Ex-Rep. Barney Frank On Possible Trump Appointees, Dodd-Frank
DAVID GREENE, HOST:
Donald Trump conducted more job interviews yesterday. Among the many positions he needs to fill, treasury secretary, and he is considering people with close ties to Wall Street. We brought that up with someone known for being tough on Wall Street, former Democratic Congressman Barney Frank of Massachusetts.
Congressman, it's good to have you back on the program. Thanks a lot.
BARNEY FRANK: You're welcome.
GREENE: So can you tell me, is experience on Wall Street a plus or a minus when it comes to a potential treasury secretary?
FRANK: Oh, it's a neutral, and it depends on the individual. I don't think you should say, OK, we're going to have a Wall Street person or not a Wall Street person. Obviously, if someone is well-intentioned, knowing the industry is a good thing. It is also possible, however, that someone's sympathies could be too much the other way.
GREENE: Let me ask you to listen to a bit of - a little bit of tape here. We spoke to Anthony Scaramucci who is working on Donald Trump's transition team. He's a hedge fund manager, and this is a bit of what he had to say about potential treasury secretary picks.
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ANTHONY SCARAMUCCI: It's absolutely critical for him that he gets world-class people - A-plus-plus to use his own expression - on the Cabinet and members of his team. So if that means he's going to draw from Wall Street to do that, that's what he's going to do.
GREENE: It sounds like you two don't necessarily disagree.
FRANK: Well, Mr. Scaramucci once paid me $60,000 to speak to his conference, so there are times in the past when we have agreed. And if he's listening, I'll tell him I'm still available. But when you come to a pick, it's a person. You're not picking a category. So I'd just say that it's one factor to be considered.
GREENE: Now, Barney Frank may be best known for the banking law named for him - Dodd-Frank. It was signed into law in 2010. It aimed to overhaul the financial regulatory system. But critics said it made it more expensive for banks to lend to small businesses. Here again is Anthony Scaramucci from Trump's transition team.
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SCARAMUCCI: One of the biggest problems that Dodd-Frank has caused is it has restricted the lending to small businesses. The lifeblood of the economy is that the banking community is a circulatory system for American capitalism. So if you're restricting that arterial flow, which is what Dodd-Frank has done in an effort to make people super and ultra safe, well, that's a very big mistake for the economy.
GREENE: I asked Congressman Frank whether this was a big mistake for the economy.
FRANK: I am not aware of any specific provision that mandates any tightening of lending to small business other than a requirement that people who lend and then sell that loan be prepared to take a part of the risk. And I'm proud of that.
GREENE: But one of the - one of the general criticisms, though, is that maybe inadvertently Dodd-Frank has squeezed lending and people of lesser means and small businesses have had more trouble getting loans from banks. Is that...
FRANK: No, that's not a - that's not a specific criticism. I don't understand. What provision? I don't know. Maybe I'm being unfair when I ask which provision. We very specifically restricted home mortgage loans, not small business loans.
GREENE: Well, Congressman, you recently acknowledged what you called a mistake in the law. What - that you might have been too tough on banks that don't have a tremendous amount of assets. What exactly was that? Explain that for our listeners, if you can.
FRANK: Oh, I said this in 2013. I agreed with Dan Tarullo of the Federal Reserve. We say that at $50 billion in assets you got subjected to greater scrutiny because you could have a systemic impact if you failed. I agreed by 2013 that was too low. I would like to have that go well above $100 billion.
GREENE: Why is that? What - why - is this being just too much of a burden on smaller banks or what?
FRANK: Yeah, middle-sized banks. I mean, a $60 billion, $70 billion bank is not generally viewed as small. The midsized banks, yeah, it requires them to do more paperwork than is necessary, although I'm not aware that it's caused any shortage of loans. It does put a kind of an administrative burden on them. Now, that...
GREENE: But could the - could the paperwork you're talking about, if I may, could the paperwork here, could that be what some of your critics are pointing to is saying these banks are involved with too much paperwork and can't - they can't lend as much.
FRANK: I don't know. Why don't - excuse me. I don't mean to be rude, but have you ever thought of asking one of the critics what specifics they have? I mean, I don't mean to tell you how to do your job, but if I was you and people said, hey, well, what specific is there? I don't...
GREENE: Well, we have - we have a lot of people who are going to be continuing this conversation, so we will keep asking about the specifics. I...
FRANK: Well, to be honest, it seems to me you'll have to start asking. In terms of the paperwork, no, I am not aware of anybody saying that they're lending less because of the $50 billion. There is one other one where there was too much paperwork.
GREENE: What's that?
FRANK: I believe some smaller banks - this is the other thing I want to change. We have the Volcker Rule, and that says you shouldn't - if you're an insured depository bank, you shouldn't engage in derivative trade for your own account. I - we never thought that would apply to the smaller banks. Some lawyers understandably are telling the smaller banks, well, you got to be very, very explicit in documenting that you don't do that. So, again, I agreed with Tarullo who said let's exempt banks under $10 billion explicitly from that rule.
GREENE: Well, Congressman, let me look forward here. I mean, you have said that, you know, having involvement on Wall Street is not necessarily a deal breaker for new treasury secretary. The names being floated around like Steve Mnuchin from Goldman Sachs, Texas Congressman Jeb Hensarling who is a - has been a big critic of Dodd-Frank. I mean, if someone like that comes in and wants to open up a debate about Dodd-Frank, maybe talk about repealing it and maybe talk about improving it, I mean, are you necessarily opposed to that debate happening?
FRANK: Excuse me. Are you serious? Of course not. I mean, we're having that debate. We've been having that debate for years. Of course I'm not opposed to a debate on the law. I just cited to you two areas that I agreed you should make changes.
GREENE: Let me take this question a step further. I mean, if you don't necessarily think experience, you know, on Wall Street is necessarily a bad thing, could Donald Trump be a president who is the right person to lead a debate over banking regulation when it comes to these questions?
FRANK: No. I - look, I don't think Donald Trump is the right person because I very much disagree with him. I also think, frankly, his thinking on this is somewhat incoherent. On the one hand, he campaigned as the man who was going to stand up to the big banks, who said that Hillary Clinton was too close to the big banks. Ironically, she's the supporter of tough regulation. He says in general he wants to repeal all the regulations. That's totally inconsistent with being someone who's going to stand up to it.
GREENE: All right. Former Congressman Barney Frank, thanks so much.
FRANK: You're welcome.
GREENE: He is a former Democratic congressman. Transcript provided by NPR, Copyright NPR.