Former US congressman Barney Frank, an architect of landmark legislation designed to make the banking system safer, has defended his decision to take a job on the board of failed Signature Bank, saying “I need to make some money”.
Frank, 82, joined Signature’s board of directors in 2015, two years after leaving Congress, where he shepherded the sweeping Dodd-Frank financial regulatory law in the wake of the 2008 financial crisis.
On Sunday, regulators seized control of New York-based Signature in the third-largest US bank failure in history amid worries about the financial strength of regional lenders and deposit flight after the collapse of Silicon Valley Bank.
In an interview with the Financial Times, Frank said he was disappointed that Signature had been closed down and “chagrined because obviously people will say, ‘Oh, hey mister, you told everybody else how to run a bank and the bank you were helping run failed’.”
But the Democrat said he had no regrets about joining Signature’s board. “I worked as a member of Congress for a certain objective. And then having retired, not having a pension by my choice, not wanting to be a lobbyist for reasons personal, I need to make some money.
“I do it in part by writing. But I also do it by joining boards. Logically, I’m asked to join boards on subjects with which I was identified.” He said he also joined Signature to advance funding for affordable housing.
Based on stock sales and cash compensation, Frank appears to have made roughly $2mn from his work at Signature before the bank failed, according to FT calculations.
While Frank never officially registered as a lobbyist, he had publicly argued that Dodd-Frank’s $50bn threshold for triggering greater regulatory oversight was too low. Signature’s assets surpassed $50bn in 2019. By the end of 2022 it had more than $100bn in assets.
Frank had announced previously that he would step down from Signature’s board ahead of its annual shareholder meeting.
The former congressman defended the financial strength of Signature, arguing that it was not insolvent and would have survived had it been allowed to open on Monday.
He said customers would have been calmed by actions taken by the US government to shore up confidence, including a new lending facility to other banks to help cover any deposit withdrawals.
Officials at the New York State Department of Financial Services, which made the decision to close the bank on Sunday evening, say that Signature was in freefall and could not have opened in a “sound and safe manner” on Monday morning. A spokeswoman for Signature declined to comment.
Frank said the US banking system was in “very good shape”, in part thanks to the Dodd-Frank act, which included measures such as a ban on proprietary trading by big banks.
“I would say the fact that I was part of a bank that didn’t foresee some particular individual problems doesn’t undercut the validity of what we did systemically, and I think that’s good.”
As chair of the House of Representatives’ financial services committee, Frank publicly criticised staffers who left to become Wall Street or bank lobbyists, and barred staffers from communicating with their former colleagues.
Jeff Hauser, who heads the Revolving Door Project, part of the liberal-leaning Center for Economic and Policy Research, said Frank’s distinction between his role on the board of Signature and being a lobbyist was essentially meaningless.
“Ordinary people don’t disdain lobbyists because of the narrow, legal definition of the term.
“It’s sophistry beneath Frank’s considerable intellect” to argue he was doing “anything other than lobbying within the commonly understood sense of the term”, he added.
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