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The Education of Barney Frank

March 14, 2023 By E.J. Smith

President Barack Obama talks with guests, including Rep. Barney Frank, left, and Sen. Joe Lieberman, at the signing of the Federal Benefits & Non-Discrimination memorandum, June 17, 2009. The Presidential Memorandum extends benefits to same-sex domestic partners of federal employees. (Official White House Photo by Pete Souza)

After authoring one of the banking industry’s largest regulatory bills, Barney Frank, ironically, has found himself on the regulated end of a bank failure. Frank, who has been on the board of Signature Bank, which just failed, is now learning just how difficult life can be for regulated businesses. The editors of The Wall Street Journal write:

Life is full of irony, but it’s hard to think of a richer one than Barney Frank sitting on the board of the failed Signature Bank. The former Congressman who was the scourge of Wall Street, the co-author of the Dodd-Frank Act that was supposed to keep the banking system safe, wasn’t able to prevent his bank from becoming one of the first casualties of the latest bank panic.

It’s amusing to think of Mr. Frank cashing a check as a bank director, but then even left-wing former Congressmen have to make a living. And in Mr. Frank’s case it has been a nice one, with cash compensation of $121,750 and stock awards of $180,182 in 2022 alone. He’s been on the board since 2015. Perhaps out of office and late in life, Mr. Frank developed a strange new respect for capitalism.

Mr. Frank once famously said he wanted to “roll the dice” to ramp up lending on Fannie Mae and Freddie Mac before they failed. Signature seems to have done the same as it dove into crypto during the Federal Reserve-fueled financial mania.

In recent interviews, Mr. Frank is blaming crypto for the bank’s demise in the wake of the Silicon Valley Bank (SVB) closure on Friday. He told Politico that Signature was in good shape as recently as Friday, but was then hit by “the nervousness and beyond nervousness from SVB and crypto.” He said the bank is the “unfortunate victim of the panic that really goes back to FTX,” the failed crypto exchange.

Mr. Frank seems to blame regulators for taking a needlessly hard line against Signature because of crypto. “I think that if we’d been allowed to open tomorrow, that we could’ve continued,” Mr. Frank told Bloomberg. “We have a solid loan book, we’re the biggest lender in New York City under the low-income housing tax credit.”

We sympathize with Mr. Frank because the Biden Administration really does want to purge the U.S. banking system of any dealings with crypto companies. It may be that the regulators decided to roll up Signature Bank because of its crypto association. It wouldn’t be the first time regulators saw an opening in a crisis to achieve a political goal by other means.

Action Line: Why is it that risk is always recognized after the fact? This is a perfect example of banking royalty acting like the smartest guys in the room and then….boom. It’s a story we’ve all heard before and rich in irony. When you want to discuss risk in your investments, let’s talk. Until then, click here to subscribe to my free monthly Survive & Thrive letter.

Originally posted on Your Survival Guy.

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E.J. Smith
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.

Please get in touch with E.J. at ejsmith@youngresearch.com

Click here to sign up for my free monthly Survive & Thrive letter.
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