DEC 26, 2012 11:41am ET

Politics, Banking and Gridlock: A Q&A with Barney Frank

DEC 26, 2012 11:41am ET
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Rep. Barney Frank, the retiring lead Democrat on the House Financial Services Committee, has always been known for speaking his mind.

But in a more than one-hour interview at his office in Massachusetts earlier this year, he was also surprisingly open, discussing what motivated him to get into politics, his sexual orientation, and the cause of political gridlock in Congress.

While a handful of these remarks were included in an earlier article on Frank's legacy, much of the conversation was left on the cutting room floor. As Frank prepares to leave Congress, we offer an edited transcript of the full interview:

How did you get into politics?
I was fascinated by the [Joe] McCarthy hearings—I couldn't wait to get home and watch them.

Secondly, I was reading about a kid my age named Emmett Till. A black kid from Chicago—he whistled at or looked at the wrong way a white woman and they killed him. I was outraged. This was my first look into what was going on in America in the south. At that point I became very interested in the '54 elections and thereafter.

I was outraged by racism, outraged about the interference with free speech. I feel strongly about ending discrimination and people being free to express themselves. The economic piece of it evolved but those are the first things that come to mind.

What made you run for office?
I decided I wanted to be in politics and would follow it. For two reasons at that time, I assumed I would never be an elected official

One, I realized I was gay when I was 13—I didn't tell anybody. This notion that it's a choice. At 13, realizing I was gay was just devastating. I carried on, I didn't dwell on it a lot, but it was not good news.

And secondly, I'm Jewish. One of the things that has evolved in America is that anti-Semiticism is no longer a barrier to getting an elected office, but it was 60 years ago.

So I figured I would be involved in politics as a volunteer, a helper, etc.

I volunteered to go to work for Kevin White. I assumed I would work for him, the election would be over, and I would go back [to law school]—I was supposed to be writing my thesis.

And he won and said he wanted me to come work for him. It changed my life.

In early 1972, the moderate Republican state representative from downtown Boston, Back Bay announced he was retiring. I had moved there when I went to work for Kevin White.

So some friends said, you know there's a vacancy here. It's been a Republican seat but it's changing. People moving in. It was the year of the 18-year-old vote and George McGovern.

And I went back up and I got elected to the legislature.

I figured at that point this will be a good run, I'll be in the state house for a while.

Then in 1980, the pope ordered Father Robert [Drinan] who was the congressman from the district that was next to mine, I lived in Tip O'Neill's district, not to run again.

And so I said, 'What the hell?' and I ran for that seat.

Did you think you would win?
I thought I had a good chance to win. At first I thought I was going to win—then I thought I wasn't—I was up and down. I always think I'm going to lose when I'm in a tough race—I'm very pessimistic.

Were you worried what would happen when you came out of the closet?
Yeah. Personally, I wondered what would happen if people outed me, and I didn't know what I would do. And I did worry about it.

I came out because I couldn't live closeted. It was a crazy way to live. I couldn't meet people, that's how I got in trouble with that hustler. There's a need for emotional and physical relationships—and it's just very hard.

I thought I would go to Washington and I would be publicly ambiguous, privately I could live as a gay man, but you can't do that, I was too much in the spotlight.

It just was impossible. So I decided that I would come out. And I was worried but I just couldn't live any other way.

I was talking with former Rep. Mike Oxley and he said, "Barney really believes in the institution of Congress." Is that right?
Yes. One of the things I'd like to do later on is I'd like to teach a course on Democracy.

Democracy has been the motivating factor in my life—Emmett Till, McCarthy—I just believe very strongly in democracy as a moral imperative. That people have a right to run their lives and that Democracy is very important.

And the embodiment of that Democracy is the Congress and the House of Representatives. So yes, I believe very much in the institution of Congress, not in itself, but as the institution of American democracy.

But people feel now like Congress doesn't work.
That's true, but that's only since the Tea Party came. Did you feel that way in 2009 and 2010?

In 2009 and 2010—go back—read Hank Paulson's book—we worked very closely together. We did the Tarp with the administration. In the most political part of our history, we did the auto bailouts.

First of all, bipartisanship stopped when Obama came in.

Nancy Pelosi did a stimulus with George Bush in 2008 in January—people forget that—which we worked with him because the economy was turning down.

We didn't say go ahead and screw up and we'll beat you bigger in 2008.

In 2009 and 2010, we got health care, we got financial reform, we got Lily Ledbetter, we got the repeal of Don't Ask, Don't Tell—it was very productive, including some foreign policy cooperation.

What then happened was that the Tea Party took over the Republican party. So that lack of functionality is very recent, it's a two-year period.

The other thing about it is, and people forget this, it's the American constitution.

In England, if you are the candidate for prime minister, and your party wins the majority of seats in the House of Commons on Wednesday, you are the prime minister on Thursday or Friday and you run the whole government.

But in America, at any given time, we are governed by the product of three elections. You have senators who are elected in 2006, a president from 2008, representatives from 2010.

Now the public rarely changes its verdict as radically as it did between 2008 and 2010.

The gridlock is a result of the voting public in America drastically changing its mind and electing Barack Obama and Democrats in 2008 and then the most right-wing faction in American history to control a party in 2010.

That's where the gridlock came from.

Is this something that changes on its own?
I think it's going to change. You have people now that don't believe in governance in charge of one chunk of the government. But I urge people. Go back: read [former Treasury Secretary] Hank Paulson's book.

You had two years of a Bush presidency and Democratic control of Congress and there was a great deal of cooperation over the economic crisis.

There is nothing institutional and permanent. There is this overlap problem but it's a combination of three sets of elections and the public making a drastic shift between 2008 and 2010.

You have a real passion for banking and housing issues. What started that?
It started out with housing. I care a lot about poor people.

My passion has been to end discrimination, protect freedom of expression—promote freedom in general, like marijuana and gambling—and keep people from being too poor.

So I worked in the legislature.

When I got to Congress, Tip [O'Neill] was very careful to make sure that we had Massachusetts people on all the important committees. So when I got there, we had people on Appropriations, Ways and Means, Energy and Commerce, but nobody on Banking.

And I said, "Okay, that's what I want to do" and called Tip. But I went onto banking to do housing.

For years, I was one of the few that would pass up the capital markets subcommittee. I was never that involved, including with Fannie and Freddie—that was in the capital markets subcommittee.

I didn't really have an interest in that. I had very little to do with Sarbanes-Oxley. I was No. 2 on the committee, I just followed [former Rep.] John LaFalce on that.

Then I became ranking member. As ranking member, I had to take on that activity. But even at first as ranking member, I was spending most of my time on housing.

My involvement with the financial markets came with the crisis.

In 2006, Paulson calls me and says, "You guys are probably going to be in charge, we have some serious issues here."

Prior to Dodd-Frank and Tarp, what is your biggest banking accomplishment?
It's low-income housing. Charlie Rangel and I—this goes back to 1986—the creation of the low-income housing tax credit program. The single most important source of affordable housing and very much a public-private thing.

The second action I care about is trying to make the international financial institutions more concerned with equity.

The World Bank has something called the Doing Business Report, in which the more you screwed your workers, the better you were treated. Saudi Arabia would come out better than Sweden. And we got that changed. Literally, you got a negative if you had vacation days.

And debt relief. Maxine Waters, Jim Leach, Spencer Bachus and I beat the Clinton administration and both parties' leaderships over debt relief for the highly debt-poor countries.

How much do you think your legacy will be dominated by Dodd-Frank?
Not my concern (shrugs).

Look, somebody asked me the other day. I'm the first person in Massachusetts history to file a gay rights bill. First member of Congress to come out voluntarily. I think maybe one of the first, or second, of any national parliament.

The first [gay member of Congress] to get married.

So somebody said "when you die, do you think your legacy will be you were the first person to come out?"

And I said, "No, because I hope I live long enough so people say, 'Was that ever a big deal? What was that about?'"

There are other factors. One of the things I'm very proud of is in September of 1998, when they found Clinton's DNA on the dress, there was a sense that Clinton was going to go. People were already getting ready for that.

On the first votes in the House, the first vote…against Clinton was something like 240 to 60.

I was No. 2 on the [Judiciary] Committee. I think we helped turn that around. I'm very proud of having helped stop that effort to throw him out. I think we turned it around in public opinion.

In the broader world, you are seen as very partisan, very associated with the Democratic brand. But with financial services issues, you seem less so. Can you explain that?
Well, there are two things about it. Maybe it's a little bit of the curl in the middle of my forehead. When I am partisan, I am very, very partisan.

Actually, I was very proud, I was voted one of the five most partisan and the five most bipartisan. That's my view. Partisanship is very important and there are very real differences.

Partisanship is bad when people get so angry over the differences that do exist that they can't cooperate when they should. I think you should be both partisan and bipartisan at the same time and not let one poison the other.

The other thing is I think I'm more of a free market economist than a lot of liberals. My view is that ideally I would like to make it possible for the free market to make a lot of money and I would take some of it and help poor people but also have some fair rules.

I guess it's seen that way because the partisan part of it makes better copy. It makes better TV. Working out a deal with Mike Oxley in his office doesn't get on TV. Part of it is that you can't put that stuff on TV.

Your public profile for a member of Congress is outsized. You were mentioned on Glee the other day.
I heard that—a sign of the coming of the Apocalypse.

I don't know. I tend to say things in colorful ways. Part of it is in some ways I was an accidental congressman. I didn't know I was going to go to Congress. I'm not one of these kids who thought I could always do this.

I got here because of the Pope and other things.

It could be [because] I'm gay, I'm Jewish, my diction is imperfect, I have a slight lisp. I grew up in an area with a very pronounced regional speech pattern and moved to an area with another one so I have an amalgam of Northern New Jersey-Massachusetts.

I do have certain…I'm good at some things, bad with others. I'm good with words. That may be it.

It could be because I'm unconventional. I have some colleagues that are much better people in private than they are in public. I want to say, 'Be yourself.' You get to be a certain point of success in politics and people say, 'Okay, now you have to change, now you have to do something different."

I talked to [JPMorgan CEO] Jamie Dimon about you yesterday and he said, "The guy you see on TV is the same guy in private."
A lot of my colleagues aren't. And you lose. One, it's harder to do and you become less interesting. People censor themselves and filter themselves and I think that's a part of it.

The other thing is, Look, I'm lucky. There are some things that I'm terrible at. I've had three relationships with men in my life. They are three different guys but I can hear all of them saying the same thing, "Barney, don't touch it." I break things. I get frustrated. I have no manual dexterity. I'm not good at it.

The luckiest thing for me was from that standpoint was I got into a line of work that plays to my strengths and not my weaknesses. Including the district. I'm not a great candidate. I'm a better inside politician than outside politician.

I've won and I'm better at it, but it's not my natural strength. But I'm a good performer. Sonny Bono and I used to talk about similarities between performing comedy and entertaining in politics, in the sense of the centrality of an audience.

You aren't just good with words in totality. You are good with words in that moment. Very few congressman can keep up with you.
I'm lucky. I think quickly. Compensation—I'm now going to be writing a book or two and that's going to be tough. That's one of the reasons that…I was determined to retire when I was still sentient because I want to write. There are things I want to say. I have a great respect for the written word, that's a part of me that I always want to deal with.

[The late Sen.] Pat Moynihan could write books and be a senator at the same time. I can't do that.

As much facility as I have orally, I have none of that when it comes to the written word. I have to really sweat. I work at it. The organization—I always want to say too many things at once.

What was your lowest point during the housing crisis?
The most frustrating part for me was after we got it done, and one angry moment I had with Hank Paulson was his refusal to use the authority to do more mortgage modifications.

I just saw this slipping away, I tried hard and I couldn't do much.

How hard did you have to work to pass Tarp?
The hardest part physically was selling it to the Democrats. I worked very hard. It was going to happen. I was fully supported by Nancy [Pelosi] and others. The Democrats, as I said, there is more bipartisanship with a Republican president and Democratic Congress because we believe in governance.

Now they used to too. Bob Dole certainly did. Dennis Hastert did. Even [Tom] Delay understood it—this crew does not.

You mentioned mortgage modifications. It feels like the Obama administration could have done more than it did.
They could have done more in the very beginning. I was particularly upset. We gave them money to help the unemployed.

But the real problem was where is the money going to come from. We were able to take some Tarp repayment.

I was very disappointed in Shaun Donovan. We gave him like a $1 billion and he spent less than half of it to help the unemployed. Yes, I do think they could have done more.

Not as much more as people think. You had this problem. Look, early on: Obama said in 2008 he was not going to support bankruptcy for primary residences.

Then you have this terrible problem: somebody has got to put up the money. And you couldn't get public money. There was a period where we could have used Tarp money for that—and we lost that.

I think they were afraid of misspending it. I think the whole ACORN thing at that point had hurt them. They were afraid politically so they overdid the safety bit.

Talking about Dodd-Frank, what do you feel were the best decisions made as you drafted that?
The best thing in that bill was risk retention. The absolute stunner of a change was people could lend money and not be responsible if nobody paid it back.

The independent consumer bureau is very important, but from the systemic standpoint, I think risk retention is the deal.

We could give them capital standards and other things. Lenders, through securitization and no risk retention, came up with a way to take risks and have no consequences if the risks go bad.

And risk retention puts that back in. I think that's the single biggest thing.

The other is the regulation of swaps and derivatives, which the problem wasn't so much deregulation as it was non-regulation.

Are there items you don't like?
I wanted to do more on preemption. We got most of it.

Ideally—if I had a magic wand—we would have merged the CFTC and the SEC [Frank subsequently introduced a bill to merge the CFTC and SEC, but it did not pass.] It's the great irrationality of the American financial regulation—there is nothing I could do about it. I didn't have jurisdiction.

The SEC and CFTC have overlapping jurisdictions but they represent such a deep cultural divide in America between the Midwest and the agriculture people and…you couldn't change that.

Those two are reflections of deep political currents in America.

The Republicans say Dodd-Frank doesn't do enough to ban bailouts. Some say we should have gone further to break up the banks.
I've asked them to what size. If you are going to have nothing that's too big to fail, then nothing can be as big as Lehman Brothers.

Lehman Brothers created this crisis. So no financial company in this country can be as big as Lehman Brothers used to be?

What's the right size? And by what method do you break them up? You say, "Oh, let's sell things off," well what a great fire sale that would be. First place, who are the buyers? They are each other's buyers.

I can't see any evidence that size alone was the problem. Canada is of course dominated by a handful of big banks, but with the right regulations, never had this problem.

There is this incredible idea that if there is a big crisis and Citicorp, Bank of America, JPMorgan, Goldman are about to go under, there will be overwhelming pressure on the administration to bail them out.

In what country do these people live?

There would be overwhelming pressure not to do anything for them. I mean, maybe in 10 years it would be different, but in America, today, with the American public the way it is?

Tarp is the most unpopular successful program in American history. This notion that there is going to be pressure for the government to go to the aid—it's just insane. It's totally opposite from where the political system is today.

They say when the chips are down, Congress will give someone an out. You just don't see it?
They have no idea what Congress would do, including some of these guys who were there. We were barely able to get the Tarp through.

That's just the worst political misreading that I could think of.

We do acknowledge that there are some institutions that are too big to be allowed to fail without any attention to the consequences. But we pay attention to the consequences and the institution's gone.

The analysis just isn't even close. The quality of the arguments are very weak.

GSEs. You worked closely with Oxley on a bill in 2005 and supported it. But when it finally came up for a house vote, you opposed it.
That's right. He agreed to incorporate the low-income trust fund. When the bill left committee, it had a good low-income trust fund.

In the Rules Committee, they amended the bill to exclude from participation in the low-income trust fund any organization whose mission was not wholly housing. That was an ACORN thing.

They wouldn't give us an amendment.

Among the institutions that was then told they couldn't participate was the Catholic Church, because their mission includes other than housing.

So that's why I voted against the final bill. Because the bill I voted for on the floor (I think he means in committee) had been amended to cripple the low-income trust fund.

It's caused you some grief since then. Do you regret that vote?
No. But that bill didn't pass anyway. If anybody had paid attention, that's the bill that Bush repudiated.

I voted against it and the bill passed anyway. That's the point I was making. I wasn't making policy then. The bill passed anyway and it was Bush and the Senate Republicans that killed it.

If you search your name on Google it will come up with "Barney Frank caused the housing crisis." Does that frustrate you?
Yeah, that misreading of history. I became very prominent because of 2007, so the number of people who know that I didn't become chairman until 2007 and impute responsibility to me for the earlier period, yeah it's a little frustrating, but so what?

I think the other thing is that people don't differentiate. There's that quote from me about "rolling the dice." If you read that, it's about multifamily housing. And that's also frustrating to me. I was always a rental guy, not a homeownership guy. And they had a great record. The multifamily portfolio never lost money. It was very successful.

Yes, I think we should have pulled the plug earlier. The best answer I can give you is that as soon as I could, we did.

The other day you put out a statement on government lawsuits against JPMorgan. I find it interesting you put it out, because as far as I can tell, nobody asked you for your opinion on it.
No, and in fact I made a point of not talking to either [JPM's Jamie] Dimon or [BofA's Brian] Moynihan.

Look, I was there in 2007 when they were doing that. I wasn't a direct participant putting the pressure on JPMorgan Chase, but I was there and I was helpful, I was supportive of it.

I wouldn't want to be the secretary of Treasury a year or two from now who calls up a big financial institution and says 'Look, we've got this problem, can you take over such and such.' You've just lost all ability to do that. It's counter-productive, plus it's just unfair.

I felt that when some of the liberals where criticizing Bank of America over Merrill Lynch. You know, they did that as a favor to the federal government.

You want to go after John Thain, go after John Thain.

I just thought it was wrong.

What will you miss most in leaving Congress?
Being able to affect public policy. That's the only thing I will miss.

Some of the personal friendships. People underestimate what a high quality of people—not just serve in Congress, but the greatest bargain the American people get are Congressional staff. They are just an extraordinarily talented group of people on all sides. I'm very proud of the relationships I have with a lot of staff, including Republican staffers. They have been very, very good.

But mostly I'll miss the ability to change public policy.

What are your future plans?
I have two books in mind. One, what I think the program ought to be for people who agree with my values. How liberals can do a better job of winning elections and public policy.

Then a history of the gay rights movement. My political career and the gay rights movement are co-terminus. I was elected in '72 and that's when it started.

I will give speeches for money. I will make a lot of money doing that I think.

Some TV commentary, but not on a regular basis.

I will take on no responsibilities. I plan to run my mouth for money, both orally and in writing.

And then I would like to have a base at a university and do some teaching. Part of that is I need that to organize my thoughts and I want to be around other smart people.