I cannot believe the New Yorker published this complete evisceration of their own reporter.
“Let me put it this way. As a congressman, you passed the biggest financial regulation in a generation. Then you went to work on the board of directors of a bank … I just wonder if going on bank boards and saying that you’re doing it in part because you want to make money is helpful. That’s all.”
“Former members of Congress should not go to work on anything related to what they may have done while they were in Congress? Could I have become an official of a gay-rights organization? I spent more of my time during my years on gay rights than on financial reform. What about housing? I created programs to support affordable housing. I continue to try to work with that. Is that wrong?”
“I think that’s a good place to end it.”
“No, I want an answer to the question.”
“I don’t know enough about the housing sector. I was making—”
“You don’t know that much about banking, either. … If I ruled as off-limits anything I’d worked on when I was in Congress, I guess I’d be a monk.“
Absolutely brutal. Never thought I’d want to buy a banker a beer but this Barney guy is alright.
Honestly, I'm not sure what point you are trying to get at from reading your comment, its all disjointed without a clear overarching point.
If you're trying to say that regulators should be able to go and work for the people they were regulating, that shows a significant lack of understanding about how corruption has worked in actuality.
The reason many countries have blackout periods where regulators are forbidden from receiving any kind of funding from the people they were regulating afterwards is because when its allowed, corruption occurs, and the cost to prosecute it is almost always high. The more centralized and heavily regulated the area is, the more prevalent it is, and worse the enforcement arm becomes less effective at a general cost to the public (look at the SEC).
There are a number of legal ways that bribes and payoffs may happen without blackout periods (i.e. where they can't accept a position with any company doing business in areas they oversaw), and while a number of these loopholes have been closed, there are still many avenues where sophisticated bad actors can easily get around law intended to punish corruptive behavior such as with blind trusts set up for education, where there is only one beneficiary but its set up as a lottery.
Corruption should be rooted out, and heavily punished because it causes harm to the public good, its insidious and pernicious in regulated areas.
I’m trying to say that a journalist set out to make a banker look like a corrupt hypocrite, the banker made the journalist look like a fool instead, and then the newspaper committed a hilarious act of mild betrayal by publishing it.
>the banker made the journalist look like a fool instead,
Certain readers would takeaway that he deflected where a person of integrity and good faith would use the opportunity to steelman and address the core conflict of interest criticism put forth.
As a congressman, he sponsored a highly significant law that governs all of the activities of regulators. So if anything, the conflict of interest question is more relevant to him than it would be to a bureacrat working in one of the regulatory agencies.
I disagree. Once a law is passed, it's the law. It applies to everyone, including the congressman who authored it. Regulators however are the people who enforce the laws. Having a regulator in your pocket is many times more useful than having a lawmaker in your pocket.
For example, if a cop pulls you over for a traffic violation, would you rather have the chief of police among your "good friends", or the lawmaker who passed whatever traffic law you violated?
> if a cop pulls you over for a traffic violation, would you rather have the chief of police among your "good friends", or the lawmaker who passed whatever traffic law you violated?
If I get pulled over by a cop for a traffic violation, it means my attempts at major corruption have already failed. The minor corruption of having the chief of police fix my ticket is small potatoes by comparison.
If I want to buy laws and regulations that favor me over my competitors, which is a much more serious form of corruption (and the form that large organizations like banks are much more likely to engage in), I want to buy the lawmaker, not the regulator, because the lawmaker will give me much better value for my money.
It’s worth noting that the interviewer didn’t start out planning for a debate about members of Congress working in fields related to their congressional activity. The original plan was to pin the subject for his hypocrisy in trying to weaken his own legislation once he got hired by a bank. The subject was ready, though - the first thing he said was:
“I came to the conclusion shortly after we passed the bill that fifty billion dollars was too low. I decided that by 2012, and, in fact, said it publicly. The reason I say that is that I didn’t go on the board of Signature until later. In fact, I had never heard of Signature Bank at the time when I began to advocate raising the limit. This is relevant, obviously, because Signature was a beneficiary of that.”
That's because the interviewer is an activist, not a journalist, and a bad one at that. Barney Frank was simply the more intelligent person in this interview.
The fact he had such an answer prepared shows he has thought about it over the years, far longer than the reporter spent thinking about a gotcha question based on the superficial premise of "revolving door bad."
As for the reporter, the interview doesn't start any better than it ends. Those are some embarrassing questions based on factually incorrect premises, and Frank consistently corrects him, only to be told "well, look what the Washington Post said in 2018!" How embarrassing. I admire Frank's patience. Can you imagine a reporter childishly grilling you about your subject of expertise while insisting you're wrong?
> Could I have become an official of a gay-rights organization? I spent more of my time during my years on gay rights than on financial reform. What about housing? I created programs to support affordable housing. I continue to try to work with that. Is that wrong?
No, these are totally different things. Congress does not "regulate" gay rights organizations and affordable housing charities, and you presumably are not being paid to do these things. If you are, then obviously stop that. If you feel strongly about the cause, do it for free. On the other hand, Congress (and you personally) does (did) regulate Signature Bank heavily and have (had) lots of opportunities to shape public policy to benefit /specifically the officers and shareholders of this bank, which also employs you/. The suggestion that these things are equivalent is obviously an argument in bad faith.
Well, since lack of bank regulation almost destroyed the economy a little while ago, having a job that comes with incentives to reduce regulations is qualitatively different than those other options: more morally complicated, more dangerous.
The interviewer may have expected that fact to be self-evident to his readers, and that Barney Frank's unwillingness to engage with it, and to try to deflect in order to "win the argument," would speak for itself.
Maybe that was their plan, yeah. Barney’s argument seemed to be “if you’re tough on banks as a legislator it’s good to go work at a bank after leaving Congress; if you’re soft on banks as a legislator it’s bad to go work at a bank after leaving Congress”. If you approach it with sufficient distrust of politicians/bankers and insufficient understanding of the regulation I can see that argument being unconvincing.
(Unimportant nitpick: one option being more morally complicated and more dangerous than the others is a quantitative difference, not a qualitative difference.)
It s indeed amazing. I work in a big bank myself and the old arguments repeated over and over about our evils is completely incoherent from the inside, where there is an incompetent apathy group crossing a passionate group of financial stuntmen, balancing each other, under the very low tolerance eyes of various regulators fining us for the smallest fart.
It simply doesnt fit the narrative outside that we re helping drug cartels or shits like that.
He is -- bankers get a lot of hate based simply on the fact that the average person doesn't actually understand much about banking.
The big salaries you hear about aren't there because banks are greedy; they're there because bank shareholders know that banking is hard, and you need to make sure you can command the best person for the job. It doesn't always work out, but that's the goal. Shareholders don't give up dividends for fun, in any industry.
If you don't take risk, you lose market share (and really, risk is where liquidity originates from -- it's the whole reason we have banks; otherwise, we'd all just wait until we have enough cash to buy what we want). Too much risk, and you blow up. Which would be all fine and good, except not enough and too much aren't ever clearly delineated until after the fact.
His name is on "the biggest financial regulation in a generation". Then he works for a bank and advocates for weakening that law. His advocacy carries more weight than most people since he wrote the original law. The bank paid him to do that. You don't need a degree in finance to see that that's corrupt.
Barney's great at bickering and obscuring the point.
“You passed the biggest financial regulation in a generation. Then you went to work on the board of directors of a bank, and then after that you supported weakening certain requirements.”
“No, no. Wrong. Wrong on sequence. I supported [weakening certain requirements] before I even heard of the bank. I decided that there was one area where we had been mistaken and began advocating, correcting this. … The events are that I made an independent decision, without regard to being on a bank board, that I had made a mistake. When I went on a bank board, I should stop believing the conclusion I had come to?”
Also from the article and already reproduced in a sibling comment is the first statement Barney made in the interview, to the effect that he is on public record pushing for these weakenings in 2012, long before he joined (or was even aware of the existence of) Signature Bank.
We kinda as a society and all that, expect people working in government to have some saintly features. For people who are selected and elected to positions within a government.
The power held through working in a government clearly doesn't justify their documented benefits. So, we do hope these individuals to possess monk like qualities with a self sacrificial mindset.
Even though their argument for working in social and civil reform institutes does sound reasonable at first, but I think it is controversial.
I think fundamentally progressive ideas does not win through democratic process. They are disruptive ideas that represent a minority of people. Through an incredible movement these reforms gain democratic edge. But politicians are elected to democratic process and presently compared, they often aren't the ideal persons to led a progressive movement, they have too much skin in the game and can hold back free flowing progressive and disruptive ideas.
I think you might find Thomas Sowell’s A Conflict of Visions interesting; he argues that it’s only about half of society that has this view you describe (expecting people in authority to be somewhat saintly, self-sacrificing, or monk-like), and the other half has a very different view.
That is interesting. I am not very educated on Sowell's views beyond his interviews on the Hover Institute YT channel. I will take a deeper look. Thank you for your recommendation.
Barney Fwank is not alright. He is corrupt like the rest of them. He knows nothing about banking and everything about corruption. There were not two people on Signature's board that were actual bankers.
Isaac Chotiner has a reputation for totally destroying the people he interviews, something he does by letting the subjects hang themselves. I often wonder why anyone agrees to be interviewed by him. That said, Barney Frank managed to hold his own against Chotiner, perhaps better than any other interview subject I've seen.
In this case Chotiner didn’t come back at weak arguments as much as he often does. In particular Frank downplayed the importance of stress tests, arguing variously that they are procedural, mostly about contagion, don’t concern the “physical”, i.e. capital, condition of banks, and wouldn’t have helped because “this all came up very suddenly”. This is all incorrect.
Likewise when Frank argues in favor of his working for the banking industry, this raises conflicts of interests for legislators and potential for undue and hard-to-detect influence in a way that e.g. taking an academic position concerning banking or lobbying for gay rights would not.
“I don’t know enough about the housing sector. I was making—“ is a pretty terrible last question. Barney Frank’s retort is hilarious: You don’t know that much about banking, either. You’re not supposed to; you’re not an expert. It’s the exact same issue as with banking. If I ruled as off-limits anything I’d worked on when I was in Congress, I guess I’d be a monk.
That being said, Barney Frank’s rationale of wanting to make money is pretty openly terrible, he doesn’t come of great either
Well he explains he wants to make money, and I want to make money too, so I dont get the terrible problem here: why not work in a company hiring you for the highest possible salary balanced by keeping your integrity ?
Having made the mistake to have been an elected official in the past should not ban you from high responsibility jobs, maybe ?
Why do you work at whatever job you work at? If they said “we’ll keep everything else exactly the same, but starting Monday, we’ll only be paying you minimum wage”, would you change anything?
I like what I do; I like my colleagues; I’m proud of what our teams have accomplished, but I’m very clear that I work for money.
Barney Frank is the Director of Signature Bank, so naturally he'd make up conspiracies about why it was shut down rather than recognizing it as the danger that it is. Even more than the bank's reputation and his affiliation with it, if he were to admit a failing at the bank, it would be a personal blow to his legacy since the Dodd-Frank Act was specifically supposed to prevent this kind of shit from happening.
Said crypto business was being actively investigated by US prosecutors and the SEC. As a potentially criminal enterprise it’s no wonder that it can’t be part of a sale:
When the Republicans don't have the votes to pass a given piece of legislation and a large fraction of the Democrats in the Senate take their side, you can't call it anything else.
Presumably, a bank could follow any behavior dictated by the original Dodd-Frank Act voluntarily, if it was a good piece of legislation in the first place.
Depends. If competitors aren't playing by the same rulebook, you're at a competitive disadvantage, and that risk could outweigh the risks you'd prefer to avoid. Regulation is needed not just to prevent risky actions, but to evenly distribute the incentive to avoid risky actions.
That's not true of banks, because as history has shown, a temporary competitive advantage as a result of riskier behavior often ends with insolvency (indeed, often is the case with business in general, but especially banking). In the case of Frank and his leadership and influential role, it stands to reason he would foresee such risks and avoid them. As of yet, though, I haven't heard any concrete argument about a specific item of the original legislation (or its current leaner form) that would have prevented Signature or SVB failures.
Do you think banks don't need to compete? Aren't exposed to risk? They're not hedge funds, but they're still participants in various investment markets, and compete for customers on rates.
The point of legislation is to enact behavior because not everyone is a beneficent actor. If we could rely on beneficence alone, there would be no need for law.
(It should be obvious that banks do not do strictly beneficent things.)
Sure, but in this case, the co-author of one of the 21st century's most consequential banking regulations was placed in a leadership role at a bank that ended up failing.
The point of legislation like this isn't to support good actors who were going to make good choices regardless, it's to limit what bad actors will do when left to their own devices.
If everyone did the right thing on their own then we wouldn't need laws to prevent wage theft, or false advertising, or people dumping toxic chemicals in rivers people might drink out of, or murder.
It's also to (at least theoretically, can't comment on Dodd-Frank specifically but other areas of compliance that I've dealt with) ensure that even good actors don't stray too far. "Normalization of deviance" is a real issue, even for well-intended individuals and organizations. Having some manner to hold people to account can reduce (though certainly not eliminate) those incidences as well, or provide a way to get back on track (including, potentially, paths for self-reporting and rectifying to discourage coverups).
That sounds nice but it’s childish, like suggesting people voluntarily pay more taxes than owed. Don’t hate the player, hate the game. It’s perfectly reasonable to follow the rules of the game while believing the rules can and should be be improved. Or in Barney Frank’s case, actually doing so.
How would the original Dodd-Frank legislation have stopped Frank's own bank from failing? Or is it the case that there are always inherent risks in banking and that no legislation is sufficient to prevent all failures? Perhaps even, sometimes legislation has unintended side effects that lead to adaptive behavior in the market which then causes a shift in risk patterns that then ultimately causes a different, altogether unforeseen disaster?
He says in the article that he quickly realized the 50 billion threshold was too low and began advocating to raise it. Why would you expect him to follow the part of his legislation that he thinks is a mistake, after he succeeded at fixing that mistake?
> Problems with the bill, Frank said, include the amount at which a bank is considered risky and subject to harsher oversight. The new bill increases the threshold five times, from $50 billion to $250 billion.
> “Fifty [billion dollars] was wrong,” Frank said. “It was too low. … But I think above 125 [billion dollars] was a mistake.”
What would you have done as president in that moment? Sign this bi-partisan bill or not sign it? (Strike through $250M and write in $125M and sign that is not an option.)
I find it hilarious when the executive branch (of either team red or team blue) gets blamed for faults which plainly and obviously stem from the legislative branch.
> naturally he'd make up conspiracies about why it was shut down rather than recognizing it as the danger that it is
I would have agreed with you a few years ago, but we've now seen SBF, Donald Trump, and other major figures admit to crimes to journalists (and sometimes on TV).
Regardless, I think you have to investigate from every angle, including asking someone who is likely to lie to you at the advice of their lawyer.
Dodd-Frank always seemed like a vague hodge-podge of stuff that, sure, strengthen regulators but didn't put many hard limits on banks. Regardless, Frank is correct that the agency that should have dealt with Signature's problems was the State regulator, not the Feds.
The thing is that both SVB and Signature were these large commercial banks that didn't really do many commercial loans, they just bought bonds. That's more or less going to doom you to die sooner or later 'cause your estimate of the future value of a money isn't always going to be better than average. So regulators should have said something a while back, yeah. Why they didn't or couldn't is the question.
I think the thrust of the article is: why did Frank go to work for this particular bank (that has now fallen apart) when he could likely have worked at larger banks and made even more money?
“Let me put it this way. As a congressman, you passed the biggest financial regulation in a generation. Then you went to work on the board of directors of a bank … I just wonder if going on bank boards and saying that you’re doing it in part because you want to make money is helpful. That’s all.”
“Former members of Congress should not go to work on anything related to what they may have done while they were in Congress? Could I have become an official of a gay-rights organization? I spent more of my time during my years on gay rights than on financial reform. What about housing? I created programs to support affordable housing. I continue to try to work with that. Is that wrong?”
“I think that’s a good place to end it.”
“No, I want an answer to the question.”
“I don’t know enough about the housing sector. I was making—”
“You don’t know that much about banking, either. … If I ruled as off-limits anything I’d worked on when I was in Congress, I guess I’d be a monk.“
Absolutely brutal. Never thought I’d want to buy a banker a beer but this Barney guy is alright.