended at the time it was adopted, trying to give clarification to regulators. … This is why we did what we did and why we intended it to be this way,” said Ken Bentsen, a former Democratic Texas House member and currently executive vice president of the Securities and Financial Markets Association, a major industry lobbying group. Bentsen points out that Frank recently pushed regulators to understand that one aspect of the new Over-the-Counter derivatives regulation didn’t apply to broker-dealers, for instance.
Dodd-Frank does have some major champions among Senate Democrats, including Sens. Dick Durbin, Jeff Merkley and Jack Reed, all of whom helped author different components of the bill. And if Elizabeth Warren is elected in Massachusetts, she would be an obvious new face for Wall Street reform, given her role in creating the legislation’s new Consumer Financial Protection Board.
On the House side, Rep. Rosa DeLauro has worked to prevent Dodd-Frank from being defunded, and the Democratic leadership — including John Larson, Nancy Pelosi and Steny Hoyer — have been vocal about defending the legislation, Greenberger points out. “You’re losing an All-Star player on a baseball team — there may not be anyone with immediate name recognition and admiration held for that person, but people are gaining experience with Dodd-Frank,” he explains. What’s more, more recent financial upheavals — including the meltdown of MF Global and the ongoing euro zone crisis — have brought new attention to the state of financial regulation, not only in Congress but in the White House and federal agencies.
Frank still has another year in office to help assist Dodd-Frank’s implementation, with the major rules scheduled to be finalized by the end of 2012. All this said, Democrats on the Hill are already bracing themselves for the loss. “It’s a sad day today, and it will be more sad in January 2013,” the Democratic staffer said.
* Update :The American Bankers Association also had kind words for Frank upon his departure. “Frank has always been a formidable but fair legislator who understands financial markets and the indispensable role banks play in the broader economy. His depth of knowledge and willingness to be open to opposing viewpoints will be greatly missed,” ABA president and CEO Frank Keating said in a statement.