Fewer individuals have shaped modern banking quite like Barney Frank. The former U.S. Congressman from Massachusetts' 4th district served in the House of Representatives for 32 years, writing legislation that continues to regulate and define the financial industry to this day. He served as the Chairman of the House Financial Services Committee during the financial crisis of 2008-2009 and, along with Senator Chris Dodd, co-sponsored the Dodd-Frank Act, which overhauled financial regulation and established the Consumer Financial Protection Bureau.
Frank is also an outspoken LGBTQ rights advocate, and was the first openly gay member of Congress, as well as the first to marry a same-sex partner while in office. He now serves as a board member of LGBTQ Loyalty, a financial methodology and media company that aims to "quantify corporate alignment with the LGBTQ community and its supporters." The firm's U.S. Loyalty Preference Index will be used as the benchmark for an upcoming ETF from ProcureAM, trading under the ticker “LGBT.”
ETF.com sat down with Frank ahead of Inside ETFs 2020, where he will appear as a panelist on "The Power of Inclusion & Equality: A New Approach To ETFs."
ETF.com: LGBTQ Loyalty is providing the index for an in-registration ETF that would track companies based on their commitment to advancing equality for the LGBTQ community. But we've had ETFs that track this theme before, and they've all closed. Why is this time different?
Barney Frank: I first filed legislation to deal with equality for gay people almost 50 years ago, in 1972. I've spent most of the past 50 years on the defense, trying to win rights, trying to fight discrimination.
Only in the past few years, after the Supreme Court decision in 2013 [which struck down parts of the Defense of Marriage Act], have we been able to get off the defensive and start working to ensure that we have a right to participate; that it's not simply about preventing us from being discriminated against, but something more affirmative.
So I think this is the right time. I think there are now a critical mass of gay, lesbian, bisexual and transgender people who have reached a point where we don't have to worry as much about our rights—though you can't forget that problem, potentially—but we are now able to take advantage of opportunities and be proactive. This is the right time now.
ETF.com: Plus, I think it's never been more acceptable, even popular, to be an ally to and support marginalized communities, right? People want to help.
Frank: Right. The prejudice is greatly outweighed by a sense that this is a group that has been greatly mistreated, and we have to show people that we're fair.
ETF.com: Dodd-Frank is a landmark piece of legislation that was rolled back in some significant ways by this administration. Years on, what do you see as the lasting legacy of Dodd-Frank?
Frank: I would disagree with one thing: It has not been significantly rolled back. In fact, one bill that passed, some of it we agreed with, Senator Dodd and I.
For the largest banks, nothing has changed. There was some conversation about change going forward, but essentially, it's in place. In fact, I was struck that at the signing of the China trade agreement, Donald Trump was talking about how well JPMorgan Chase is doing. For a while, he was saying that we were hurting JPMorgan Chase, right? But nothing has changed in the law about JPMorgan Chase. And in fact, despite [the law], they've been doing very well.
So I think this has proven that [Dodd-Frank] has made the financial world safer. Again, for the biggest banks in particular, and for most banks, there has been no significant weakening. There has been a relaxation for the smallest banks, which we were in favor of, and some relaxation for medium-sized banks. But most of the regulation is still in place.
ETF.com: What do you see as left to be done?
Frank: More than I would like, there's still securities lending going on, where people kind of dodge the responsibility. I would like to impose a strict requirement on every loan made that somebody who is in the decision-making position with regard to that loan has some responsibility if it doesn't pay off. It's a retention of loss. We went pretty far with that, but we didn't get as far as we wanted.
ETF.com: What are your thoughts on the 2020 election?
Frank: I haven't picked a candidate yet. I'm going to be the chairman of the Rules Committee at the Democratic National Convention, so I have to stay neutral. But I'm optimistic for the Democrats. I can't see many people who didn't vote for Trump last time voting for him this time.
I do think that all of the [Democratic] candidates' proposals are popular, but that some of the candidates who identify as further left are underestimating the public's unhappiness with government in general.
In other words, the proposals are popular, but when you add them all up and you get a big expansion of government, people start to balk. So I like the approach of Sen. Biden, Mayor Buttigieg and Sen. Klobuchar, who emphasize the specifics and say, “We're going to see how well these [proposals] work, and if these work, we'll go beyond them."
ETF.com: How do you see the congressional races shaping up?
Frank: I think Democrats will hold most of the gains from the last time. I think they may be a little overextended; there were some seats that were tough. So there might be some slight slippage. But I think the Democrats will retain a comfortable majority in the House.
In the Senate, I think we have about a 50% chance of takeover.
ETF.com: A lot of hay has been made about the Obama-Trump voter. Is there any potential to move them back to the Democratic side in 2020?
Frank: Some of them, yes. Some of them will stay there. One of the things we have to do is a better job of emphasizing fairness. Mainstream liberals have overemphasized growth as the answer, without worrying about how distribution of that growth affects people. So I think we have to be more explicit: Growth alone does not make people better off if it is unfairly distributed.
So I think some of those voters will stay there, but others will move back. Trump has not in fact been able to deliver much for them. As I said, I don't see many people who didn't vote for him last time voting for him this time; and I think I see a lot of people moving away.
ETF.com: If you could tell anything to the current crop of presidential candidates about the financial industry, what would it be?
Frank: I would stress to them that what we have done has worked well. Forget the rhetoric and look at the results, and there's zero showing that anything we've done in that bill has restricted [banks] from doing their job or has hurt the economy. We got this one right, by and large.
ETF.com: Are there any market risks you think are being overlooked right now?
Frank: Two things. First, one loss I suffered in the process was when the automobile dealers lobbied successfully to get themselves exempted from the jurisdiction of the Consumer Bureau. One area in America where there are problems of people being over-indebted is in automobiles. Now, if there are failures, that's not going to have the same consequences as housing, but I do regret that they were exempted.
Secondly, people are finding ways to securitize and sell packages of obligations without having responsibility if they fail. As I said before, I'd like to impose a universal rule that if you were involved in making loans, you have to retain some of the potential loss if and when they're sold.
Contact Lara Crigger at [email protected]