Yesterday, Rep. Barney Frank (D-Mass.) announced he would retire at the end of his 16th term in Congress, saying simply, “There are other things I would like to do with my life.”
The life Frank is preparing to leave behind includes serving as the ranking Democrat on the House Financial Services Committee -- a position Rep. Maxine Waters (D-Calif.) would very much like to fill.
“As the next most senior member of the committee, the current ranking member on the Capital Markets subcommittee and the former chair of the Housing and Community Opportunity subcommittee, I hope to use my experience to continue and expand his work in the committee,” Waters said in a statement
Though Barney Frank co-authored the sweeping Dodd-Frank banking reforms, Wall Street now seems somewhat sorry to see him go.
“Rep. Frank has always been a formidable but fair legislator who understands financial markets and the indispensable role banks play in the broader economy,” said Frank Keating
, CEO of the American Bankers Association, who also called Frank
a “very tough adversary” who is “bright and relentless” while remaining “open-minded to the facts.”
And former Fed lawyer Cornelius Hurley told National Journal
that bankers “might curse Barney Frank in public but I think they secretly light a candle to him every night.”
Indeed, the financial services industry has been quite generous to Rep. Frank. JPMorgan Chase
(JPM) and Bank of America
(BAC) have been among his top campaign donors
, and Goldman Sachs
(UBS), Morgan Stanley
(MS), Credit Suisse
(C), and other household names have supported the Congressman over the years.
So, what does Wall Street make of Maxine Waters, who does not count a single bank among her top 20 career campaign contributors
Depends on whom you ask.
The potential appointment of Waters, who has been under investigation by the House Ethics Committee for her role in allegedly securing government bailout funds for OneUnited Bank (Waters, whose husband once sat on OneUnited’s board and owned “thousands of shares of stock,” denies any wrongdoing), elicits a broad range of reactions.
, director of economic research for Reason Foundation, has testified before Rep. Waters
[PDF] in the past and doesn’t believe her desire to replace Barney Frank is at all a fait accompli.
“I would be surprised if the Democrats easily let Rep. Waters become the heir apparent,” Randazzo told me earlier today in an e-mail message. “She has taken tens of thousands of dollars in political donations from Fannie Mae, and has a history of vigorously defending them while they were in the midst of participating in the undermining of the American economy. She used the power of her office to direct TARP funds to a bank that she owned stock in and her husband was formerly on the board of -- such an abhorrent ethics violation that it is stunning she has not been forced out of office. That bank, it turns out, only had 1.8 percent of its assets in Tier 1 capital -- the lowest capital ratio of any bank that got TARP funds in the initial dispersion. Bailout-pushing, crony capitalism marks like that should put her near the top of the Occupy Wall Street enemy list. If the Democrats want to reform their image they'd jettison Rep. Waters completely, and it would not surprise me if someone jumped her in line.”
Randazzo maintains that Waters is “not lobbying to head the Committee after Barney as much as be the lead financial services bomb thrower, since the Democrats will likely be in the minority in the House again.”
“Maxine Waters … would be in her element as the minority leader, since her past has been about either stopping Fannie Mae and Freddie Mac reforms (see her unambiguous 2004 defense of the GSEs as being "not broke" and "not in crisis"), or rent seeking on behalf of her husband's bank, her campaign donors, or her other subjectively favored groups of Americans,” Randazzo said. “I do not think it is unfair to say that Rep. Waters has been blinded by her worldview to become out of touch with the reality of what is wrong with the financial services sector: namely, politicians like her that think they can fully regulate a safe market environment while using the power of law to manipulate the flow of capital in society to their special interests.”
On the other side of the coin, Craig Holman
, legislative representative on campaign finance and governmental ethics for nonprofit consumer advocacy group Public Citizen,
has only praise for Rep. Waters.
“I have always admired Maxine Waters and have worked with her on many different issues, so I really do like the idea that she may become the head of the Financial Services Committee,” Holman told me in a telephone interview. “Having said that, I really want to express my regret that Barney Frank has announced his intent to resign. He really was superb.”
Holman agrees that “Maxine Waters has had some ethics problems in the past,” though he does not believe it should preempt her replacing Barney Frank atop the Financial Services Committee.
“The OneUnited case is not a grand ethics violation -- if there is even a violaton in there,” Holman said. “I don’t consider it anything that would be disqualifying. If anything, it has perhaps put her on alert that if there are conflicts -- which there are for almost any member of Congress -- there may be an appearance of impropriety. So, I think this will make her very aware of any potential probs. Rep. Waters is perfectly qualified to handle this position.”
If Maxine Waters does, in fact, replace Barney Frank, Professor Lawrence G. Baxter
of the Duke University School of Law expects nothing less than “a very big change.”
“I think Waters would certainly alter the tone of committee if she were to become Chair,” Baxter, who worked on the staff of the United States Senate Committee on Banking, Housing and Urban Affairs “during the period of reform after the Savings & Loan Crisis of the late 1980s,” told me. “She’s certainly very much more anti-banker than Barney Frank ever was.”
“I think the industry was just dead wrong about Barney Frank,” Baxter said. “They chafed and bridled quite a lot at his directness, but he understands banking about as deeply as anyone in Congress.”
That Frank could “see right through the smoke somehow created a false impression that he was radical,” Baxter told me. However, he added, “I don’t think they’ve seen radical yet. Barney Frank was about the best deal Wall Street will ever get.”
Baxter thinks that, “with the Tea Party and Occupy Wall Street coalescing on many issues, if we see another MF Global-type of situation occur, the more liberal Democrats and even some members of the Republican Party could find themselves under a great deal of pressure from the public.”
This is one reason why Baxter warns against taking lightly the idea of Maxine-Waters-as-Chair-of-the-House-Financial-Services-Committee.
“While I think banks would be more comfortable with someone like Mel Watt (D-NC), it would be a terrible mistake for Wall Street to underestimate Maxine Waters,” he said.
“Have a look at somebody like Ron Paul, who has quite a bit of momentum right now and is high up in seniority in the House,” Baxter continued. “I don’t think the banks would like what he would do to them.”
As for Barney Frank's future and the “other things” he'd like to do with his life?
Well, at least we know what he won’t
“Let me be very clear,” he told reporters
. “I will neither be a lobbyist nor a historian.”
(See also: Barney, Freddie, and Fannie: Evaluating the Legacy of the Controversial Barney Frank