Barney Frank — the retired congressman who co-authored the Dodd-Frank Act to tighten bank regulations after the 2008 financial crisis — is under fire over his role in the latest US banking disaster.
The 82-year-old Democrat is on the board of directors at Signature Bank — a New York lender that was shut down by state regulators over the weekend, becoming the industry’s third major casualty since Silicon Valley Bank was abruptly shuttered on Friday and the crypto-focused Silvergate Capital shut down a week earlier.
In an interview with Bloomberg late Sunday, Frank partly blamed cryptocurrencies, which hadn’t existed when he and fellow lawmakers in Washington were grappling with the collapse of Lehman Brothers in 2008.
“Digital currency was the new element entered into our system,” Frank told Bloomberg. “A new and destabilizing — potentially destabilizing — element is introduced into the financial system. What we get are three failures.”
Frank didn’t address the fact that crypto had become a key growth vehicle for Signature Bank under the direction of himself and others — despite widespread concerns about the risks of the notoriously volatile sector.
Meanwhile, Frank also insisted that regulators’ move to shut down Signature was overly aggressive — claiming that the bank could have survived.
“I think that if we’d been allowed to open tomorrow, that we could’ve continued — we have a solid loan book, we’re the biggest lender in New York City under the low-income housing tax credit,” Frank said. “I think the bank could’ve been a going concern.”
Frank, a staunch Democrat and chair of the House Financial Services Committee during the 2008 crisis, was brought into Signature because of his deep understanding of the importance of financial regulation, according to the company’s website.
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“Mr. Frank’s extensive experience as a Congressman, and particularly as Chair of the House Financial Services Committee, led the Board to conclude that he should be a member of the Board,” a statement about Frank’s appointment to the board reads.
In 2022, Frank received $121,750 in cash compensation for his work on Signature’s board, as well as $180,182 in stock awards, according to a company filing.
As of February, Frank owned 5,542 shares of Signature Bank worth $825,000; the shares are likely now worthless after the government took the bank into receivership. Frank has been part of the board since 2015 and is expected to depart later this year, the filing adds.
A spokesperson for the bank did not immediately respond to request for comment.
Frank was “instrumental” in creating the $550 billion bailout for banks during the 2008 crisis, the website adds. But his legacy was cemented with the passage of the most stringent financial regulation, the Dodd-Frank Wall Street Reform and Consumer Protection Act.
While Frank cracked down on banks during his time in Congress, he appeared to embrace them once he left.
In a Politico op-ed, he even explained that it was good for Democrats to accept money from Wall Street, “For liberals to demonize those who do so is a needless self-inflicted wound for their cause.”
The federal government Sunday announced the failure of Signature Bank as regulators rushed to try to stem the losses caused by last week’s collapse of Silicon Valley Bank.
Manhattan-based Signature Bank — a key financial institution for the cryptocurrency industry — was shut down over a “similar systemic risk exception,” according to a joint statement from the heads of the US Treasury, Federal Reserve and Federal Deposit Insurance Corp.
Silicon and Signature depositors will be made whole, but the banks’ shareholders and unsecured debtors will not be protected, officials said.