With the Democrats taking control of the U.S. House of Representatives, long-time Massachusetts Congressman Barney Frank is expected to helm the House Financial Services Committee.
To give you an idea of how long Frank has served in Congress, BayBank (now part of Bank of America) was just pioneering ATMs in Massachusetts when he was elected in 1981. The change in leadership brings up the question, what will he do? In his 25 years of service, Frank has not only watched the growth of electronic banking, but also seen the names of local institutions like BayBank first being acquired by Bank of Boston then Fleet turn to national ones like Bank of America. Not only has he watched as walls against interstate banking fell, but he eventually participated in the debates also surrounding the end of Glass Steagall, which separated investment and commercial banking.
Nervous dealmakers may take heart in Frank's post-election comments. While speaking Wednesday at a conference sponsored by the Greater Boston Chamber of Commerce, Frank put the Sarbanes-Oxley Act on notice — a somewhat surprising statement from a liberal Democrat. Frank acknowledges that there are flaws in the law that make it hard for some businesses to comply with the law, so he intends to commission a study to examine how to fix it.
However, a quick scan of bills that Frank recently sponsored shows some dealmakers would have good reason to worry — namely those in hedge fund management. In June, Frank sponsored a bill "to amend the Investment Advisers Act of 1940 to authorize the Commission to require the registration of hedge fund advisers under that Act." He also co-sponsored a bill in 2005 to increase the taxes on the wealthiest 5% of Americans, giving dealmakers another reason to shiver.
Another issue for dealmakers to worry about is Frank's rabble-rousing against executive pay packages. Last year, he sponsored the Protection Against Executive Compensation Abuse Act, which would have given shareholders the right to vote on executive pay.
On the positive side for bankers, he wants to increase aid to borrowers seeking first-time mortgages in states where median home prices far outstrip the national average. Of course, such a move is as much about helping people achieve the American Dream as it is a way to pander to his base of middle-class voters back home in Massachusetts, where home prices easily outpace much of the country. Nonetheless, such a change could put the wind back into the sails of the housing industry and ancillary businesses.
In short, SOX reform and housing lending changes are good news for dealmakers, but executive pay, hedge-fund reform and possible increased taxes are negatives. Of course, only time will tell where Frank will lead the committee.—Matthew Wurtzel
See Frank's comments at The Boston Globe's Business Ticker blog
See Frank's profile at DealBook
See Frank's profile at Dealbreaker
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