Frank mediates mortgage rescue plan

Democrat shows his bipartisan side

Email|Print|Single Page| Text size + By Alan Wirzbicki
Globe Correspondent / July 21, 2008

WASHINGTON - At first, it looked like the same old Barney Frank who appeared on CNBC last Monday morning, wearing a rumpled gray suit and his customary air of intelligence mixed with impatience.

But something was different: Instead of inveighing against corporate America or the Bush administration, Frank was defending the Treasury Department's handling of the crisis at Fannie Mae and Freddie Mac and assuring anxious investors that the two mortgage giants remained fundamentally healthy.

"They are not in danger of going under," Frank said on the business news network, a line that he has echoed repeatedly in rounds of TV, radio, and newspaper interviews since the crisis deepened last week. "Their prospects going forward are very solid."

In times of economic turmoil, the task of reassuring investors and the public that the economy is still sound usually falls to top Cabinet officers or well-coiffed White House spokespeople. But last week, it was Barney Frank - the gruff Democrat from Newton best known as an acerbic outsider and scourge of Republicans - who has emerged to take the unlikely role of Bush administration ally and highly visible public champion of the two troubled entities.

Both politically and temperamentally, it was an example of the striking shift that Frank has made as the Democratic chairman of the House Financial Services Committee.

Frank was once better known for his verbal brawls with Republicans than for his bipartisanship or soothing demeanor. But both supporters and detractors say his high-profile media blitz and legislative work on the mortgage crisis reflect his sincere concern for maintaining investor confidence on Wall Street.

Since taking control of the committee in 2007, the 14-term representative has calmed the fears of some of his critics that a Chairman Frank would embrace an agenda somewhere to the left of Chairman Mao.

Instead, analysts said, he has been surprisingly conciliatory toward his onetime enemies, offering an olive branch to Republicans at the start of his term and churning out bipartisan bills on issues ranging from predatory lending practices to divestment from rogue nations.

In the process, he has won over donors in the business community. For the 2007-2008 election cycle, he has been the top recipient in the House of campaign contributions from mortgage bankers and brokers, with $43,551, according to the Center for Responsive Politics.

"The image of the super- liberal, gay, somewhat irreverent, bombastic legislator belies the reality," said Thomas Mann, a congressional scholar at the Brookings Institution in Washington. "He's open-minded and tolerant, he believes in deliberation, he's perfectly willing to have Republicans amend legislation."

Still, not all of Frank's goals have been met: After Democrats won the midterm elections in 2006, Frank said he hoped to forge a "grand bargain" with the business community to trade some regulatory reforms in exchange for business support for progressive goals such as healthcare and rules making it easier for workers to unionize.

In an interview, Frank said he was disappointed that the business community "really didn't seem to be responsive" to his offer, but was optimistic that a successful rescue plan would give corporate leaders greater confidence that the Democrats were serious partners going forward.

"I think we are now credible partners for them," Frank said. "They now understand that when I said I was going to work with you, I wasn't talking through my hat."

The complex negotiations over the future of Fannie and Freddie have focused the spotlight on Frank's collaboration with the Bush administration's Treasury secretary, Henry M. Paulson Jr., a relationship that Frank has cultivated since taking control of the committee.

The rescue plan for Fannie and Freddie, which was unveiled last Sunday after talks between Paulson, legislators, and Federal Reserve chairman Ben Bernanke, has drawn fire from both right and left. Many conservative Republicans are balking at proposals by a Cabinet official of their own party to help the two government-sponsored entities, forcing Frank and the Democratic leadership into the role of mediator between warring GOP factions.

"I felt like I was the head counselor at Camp Republican," Frank said. "We're the adults in the room." Frank said the last time he remembered working so closely with a GOP official was the early 1970s, when he was a member of the Massachusetts state House of Representatives and cooperated on legislation with Frank Sargent, a Republican governor.

On the left, criticism has been more muted: A blog post on the website of the Nation, a liberal magazine, accused Frank of taking Wall Street's side in the crisis. Frank's Senate counterpart, Chris Dodd, Democrat of Connecticut, was initially wary of the Treasury plan and said in hearings last week that he was "uneasy" with the idea of granting Paulson the broad powers he has requested. Frank said the Democrats have since ironed out their differences on the proposals.

Frank's supporters in both parties said that his efforts to close a deal showed that his reputation for combativeness - honed during the early years of the Bush administration and, especially, during the 1998 impeachment saga when he was one of the most outspoken critics of prosecutor Kenneth W. Starr - has always been exaggerated.

"Barney knows when to be partisan and when to be pragmatic," said John J. LaFalce, a former congressman from New York who preceded Frank as the ranking Democrat on the finance committee. "He knows that half a salami is better than no salami."

In negotiations in the House, Frank has made several compromises to win approval of the measures. Last Tuesday, he agreed to restore a $4 billion program to help municipalities cope with the foreclosure crisis to a mortgage bill. Frank had supported the funding originally, but removed it from the bill because of a White House veto threat. Representative Maxine Waters, a Democrat of California who is a senior member of Frank's committee, had threatened to withhold support for the Fannie Mae and Freddie Mac rescue plan unless the funding was restored.

Frank said he expects the legislation to pass the House this week as an attachment to the mortgage bill. President Bush could receive the legislation for his signature by the end of this week. The White House has been generally supportive of the bill, but has said that Bush would veto legislation if it includes the $4 billion. Frank said he does not expect the White House to follow through on the threat.

Fannie and Freddie were chartered by the federal government to support the mortgage market, but are structured as private companies that pay dividends to their investors. The companies buy home mortgages from primary lenders, thus making it easier for banks to offer more loans to consumers. The rescue plan backed by Frank and Paulson would give the Treasury Department far more authority to lend to the entities, whose stock prices have plummeted in recent weeks, and would also tighten federal regulation and oversight.

Since Democrats took power in 2006, Frank's committee has compiled one of the more prolific records in Congress, passing mortgage reform legislation, an economic stimulus package, and a new law that makes it easier for pension funds and state and city governments to divest from Sudan.

In an interview, Frank said that he was surprised to be spending so much time coping with the crisis at Fannie and Freddie, but saw a potential silver lining if passing the emergency legislation would enhance the Democrats' standing and make business leaders reconsider the "grand bargain" he offered in 2006.

"One of the problems we've had is that liberalism and being pro-business are somehow inconsistent," Frank said.

"What we've done is deflate this myth that liberal Democrats are somehow bad for business. We've shown we're better for business than the very rigidly ideological Republicans."

The complex negotiations have spotlighted Frank's work with Treasury Secretary Henry Paulson, a relationship that Frank has cultivated.


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