Former US Congressman Barney Frank, the 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 needed to make some money”.
Frank, 82, joined Signature’s board of directors in 2015, two years after leaving Congress, where he oversaw 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 concerns about the financial strength of regional lenders and deposit flight after the collapse of the Silicon Valley bank.
In an interview with the Financial Times, Frank said he was disappointed that the signing had been stopped and was “worried because obviously people would say, ‘Oh, hey mister, you told everyone else how to run a bank and the bank you Helping to run failed’.
But the Democrat said he has no regrets about joining the Signature Board. “I worked as a member of Congress for a specific purpose. And then after retiring, I don’t want a pension, I don’t want to be a lobbyist for personal reasons, I need to earn some money.
“I do it partly by writing. But I also do that by joining boards. Logically, I was asked to join boards on topics that I identified with.” He said he has also joined the Signature to Advance Funding for Affordable Housing.
Based on stock sales and cash returns, Frank appears to have earned around $2mn from his work at Signature before the bank failed, according to FT calculations.
While Frank never officially registered as a lobbyist, he did register publicly argued Dodd-Frank’s $50bn threshold was too low to trigger further regulatory oversight. Signature assets exceeded $50bn in 2019. By the end of 2022 it had over $100bn in assets.
Frank previously announced that he would resign from the Signature board prior to its annual shareholder meeting.
The former congressman defended Signature’s financial strength, arguing that it was not insolvent and could have survived if it had been allowed to open on Monday.
Consumers may have been reassured by steps taken by the US government to boost confidence, including new lending facilities to other banks to help cover any deposit withdrawals, he said.
Officials with the New York State Department of Financial Services, which decided to close the bank Sunday evening, say Signature was in freefall and could not open “soundly and safely” Monday morning. A spokesman for Signature declined to comment.
Frank said the US banking system is in “very good shape”, thanks to the Dodd-Frank Act, which includes measures such as bans on proprietary trading by large banks.
“I would say the fact that I was part of a bank that didn’t foresee some specific individual problems doesn’t diminish the validity of what we’ve done systemically, and I think that’s good.”
As chairman of the House of Representatives’ Financial Services Committee, Frank publicly criticized employees who left to become Wall Street or bank lobbyists and barred employees from communicating with their former colleagues.
Jeff Hauser, head of the Revolving Door Project, part of the libertarian-leaning Center for Economic and Policy Research, said Frank’s distinction between his role on the Board of Signatures and being a lobbyist was essentially meaningless.
“The general public doesn’t hate lobbyists because of the narrow, legal definition of the term.
“It is sophistry beneath Frank’s considerable intelligence” to argue that he was doing “anything but lobbying in the commonly understood sense of the word,” he added.