Barney Frank is one of the most prominent Democrats in the United States House of Representatives. Since 1981, Frank has been at the forefront on a wide variety of national issues ranging from gay rights to the Iraq war. As the chairman of the House Financial Services Committee, he is a major force in determining the future of the American economy. While Frank technically only represents Massachusetts' fourth district, his interests extend far wider into national and global concerns.
Michael Bendetson: Considering that you are a graduate of Harvard College and of Harvard Law School, you could have made a large income in the private sector. However, you disregarded the financial payoffs and entered politics. Why did you choose to become a public servant?
Barney Frank: I like to enjoy what I am doing. I have a pretty strong sense of changes that I would like to see in the world. I don't have expensive tastes, so I am not really making an enormous sacrifice. I also realized early on, being gay, I was not going to have a spouse and children to support. Although some gay people make that choice, I was not going to do so. I have always been able to do fairly well on my congressional salary.
MB: Retrospectively, you seem to have been one of the 133 geniuses who voted against the Iraq War Resolution. Most congressman were influenced, as Sen. Clinton has stated, by "the context of weapons of mass destruction, grave threats to the United States, and clearly, Saddam Hussein had been a real problem for the international community for more than a decade." How did you manage to overcome the propaganda of the Bush administration and make an informed decision?
BF: Well, first ... there was this concern of public opinion. I had enough confidence in the people of my district to say that I do not think they would get spooked that way. Finally, it seemed to be clear to me, then and now, that Saddam Hussein was a terrible person for his own country. While I regretted that, unfortunately there is not a lot we can do ... I do not think we can go around throwing people out of office just because they are mistreating their own people. It never seemed to me that he was a threat to this country. I thought the sanctions we had were working reasonably well...
MB: [With your 1987 announcement, you became the second openly gay congressman in U.S. history.] Considering it was a risky move at the time, why did you decide to "come out?"
BF: I was going crazy trying to remain in the closet. I was doing dumb things ... I found it impossible to have a healthy emotional life and to meet physical and emotional needs ... I struggled to hide it. I could not meet men that I wanted to be involved with. It was emotionally very stressful for me. The decision was largely personal...
MB: Since 2003, Fannie Mae and Freddie Mac have donated over $3 million dollars to federal candidates, including $30,000 given to your campaign. Did this create a conflict of interest for you and the rest of your fellow congressman, considering the fact that you were receiving money from the interests that you were supposed to be regulating?
BF: No. Everyone donates money to congressmen. Labor unions give you money, grocery stores give you money, so why would you single out Fannie Mae and Freddie Mac? Doctors give congressmen money, but we pass Medicare laws. Automobile dealers give us money, but we pass laws about automobile mileage. The Supreme Court has ruled that the American people have the right to give their money as they so choose and that they cannot be stopped. As to Fannie Mae and Freddie Mac, I was in the minority in the House from 1995 through 2006, and no bill passed as a result of the Republican majority. I became chairman of the [House Financial Services Committee] on Jan. 31, 2007. Within two months, we passed the bill that the administration wanted to pass to regulate Fannie Mae and Freddie Mac...
MB: For years the federal government has placed pressure on banks to lend capital to poorer individuals. Retrospectively, did the government make a mistake in forcing banks to lend money to high-risk people?
BF: No, because the government did not force banks to lend money to high-risk people, but rather to poorer neighborhoods. The Community Reinvestment Act [CRA] is the legislation in question. The act only applies to banks. The loans that caused the trouble were on a whole not made by banks. They were made by mortgage finance companies. ... Over the course of the last 30 years, new entities rose up. Mortgage finance companies and others were unregulated, and they made loans. If only entities covered by the CRA made loans, we would not have the subprime problem.
MB: Beginning with his inauguration, you have been a strong critic of George W. Bush and his policies. With regard to the economy, where did the president go wrong?
BF: Well, first, with his total deregulation. We wanted to regulate and prevent subprime mortgages from being granted. His administration opposed that. [Bush] would not support regulation of hedge funds, private equity or additional entities that have caused this trouble. In addition, he has been a union buster and has pushed through tax plans that provide tax relief to people at the upper end. He has also pushed for trade pacts without any offsets for people who are hurting. What he has basically done is make the income distribution increasingly unfair, and he is largely responsible for the problems of the policies of deregulation for the current disaster we are in.
MB: President Bush has run an economic plan around the principles of supply-side economics. As an economics expert, do you believe that this economic theory works?
BF: No, it clearly does not work. Alan Greenspan once said [that] supply-side economics argued, among other things, that if you cut taxes and tax rates, you would end up with more tax revenue." I was at a hearing, and a Republican congressman asked Greenspan about [this]. [Greenspan] ... responded by stating, "Well that is theoretically possible; it [has] just never happened in my lifetime." At that time, he was 82 years old.
MB: In 2003, Bush proposed a new federal agency to supervise Fannie Mae and Freddie Mac. According to The New York Times, the agency "would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios." In response you stated, "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." What were your concerns about the proposed bill?
BF: The bill you are referring to is the one the Republicans did not pass and we passed in 2007, when we were in the majority. [Fannie and Freddie] were not in crisis; neither were Lehman Brothers, Wachovia Bank and AIG. I supported increasing the regulation, but they were not in crisis. None of these financial institutions were in crisis five years ago. The crisis came after too many subprime loans were made ... We supported regulation. The Republicans were the ones who did not pass the bill. I had no control of what went on ... The bill you are talking about did not pass until I became chairman in 2007. I have always been a strong supporter of the bill.
MB: Many Americans fail to realize the difficulty of being in the minority in Congress with regards to passing legislation. Compare and contrast the Republican-controlled Congress with the Democrat-controlled Congress.
BF: Clearly, the Democrats are for regulation, and the Republicans are not ... The Democrats in early 1994 -- when we were still in the majority -- passed a bill instructing the Federal Reserve to regulate subprime loans. The Republicans soon took control of Congress in 1995, and Greenspan refused to accept our bill. The new Congress agreed with Greenspan. Nothing happened with regards to regulation until the Democrats retook control of Congress in 2007.
MB: As of mid-July 2008, you identified that Fannie Mae and Freddie Mac "were not the best investments" but "were in good shape going forward." How come your committee, Congress, the president and the American public were caught so off-guard by the financial crisis?
BF: Remember, we were not caught off guard. We had passed the bill that ought to have taken care of it. I did not think that [the Treasury was] going to have use the authority, but we had given them the authority. We did know there were serious economic troubles. The secretary of [the] Treasury had said to us, "Give me the authority to put $200 billion dollars into the economy, but I almost certainly will not have to use it." As a result, we gave him the authority to do it. The markets were more skeptical than we had thought, but we were not caught off-guard ...
MB: As the chairman of the House Financial Services Committee, you were a major supporter of the $700 billion federal bailout bill. Why did you feel the Emergency Economic Stabilization Act was the best solution at that point in time instead of the Republicans' economic recovery plan?
BF: Secretary Paulson thought the Republican plan was ridiculous. Their plan was to insure mortgages in the future; it did nothing with regards to the current situation. The essence of their plan was, "We need more money for people to lend." In order to do this, their plan was to take all the profits that companies have made overseas and make it free of taxes ... They said, "Let's waive the taxes on the money they owned overseas and let them bring it back and they will have more money to lend."
MB: Considering all of the immense problems and issues facing the country, what do you feel President-elect Barack Obama should focus on in his first hundred days?
BF: Well, pulling out from Iraq and simultaneously producing an economic stimulus plan for the recession are the most essential. Those two tasks alone are going to be difficult. In the short term, spend to simulate the economy over the next year and half and make that up by getting out of Iraq. The war in Iraq has cost $600 billion.
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Michael Bendetson is a freshman who has not yet declared a major.
