Barney Frank Does the Right Thing

By James Kwak

The revolving door between business and government is something that Simon and I have criticized, most recently in a book you may have heard us mention once or twice. Ryan Grim of the Huffington Post reports that Barney Frank, chair of the House Financial Services Committee, has sent a message that he is serious about blocking the revolving door.

Peter Roberson was a lobbyist for the Bond Market Association (now part of SIFMA, a big securities industry lobbying organization) from 2000 to 2006 before becoming a staff member for Frank’s committee, where he was recently working on derivatives legislation. When Frank found out he was in discussions with ICE (presumably, the exchange), it sounds like Frank fired him and blocked him from lobbying the committee so long as he is chair:

“Several people have expressed criticism of the move by Peter Roberson from the staff of the Financial Services Committee to ICE, after he worked on the legislation relevant to derivatives. I completely agree with that criticism. When Mr. Roberson was hired, it never occurred to me that he would jump so quickly from the Committee staff to an industry that was being affected by the Committee’s legislation. When he called me to tell me that he was in conversations with them, I told him that I was disappointed and that I insisted that he take no further action as a member of the Committee staff. I then called the Staff Director and instructed her to remove him from the payroll and provide him only such compensation as is already owed.”

Now, it is well understood that one of the main reasons to work for a committee like Financial Services is precisely because it enables you to get better paying jobs in industry later. So I don’t know if it’s possible to block the revolving door completely. But this seems like a step in the right direction.

21 responses to “Barney Frank Does the Right Thing

  1. This is exactly the kind of grandstand play one expects from Barney Fumble. He makes some poor sap no one ever heard of the fall guy in a campaign of personal rectitude. Is Barney still sleeping with that guy who ran one of the Fannies? I love it when you guys stand up for the creeps who brought us this disaster.

  2. FedUpWithBarney

    Maybe the guy was just sick of working for such a sorry excuse of a representative…

  3. Here’s Barney Frank barking FOR home ownership in 2005 .

    Here’s Barney Frank U-turning on Fannie Mae

  4. Here’s a bank reform idea:

    1. Pass a federal law that eliminates state bank/credit union charters. This might solve the problem of reckless bank chartering a la Georgia.
    2. Take bank oversight authority away from FRB and give it to FDIC. The Fed has obvious conflicts of interest and has proven incompetent at oversight. This would give the FDIC a permanent function auditing only for theft or embezzlement; eliminating the headcount variability at the FDIC which makes it slow to respond to bank crises.
    3. Reinstate Glass Steagall barring investment banks from commercial banking
    4. Make the FDIC a government entity with a budget from Congress. See point 2.
    5. Require all deposit taking/transaction processing institutions(banks/credit unions) to invest in Treasuries only.

    Since mortgages are now an investment product just like any other, make the capital for them come from “investors”; not Grandma’s checking account. Banking as described in textbooks has already ceased to exist; this plan acknowledges that and rationalizes the system.

  5. April Fools – good one JK

  6. Mr. Kwak wrote:

    “Now, it is well understood that one of the main reasons to work for a committee like Financial Services is precisely because it enables you to get better paying jobs in industry later. ”

    A blast from the past….

    Former Barney Frank staffer now top Goldman Sachs lobbyist

    04/28/09 -Washington Examinr – excerpt

    “Goldman Sachs’ new top lobbyist was recently the top staffer to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by Frank. Michael Paese, a registered lobbyist for the Securities Industries and Financial Markets Association since he left Frank’s committee in September, will join Goldman as director of government affairs, a role held last year by former Tom Daschle intimate, Mark Patterson, now the chief of staff at the Treasury Department.”

    http://tinyurl.com/c6xvaw

  7. pairochucks

    “Ryan Grim of the Huffington Post reports that Barney Frank, chair of the House Financial Services Committee, has sent a message that he is serious about blocking the revolving door.”

    “Blocking the revolving door.” Interesting thought. Reminds me of the oft-quoted Ghandi, when asked what he thought about western civilization he replied that it’s a nice idea.

    If Barney Frank can create a law that blocks the revolving door, I’m in favor. But as government grows, that revolving door has come to include all sorts and manners of men and women in a multitude of fields, and will he also close the revolving door on those?

    If not, and this is my larger question, what is the meaning now of “equal protection of the laws”? I don’t know what that principle means any more. I would challenge everyone from SCOTUS on down to define for me what “equal protection of the laws” means in contemporary America.

    Of course, there is a constitutional definition, I’m sure, and I’m not a lawyer. But then there is the phrase itself: “equal protection of the laws”. I believe I know what that means in English, and I sure in hell don’t see it much in the evolution of American law in the last 40 years.

    So if Barney Frank can “block the revolving door” then fine, but he’d better do it for everybody, because otherwise he’s created a new preference: those who are blocked and those who aren’t – and I am sick and bloody tired of that.

  8. That’s amazing!! Barney’s got more “nads” than I gave him credit for. Now, let’s see if he uses those push his committee’s approach to where it really needs to be. There’s where my real doubt falls. This maybe is just symbolic, and he hopes will get him a few more votes this November. The jury is out, because such a constructive first step needs to be followed by others. So, Mr. Franks, what will it be? Reform for derivatives markets or just this show of (minor) force which really doesn’t accomplish very much in reality.

  9. When one has to end a point with the often used cliché of ‘this seems like a step in the right direction’, as Mr. Kwak did, I know the whole is rotten.

    http://www.robbingamerica.com points out dismissively that the Healthcare monstrosity is full of small ‘steps in the right direction’, with big steps to disaster.

  10. Simon,
    is this story real?

    http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/31_GATA.html

    its gaining a lot of attention in the blog world

  11. I think Barney Frank has to create a hard and consistent rule on how he handles his own staff. He might not be able to pass legislation which changes the rules for the House and Senate, but he controls his own staff.

    This is one of the very few issues I find myself disagreeing with James Kwak on, but there it is. I don’t think Barney frank deserves applause for eliminating one lobbyist (or what equates to a lobbyist) from his staff. He needs to make a hard and consistent rule which he posts as a public notice, and applies to ALL staff, then we can applaud him.

  12. jvp,
    If you’re talking about the manipulation of the silver market, that story is VERY REAL. And it’s a huge story many people don’t want you to know. Zerohedge has been one of the blog leaders on this story. But a lot of mainstream media trying to act like this didn’t happen. Similar to the sexual crimes against children in the Catholic church. The attitude is “I didn’t see anything… did you see anything?? Must have been the wind.”

    I can try to dig stuff up and post it here if James and Simon don’t mind. Just put a short comment up if you do, and I’ll lasso some links up for you.

  13. ICE – a name to remember.

    http://en.wikipedia.org/wiki/IntercontinentalExchange

    Those are the guys (a company in Atlanta) who facilitated the speculative part of 2008’s oil price spike.

    By working the system(s) to allow them to build a market for WTI (west Texas intermediate – as opposed to Brent [the North Sea]) oil futures in London. Completely off the radar screen of anybody. London used to pride itself on its sensibly light regulatory touch.

    Watch the ICE space/name for further developments.

  14. Mennommon,

    Good point about ICE. More than 40 subsidiaries in at least 5 countries, these guys have their fingers in a lot of pies. They own the old New York Board of Trade and something called the “Canadian Climate Exchange”, the perfect hedge for an oil futures exchange I suppose. :o) http://www.cftc.gov/stellent/groups/public/@rulesandproducts/documents/ifdocs/icespdc102209h.pdf

  15. Thanks Ted,
    I am trying to read more on it. its a little confusing to my layman’s ear, but Its seems the short version of the story is that they oversold the amount of actual Silver/Gold that actually exists? I would love to hear Simon Johnson explain it. He seems the only lucid one out there.

  16. Just give you a short answer. Honestly I’m not too knowledgeable on it. But what they did is termed “front-running”. If I understand correctly, what happens is they signal to market participants beforehand a large sell off. They sell off a huge amount of a commodity or stock (in this case silver), but they let some traders know beforehand. The traders short that commodity before the sell off and make money off of it. It’s an artificial way to manipulate the price.

    http://www.zerohedge.com/article/whistleblower-exposes-jp-morgans-silver-manipulation-scheme

    http://www.zerohedge.com/article/eric-king-follow-interview-gata-trail-biggest-gold-manipulation-story-disclosed

    http://www.zerohedge.com/article/you-dont-mess-lbma-assasination-attempt-silver-market-manipulation-whistleblower

    The silver market is kind of considered a “microcosm” of or smaller scale version of the gold market. So one of the major questions is, if it’s blatantly obvious these guys are manipulating the silver market, there is a very good chance they are also manipulating the gold market. And the Gold market is HUGE. So you can imagine the implications and the level of corruption there. Probably been going on for a long time, and many people quietly knew. You get the idea even the CFTC clearly knew and wasn’t making much effort to stop it, but this guy (maybe a hero) Andrew Maguire has forced the CFTC’s hand a little here. How much depends on if the mainstream media ignores it, or actually does their job for once.

    I for one, wouldn’t put one penny in gold or silver. I think both are over-touted as “storage of value” and inflation protection. But that’s an amateur’s opinion.

  17. what do you have against community credit unions?! how many of those have failed?

  18. NoOneYouKnow

    Good thinking. Frank should have waited to discipline someone we’d all heard of who works on Frank’s staff? It’s “personal rectitude” to do the right thing? How do you know so much about whom Barney’s boinking? And how did Frank “bring us this disaster”?
    Other than that, great post!

  19. chuckUfarley

    Jake-boy, talk about the issue without being such a homophobe pal.

  20. PDXDonSmith

    I think Rep. Frank deserves a tip of the hat. Whether if it’s for show or not, the fact that he did it, and illustrated in black and white how the staffer-to-lobbyist game is played is worth a nod.

    Whether consistent or not, the fact is, this is a concrete demonstration that even the MSM can put on the news to show just how corrupt DC is.

  21. Sorry, I forgot that a vice becomes a life style when enough people become addicted to it. For all I know adding more peder asts to Congress might improve it.