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Barney Frank: Twenty Years and Hundreds of Billions Later on Private Profit/Social Loss

Posted by Larry Doyle on May 14, 2009 3:18 PM |

I find it embarrassing that our country is subjected to the leadership of the likes of Barney Frank. In a 7 minute interview on Bloomberg News this morning, I was initially shocked at Congressman Frank’s selective memory. As I watched the interview further, I got increasingly perturbed and upset that our country is subjected to a Congressional leader with such little appreciation for his own mistakes. From there, thinking that Barney and his colleagues are likely to impose their will and vision upon our economy makes me more concerned about the long term risks for our market and capitalism itself.

I am not blinded by the will of the free market.  For a market to remain free, there needs to be strong regulation and real discipline. If the market does not impose the discipline, the government can and should provide guidance, incentives, and if need be hard rules. For the regulation to be effective, though, it is imperative that the regulators themselves are unbiased and unaffiliated within the industry. I would say that both FINRA and the SEC have fallen woefully short on these fronts. I would also say that Congress has fallen woefully short.  Against that backdrop, to see none other than Barney Frank trying to make the case for the way forward on compensation reform and municipal insurance is VERY HARD TO SWALLOW.

In regard to compensation reform, I am all for empowering shareholders. I would begin by asking, though, when did shareholders lose the ability to influence compensation? Shareholders should regularly review compensation practices and figures and if they find them problematic, they should voice their opinions and if need be sell their stock.  

As Barney was raising the risks embedded in the private profit and social loss model, I wanted to scream and ask him where he was as Franklin Raines was plundering Fannie Mae with Barney’s support on the Hill. Finding religion on these topics after twenty years and hundreds of billions of dollars may appease his constituents, but it does nothing for those who cherish free market capitalism.

Make no mistake, government was a large part of the problem then which makes me leery to think that it can be an effective part of the solution now.

To also hear Barney offer his opinion on the relative value of municipal debt versus corporate debt made me want to change the channel. The link to Barney’s Bloomberg interview is provided below. Let me know if you were able to stomach it before changing the channel.

Barney Frank, September 25, 2003 on the topic of sub-prime lending:

“I want to roll the dice…” 



  • coe

    LD – you continue to peel the onion to expose new layers of important linkages, and, as you are wont to say, reveal the laws of unintended anyone really surprised by politics of partisanship, or of flip-flopping, or of self-serving selective amnesia..I take heart, however, that whether the issues are involving compensation, or the future role of the GSEs, or even the fate of regulatory reform..somehow the “market” and/or the American body politic (we the people) will right the ship – so long as we are left with a ship that is sailing! The politicians should be a bit more circumspect about throwing down penalty flags of moral and taxpayer outrage when they themselves were guilty of their own infractions – thanks to “instant replay”, the truth will set us free…somebody just has to care… Keep up your valuable and informative work – a much needed breath of clarity and fresh air in these complex financial times

  • Thank you! Barney Frank is a schmuck, but unfortunately, one with power and a loud voice. More unfortunately, he likes that power too much to ever admit to an error in judgement, much less corruption and wrong-doing.

  • TeakWoodKite

    No Mr. Doyle, couldn’t do it.

    It appears that Barney really is a giant purple dinosaur. Some kind of Zen awareness thing gone bad,
    to live in the moment and be blissfully unawares. Rolling the dice?
    Two things I’d like to know who owns crap table and are the dice loaded?
    With your level of expertise, it must be especially grueling to watch.

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