Yesterday's announcement by Rep. Barney Frank, D-Mass., that he was retiring after 16 years in the House of Representatives was greeted with a severe mixture of praise and scorn from the financial services world. While some people acknowledged his impact on creating legislation that significantly changed how the mortgage banking industry operated, others questioned his role in the events that led up to the September 2008 financial crisis and the subsequent decline of the U.S. economy.Â
Within the financial services industry, Frank's record of public service was highlighted by organizations serving the credit union sector.
‘We believe Rep. Frank is – and has always been – a very devoted public servant and always maintained the best interests of not only his constituents, but all Americans,’ says Bob Dorsa, president of the American Credit Union Mortgage Association. ‘He has worked hard and served many years in support of his positions. We wish him well in his future endeavors.’Â
Bill Cheney, president and CEO of the Credit Union National Association, commended Frank for being ‘a friend to credit unions throughout his career’ and for ensuring that the Dodd-Frank Act included language that exempted small institutions from Consumer Financial Protection Bureau (CFPB) oversight. Dan Egan, president and CEO of the Massachusetts Credit Union League, added that the Dodd-Frank Act ‘stands as a testament to Barney's commitment to the rights of consumers and his recognition of the fact that credit unions, as consumer-owned nonprofit cooperatives, are unique in the way that they provide for working-class families in the U.S.’
Other financial services trade organizations, including the Mortgage Bankers Association and the Independent Community Bankers of America, declined to offer input regarding Frank's retirement.
Frank's role in changing the structure of the financial services system via the Dodd-Frank Act was acknowledged by some as his landmark achievement.
‘Frank made a profound impact on financial regulation,’ observes Dr. Peter Morici, former chief economist at the U.S. International Trade Commission and a professor at the University of Maryland's Smith School of Business. ‘Though he is a Democrat, he is a legislator first and he holds the national interest closest in his focus. He will be missed.’
‘I would say that the Dodd-Frank Act is one of the most important reforms over the past 20 years, so Frank has made a mark on the landscape of the U.S. financial industry,’ says Dr. Linda M. Hooks, professor of economics at Washington and Lee University in Lexington, Va. ‘We are still working our way through the implications of that law, however, so it is not clear how it will affect the industry in the long run. There are regulations from the law still to be written, and without Frank in Congress, that could change the tenor of those regulations.’
With Frank leaving Congress, it appears that the next Democrat to take the leadership role in the House Financial Services Committee is Rep. Maxine Waters, D-Calif. Dr. Mark A. Calabria, director of financial regulation studies at the Cato Institute in Washington, D.C., is concerned that Waters may not be the most satisfactory replacement for the departing Frank.
‘[His leaving] will make it a lot less likely that we will see bipartisan reform of Fannie Mae and Freddie Mac,’ he warns. ‘I see Waters as a lot less likely to compromise with Republicans than Frank would have been, assuming Waters takes his position.’
Marx Sterbcow, managing partner with New Orleans-based Sterbcow Law Group LLC, concurs. ‘The departure of Frank could muddy the waters of an already murky regulatory environment,’ he explains. ‘The fear is that you almost always knew where Frank stood and he could back up his particular position with his institutional knowledge. But some in the industry are expressing concerns over what happens when you have someone on the House Financial Services Committee who lacks the knowledge and/or understands how or why a rule was put in place. Plus, there are certain Dodd-Frank provisions which will go away because he can't protect them when he retires.’
The timing of Frank's departure raised some concern, especially since the Dodd-Frank Act is still in the process of being rolled out – albeit at a slow speed.
‘It is pretty amazing how someone put in legislation to rewrite the entire financial system as we know it and then steps out right when it takes effect,’ observes Brian C. Coester, CEO of Coester Appraisal Group, based in Rockville, Md. ‘It really doesn't make sense to retire right when the legislation that he created is still in its infancy. It is like creating a child and then abandoning it right when it starts to grow. I think it shows that the legislation was more to put something in place, rather than for something that he truly felt would help the people.’
Dr. Gregory Price, chairman of the economics department of Atlanta-based Morehouse College, notes that Frank's exit coincides with changes in the Massachusetts political landscape.
‘His retirement is probably largely motivated by a redrawing of his congressional district, which will now include voters who are more left of center and conservative,’ he says. ‘In such a new district, Frank would be vulnerable as an incumbent, and it seems he is not up for the challenge anymore.’
Highs and lows
At the same time, however, many people view Frank's congressional record as being decorated with both respectable accomplishments and dubious achievements.
‘Rep. Frank is a very bright guy and he knew government very well,’ says Joseph Murin, former president and CEO of Ginnie Mae and chairman of The Collingswood Group, based in Washington, D.C. ‘My biggest disappointment is that he never took ownership of the housing market demise – he was very much a part of it. It is a good thing that he is leaving Congress, so someone else can step in and be responsible for what takes place.’
Edward Pinto, a resident fellow at the American Enterprise Institute and a former executive vice president, chief credit officer and senior vice president of marketing and product management at Fannie Mae, also believes that Frank leaves behind a mixed legacy. Pinto points to Frank's work in bringing the Housing and Economic Recovery Act of 2008 into law as a positive achievement. But Pinto also faults Frank for bringing potential problems into the Dodd-Frank Act.
‘Whether its accomplishments are positive or negative are yet to be seen,’ says Pinto about the Dodd-Frank Act. ‘We do know that it failed to address the government-sponsored enterprises (GSEs). We also know from experience that giving a social welfare agency – in this case, the CFPB – a safety and soundness authority usually ends poorly, as we saw in the Department of Housing and Urban Development's record with the GSEs' affordable-housing goals.’
Frank's congressional career stretched beyond issues relating to the financial services world, though his late-career work in relation to housing policy appears to define his overall record.
‘I think that he deserves credit for being a trailblazer for gay Americans,’ says Jimmy LaSalvia, executive director of GOProud, a Washington, D.C.-based organization that represents gay conservatives and their allies. ‘But he also deserves a lot of the credit for driving the country into the ditch. He represents a lot of what's wrong with Washington.’
‘Barney Frank left an indelible – albeit controversial – imprint on the mortgage industry,’ comments Scott Stern, CEO of St. Louis-based Lenders One Mortgage Cooperative. ‘First, Barney Frank desired a safe and secure mortgage industry.Â Second, he was strongly committed to ensuring that American consumers received safe and secure mortgages.Â
‘Unfortunately,’ Stern continues, ‘he created an environment of unprecedented government over-regulation, overwhelming infrastructure changes and restrictive credit over-tightening. Only time will tell but we hope that the long-term impact of his leadership, as controversial as it was, is a return to a mortgage industry that is the envy of the world.’
A lack of support
There are also those within the industry who are hard pressed to praise Frank's record, but are not shy about pointing out his perceived shortcomings.
‘Barney Frank epitomized everything that was wrong with our country's liberal policies,’ says Chris Sorensen, founder of the Los Angeles-based Homeownership Education Learning Program. ‘Social engineering based on spending other people's money was allowed to continue under his reign for too long. I wish him well in his next venture, but it t is time for a more fiscal conservative policy to be put in place.’
‘I wish he'd retired long ago,’ adds Robert J. DeWit, president of Manhattan Bank in Manhattan, Mont. ‘He and his ilk were the driving force behind the liberalization of Fannie and Freddie, which, of course, gave Wall Street the golden opportunity for a gluttonous payday. He had a short memory about that while authoring the act slapping at the banking industry, including the small banks who were never a part of the problem to begin with.’
‘Barney Frank was a champion of homeownership, particularly for low- and middle- income households that could barely scrape together a down payment,’ quips Dr. Anthony B. Sanders, distinguished professor of real estate finance at George Mason University in Fairfax, Va. ‘We will probably never see a housing bubble like the last one again.’
Ruth Lee, executive vice president of Denver-based Titan Lenders Corp., saw Frank's announcement as the first step in cleaning out Capitol Hill. ‘One down, 534 more to go,’ she says, with a laugh.
However, Len Israel, president of Mission Hills Mortgage Bankers/Lenders Direct in Santa Ana, Calif., is less concerned about looking back at Frank's record and is more interested in looking ahead at how the industry will respond to the Dodd-Frank Act's challenges.
‘In general, we need to get toward 'balance,'’ he explains. ‘I've repeatedly argued that while significant losses have been realized via irresponsible program formation, lending, 'regulatory' and rating 'agency oversight,' the losses in terms of being able to put some life back into our economy is being stifled by some very overbearing, costly regulatory requirements.
‘It has been extremely challenging to operationally implement some regulatory changes that are, quite frankly, written without regard for the multiple implications faced throughout what remains of the origination process,’ he continues. ‘In seeking guidance or clarifications on some on the nuances, many times we receive conflicting information.’