A year ago, Barney Frank notched the biggest win of his three-decade Congressional career, as he ushered the financial regulatory overhaul that bears his name into law.
Today, the Dodd-Frank Wall Street Reform and Consumer Protection Act is under siege and behind schedule. As worries mount that new regulations could hamper the nation's economic recovery, lobbyists are trying to undo or significantly weaken the law.
Despite the setbacks, the Massachusetts Democrat is still confident Dodd-Frank will help prevent a repeat of the financial crisis.
"I think we have a very good structure in place that will diminish the likelihood of another collapse caused by financial irresponsibility," Mr. Frank said during a recent interview on Capitol Hill, looking disheveled in his customary dark suit and red-and-blue striped tie. "On the whole, I'm very pleased with how it worked out."
Last summer, Mr. Frank overcame fierce opposition from Republican lawmakers and Wall Street lobbyists and remade the financial regulatory landscape.
Named after Mr. Frank, 71, and Senator Christopher J. Dodd, the Connecticut Democrat who has since left Congress, the law was intended to rein in the opaque derivatives market, tighten lending standards and address other structural problems that led to the crisis.
A year later, Mr. Frank has positioned himself as the law's chief defender.
Since leaving the Senate early this year, Mr. Dodd has shied away from discussing the measure. (He declined to comment for this article.)
Now that Mr. Dodd is a registered lobbyist representing the motion picture industry, federal law prohibits the two men from chatting with each other about their law for a year. Recently, Mr. Frank said he started to pick up the phone to call his former colleague before remembering the restriction.
Mr. Frank, a 16-term representative who was chairman of the House Financial Services Committee during the crisis, said Dodd-Frank was "clearly the best we've ever done in the history of the country to protect consumers and investors from abuses."
Not surprisingly, Wall Street is less fond of the new rules. Bank executives have torn into the law, claiming that it will cost them billions of dollars. They also warn that some regulations will push business overseas, where international regulators have yet to enact similar rules.
But the army of banking industry lobbyists will not find a sympathetic ear from Mr. Frank.
"To some extent, financial institutions have latched onto the motto of a 14-year-old child of divorced parents playing Mommy off against Daddy: "?Well, if you don't treat me better, I'm going to England,' " said Mr. Frank, who is known for his sarcastic wit.
"I hate to say this, but the impression I get most is that their feelings are hurt," he continued. "Mostly what I get is, "?Oh, you were rude to us. You said we were fat cats.' "
His response? "Get over it. I'm in the kind of business where people say rude things about us all the time."
Despite the rhetoric, Mr. Frank says Wall Street has gradually adjusted to the new reality. Most banks have spun off their proprietary trading desks, as required, and many are overhauling their derivatives business.
Mr. Frank says he believes the greater threat to Dodd-Frank comes from Congressional Republicans. Over the last several months, conservative lawmakers have moved to chip away at crucial components of the law, the derivatives rules among them. Some two dozen bills are pending in Congress to delay, dismantle or repeal the law altogether.
Under pressure from lawmakers and lobbyists, the Commodity Futures Trading Commission recently decided to postpone some derivatives rules for up to six months. The agency, like other regulators, has already missed many rule-making deadlines.
"They are trying to stall," Mr. Frank said of the Republicans, "and then hope that they will win the 2012 election with the support of the financial people." Once in control of Washington, he said, Republicans would "then undo what we were able to do, and then, yes, the system would be at risk."
Eager to act, Republicans are already taking aim at financial regulators and their budgets. In June, a House committee approved a plan to keep the Securities and Exchange Commission budget flat. And some lawmakers are now seeking outright cuts. Without increased financing, regulators say they lack the resources to enforce Dodd-Frank.
Some critics of the law contend that it skimped on the details, leaving regulatory agencies with too heavy a burden. Mr. Frank said Congress had no other choice.
"We didn't punt anything," he said. "It's precisely because we knew we couldn't get everything exactly right that we did leave room for the regulators."
The agencies have yet to disappoint, he said. So far, the S.E.C., the commodities commission and other agencies have proposed dozens of new rules under difficult conditions, earning them an A in Mr. Frank's report card.
"I think the regulators have done very well, with the exception of the Comptroller of the Currency," which he said had a reputation for forming cozy relationships with the national banks under its purview. Mr. Frank would give the comptroller a D.
An agency spokesman declined to comment.
Mr. Frank, a stubborn advocate for Dodd-Frank, is quick to acknowledge its shortcomings. "If I were writing it all by myself," he said, "it would have looked a little different."
He said he never liked the provision to cap the fees banks could charge retail stores every time a consumer swiped a debit card, a measure inserted by Senator Dick Durbin, Democrat of Illinois. He also wanted to give the Consumer Financial Protection Bureau, the new watchdog created by the law, authority over car dealerships. But the dealers rallied allies in Congress and won an exemption from the agency's oversight.
The battle over the bureau has since shifted to its leadership. After a delay of nearly a year, President Obama this week nominated the bureau's enforcement chief, Richard Cordray, to lead the new agency. He was chosen over Elizabeth Warren, the Harvard professor who is currently setting up the bureau.
Mr. Frank supports Mr. Cordray, though he is not shy about saying that Ms. Warren was his "first choice." He had urged the president to appoint Ms. Warren since early this year, most recently during a private meeting about a month ago.
Mr. Frank hopes the battles will soon fade, in part so he can move on to the next fight. Even he concedes that arcane financial matters were never his strong point.
"I know more now about repos and derivatives than I ever wanted to know," he joked.
"I hope I'll some day be able to forget it."
Sign up for the DealBook Newsletter, delivered every morning and afternoon, and receive breaking news alerts throughout the day.
Subscribe
Social media starts-up is drawing big bucks from investors. How different is the new boom from the last dot-com bubble.
Get morning and afternoon news highlights with the Morning Take-Out. Subscribe to the newsletter.
Federal prosecutors are taking a hard look at hedge funds and their expert networks. See all of DealBook's coverage here.
Join DealBook reporters and financial experts as they provide timely video commentary on the latest developments.
Sign up for the latest financial news delivered every morning and afternoon.
When your need to know is need-to-know right now.
Download the new DealBook app for BlackBerry for up-to-the minute financial news throughout the day.
Follow us on Twitter for the latest in deals and those who make and break them.
Read Full Article »