Reforming Wall Street – Part II

The following is an excellent excerpt from the book “FRANK: A Life in Politics From the Great Society to Same-Sex Marriage” by Barney Frank from Chapter 10 “Reforming Wall Street” on page 289 and I quote: “The week Lehman collapsed, I was scheduled to attend a road race in memory of my mother, held by Kit Clark House, a leading social service group in Boston; the fall dinner of the Harvard LGBT organization; the Working Waterfront Festival in New Bedford; and a dinner for the prime minister of Cape Verde. These were no-stress, celebratory events with an interesting range of convivial people none of whom would want to talk about financial gloom and doom. We never got to attend any of them. Instead, I called Jim from D.C. after the second grim meeting of that week to ask a big favor. I would be spending the weekend at the Capitol and I wanted him there to help me get through what I knew would be a very stressful time. He agreed to join me.
On Saturday morning, we were on the way from the Capitol subway to Pelosi’s office when we were spotted by a crowd of journalists. They rushed toward us, cameras bobbing, mikes recording, and pads outthrust. Unused to even a peaceful horde rushing toward him, Jim was startled, and his wonderful protective instinct toward me kicked in. The result was a photo that went across the country showing Jim, with his eyes wide and his mouth open, holding his arm like a shield in front of me. It looked like an outtake from a cheesy Western when the heroes are surprised by the sudden appearance of a very large number of hostile Indians. Fortunately in this case, the charging crowd was unarmed, although not entirely unhostile.
Later that weekend, he joined the group of staffers and others who sat outside the conference room while we tried to reach a deal on the TARP legislation. At some point, Rahm Emanuel had been warned by his staff that accounts of our private session were being sent out electronically. Channeling Wyatt Earp, he stood up and demanded everybody’s BlackBerry—not mine, since I don’t like them. He put the devices in a wastebasket and then spread them out on a table in another room to be picked up after the meeting.
Jim wasn’t in the midst of these proceedings because we wanted to make a point. He was there because I needed personal support. But the point was being made nevertheless. One of a handful of people engaged in the highest level of policy making in the American government at a time of crisis was a gay man accompanied by his partner. Major political players would recognize the significance of this in various ways. In his memoir of the crisis, Hank Paulson noted that when he wanted to speak privately with me at a time when the negotiators had temporarily taken a break and scattered to separate places, his aides found Barney Frank “on the third floor” [of the Capitol] having dinner with his partner, Jim Ready, and asked him to meet with us.” Given that Paulson’s memoir was published in 2011, when same-sex marriage was still strongly opposed by most Republicans, this was an example of gratuitous niceness.
When I presented the bill to our caucus, I witnessed an expression of what by then was virtually unanimous Democratic support for same-sex marriage. The party leadership provided buffet dinners at these sessions. When one of my turns onstage ended up lasting more than an hour I said I hoped that we wouldn’t run out of Chinese food before my colleagues ran out of questions. Jim had been watching from the side of the room where the staff assembles, holding a plate of food for me but refraining from delivering it to me onstage on the assumption that it would be a breach of decorum. Still unaccustomed to treating an important meeting of a hundred and fifty or so congresspeople as if it was his kitchen, he tried very hard to be inconspicuous. Within seconds, he was spotted as he cautiously came forward to hand me the plate and was greeted with a spontaneous, affectionate “aaw”–as in, “isn’t that cute”–from the female members, followed by cheers from most of the room. This enthusiastic vocal affirmation of a gay relationship for members of Congress in the midst of these tense, high-stakes deliberations was incredibly moving, America—and I—had come a long way since 1954.
Democrats were not the only members who welcomed Jim’s presence. He told me a few nights later that when he ran into a Republican member with whom I had regular, not always harmonious, dealings, he was told, “I figured you were in town. Barney was nicer to me today than is usual.”
As the TARP vote approached, the Republican leadership was also lobbying their members, with Democratic majority leader Steny Hoyer and Republican whip Roy Blunt coordinating their efforts. When we believed we were as strong as we were going to be, Pelosi brought the compromise bill to the floor on Monday, September 29. To the world’s shock, the bill failed. While Democrats voted 140 to 95 for the bill, Republicans voted heavily against it, 65 to 133, providing significantly fewer yes votes than everyone knew would be needed for passage. It is fair to say that many members voted no while praying yes, as an old legislative adage has it. Such an outcome illustrates the fundamental mistake of applying Lord Acton’s famous dictum in all contexts. I agree that “absolute power corrupts absolutely” where it exists in authoritarian governments. But in the legislative bodies of representative governments, it is not power that corrupts but impotence. Members of a parliamentary minority are much more likely to vote no on a substantively necessary, politically unpopular measure than the majority who know they will bear some collective responsibility for failure. Anyone doubting this need only look at the behavior of those many members—myself included—who voted against raising the debt limit when in the minority but proclaimed the need to be responsible and vote yes in the majority. (I am hopeful that the debacle of 2013 has put a stop to this particular form of gamesmanship.)
With the defeat on the first vote, and the entirely predictable stock market crash that followed, our efforts went into higher gear. Even before the final vote was tallied, I made one important intervention. When the scoreboard showed that the noes were going to win, the leaders of both parties rushed to the well of the House to try to get members to switch from no to yes. This is a common pattern on close votes, although usually the party leaderships are working against each other. I am ordinarily a supporter of my party’s efforts in such cases, and sometimes a participant. But this time I knew it would be disastrous. Passing TARP through a very public display of pressure on members would have added to widespread view that the establishment was rigging the game to favor their powerful friends. Fortunately, several others shared my views, and we succeeded in persuading everyone involved to back off, accept defeat for the day, and work in a calmer manner for passage.
A priceless rhetorical opportunity soon arose. After the vote, Eric Cantor issued a very silly statement in which he tried to absolve his party colleagues from responsibility. He explained that many of them had changed their yes votes to no because they’d been deeply offended by Nancy Pelosi’s floor speech, in which she’d blamed Republican deregulatory policies for the crisis. He had obviously not thought this through, and I took advantage of his mistake. When a reporter asked Pelosi to defend herself against the charge, I stepped to the mike. “In other words,” I said, “Mr. Cantor is telling us that some of his Republican colleagues who agreed that passing the bill that their president was strongly supporting was in the national interest, and would keep the economy from further damage, nevertheless voted to kill it because Nancy Pelosi hurt their feelings.” Expressing my surprise at their sensitivity, and their sudden distaste for partisan remarks on the House floor, I made an offer with all the mock sincerity I could muster. “I am prepared,” I continued, “in what I acknowledge is an uncharacteristic display of conciliation on my part, to apologize to all of those offended Republicans, in the hope that this will let them put the national interest ahead of any hurt feelings that remain.” (Since no transcript exists, this is probably not verbatim, but it is everything I said and is very close to the exact form.) Neither Cantor nor any other Republican tried that defense again.
Later that evening, I called Paulson to commiserate, but also to assure him that we would win the next vote. I compared some of the TARP opponents to a young teenager who became so angry at his parents that he decided to leave home, only to get a few blocks away on a cold night and think better of the idea and come back.
I do not claim major credit for the vote switches that passed the bill on Friday, but I am convinced that I helped remove some of the obstacles to the bill’s passage. It is noteworthy that even with a very angry business community pressing the case for the bill, a majority of House Republicans remained opposed. The final vote was 172 to 63 among Democrats, and 91 to 108 among the president’s supposed supporters.
The passage of TARP and its subsequent prompt execution did not solve the crisis, but they did buy time for a series of other measures that collectively kept the meltdown from becoming the deep worldwide depression it had threatened to be.
As the 2008 election neared, my next concern was my reelection. My very able, astute chief of staff, Peter Kovar, had alerted me that opposition to TARP was audible in my district. With Dan Payne’s great TV ads, and a Republican opponent who’d served time in prison after violating the probation sentence he’d received for hitting his teenage daughter, I won easily—too easily, because it left me overconfident when I faced a more serious challenge in a much tougher political climate two years later. That same day, Barack Obama defeated McCain, and a new era of Democratic control happily beckoned.
I had not worked closely with Obama before the crisis. I was a strong supporter of Hillary Clinton in the fight for the Democratic nomination, and had even made a radio commercial for her that played in Massachusetts, a state she won decisively. My first dealing with Obama had come when we coordinated our strategy for responding to the financial crisis and, particularly, the meeting at the White House. Things had gone well. As he took office, I did have some concerns that he was going to underestimate the difficulties of working with the Republicans. When he made a comment that seemed to me to put some blame of Bill and Hillary Clinton for the bitter partisan fighting that had marked the 1990s, I thought he was being unfair to them. Knowing as I did how deeply the right wing had entrenched itself on the Republican side, when the presidential nominee said that he intended to govern in a “postpartisan manner,” I said publicly that this had given me postpartisan depression. It was not that I thought working with Republicans was a bad idea; I was simply convinced that it was impossible. In this case, I believe I’ve been fully vindicated.
My relationship with Obama and his administration deepened during the two years we spent writing and passing the financial reform bill. After the Republicans took over the House in 2010, I became concerned that his unjustified hope for “postpartisanship” would be a problem, and I was particularly troubled when he offered to restrain Social Security cost-of-living increases for moderate-income elderly people in the vain hope of getting a deal with the Republicans. Fortunately for good public policy, Republican intransigence took that deal off the table. On the whole, my relations with Obama, and my approval of his approach to governing, were very strong throughout this first term.
In histories of the Great Depression, I had read about the long and fraught interregnum between the defeat of Herbert Hoover and the inauguration of Franklin D. Roosevelt. The result was a constitutional amendment that advanced the incoming president’s Inauguration Day from March 4 to January 20.
But to my dismay, even a shorter transition period turned out to be too long in this crisis. For the first time since 1932, a handover of the presidency from one party to the other was occurring in the midst of a national emergency. And to my regret, our efforts to aid homeowners would be lost in the shuffle.
In the original TARP legislation, we had included strong instructions to the administration to reduce foreclosures. This would be done through the direct use of TARP funds and by using the leverage the program gave us over the banks. Paulson’s refusal to carry out these instructions led to my one major disagreement with him, which I expressed vigorously in a hearing I called for that purpose in November. His response, which I know was entirely honest, was that the imminent threat of total financial collapse required him to focus single-mindedly on the immediate survival of financial institutions, no matter how worthy other goals were.
In what I took as a manifestation of our mutual respect, Paulson agreed to include homeowner relief in his upcoming request for a second tranche of TARP funding. But there was one condition: He would do it only if the president-elect asked him to.
That condition was rejected by Obama, who noted that we have only one president at a time. My frustrated response was that he had overstated the number of presidents currently on duty—a comment that, I was emphatically told, achieved full bipartisan status by irritating the incoming and outgoing chief executives equally. I understood Obama’s unwillingness to take responsibility before he had the concomitant authority, but I believed that the situation justified an exception to that rule.
Throughout my efforts to achieve foreclosure relief, I found Sheila Bair a valuable counterweight to Paulson and Timothy Geithner, whose influence had grown as he went from being president of the New York Fed to secretary of the treasury-designate. I liked, respected, and trusted Paulson and Geithner, and agreed with their general approach. But my instinct was that they felt a greater need to show deference to the financial community than the federal government had to. Bair’s independence was a powerful reinforcement for me, especially given her own intellectual credentials and status as a Bush appointee. When we learned that Paulson and Geithner were likely to ask her to leave the FDIC before her term expired, Chris Dodd and I intervened to object. I told Geithner that he and the other male regulators were coming across like ten-year-olds in the tree house who had posted a sign that said NO GIRLS ALLOWED. This did not, however, mean that I was permanently allied with Bair against Geithner. After the crisis, Bair, Geithner, and Paulson would all write generously about me. I know I am regarded in some quarters as a curmudgeon. I offer as strong evidence against this view the fact that I got along with Bair and Geithner much better than they did with each other.”

(THE $700 BILLION TARP BANK BAILOUT WAS A VERY UNPOPULAR BILL, WHICH WAS DEFEATED THE FIRST TIME. IT EVENTUALLY DID PASS, WITH A LOT OF LOBBYING FROM THE BIG INVESTMENT BANKS BECAUSE THEY WANTED THE BAILOUT MONEY. IN FACT FORMER TREASURY SECRETARY, HANK PAULSON, GOT ON HIS KNEES BEGGING SPEAKER NANCY PELOSI TO HELP OUT AND GET THE BILL PASSED, WHICH IT DID THE SECOND TIME. IT PROBABLY WAS A MISTAKE THOUGH, BECAUSE THE BIG INVESTMENT BANKS HAVEN’T LEARNED ANYTHING FROM THE 2008 CRASH BECAUSE THEY ARE STILL OPERATING AS RECKLESS AS BEFORE. SOME ECONOMISTS SAY WE’RE GOING TO HAVE A BIGGER CRASH DOWN THE ROAD THAN WE HAD IN 2008.

LaVern Isely, Progressive, Independent, Overtaxed Middle Class Taxpayer and Public Citizen and AARP Members

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About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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