- The ex-Congressman behind the Dodd-Frank Act was serving on the board of the bankrupt Signature Bank.
- The nemesis of Wall Street, co-architect of the Dodd-Frank Act aimed at safeguarding the banking system, failed to avert his bank from being among the early casualties of the recent banking crisis.
- Frank, a board member since 2015, expressed disappointment at regulators’ decision to close down Signature Bank.
- He believed that regulators took over Signature to send a warning to other banks about getting involved with cryptocurrencies.
The Barney Frank scandal epitomizes incredible irony. The ex-Congressman behind the Dodd-Frank Act was serving on the board of the bankrupt Signature Bank.
The individual who was the scourge of Wall Street, co-architect of the Dodd-Frank Act intended to safeguard the banking system, was unable to prevent his bank from being one of the initial casualties of the recent banking crisis.
Frank, a board member since 2015, expressed disappointment at regulators’ decision to close down Signature Bank.
Mr. Frank mentioned in an interview, a day after the bank was shut down, that he was shocked by its failure as the situation seemed stabilized by Sunday.
He believed that regulators took over Signature to send a warning to other banks about involvement with cryptocurrencies.
“They execute one man to motivate the others,” Mr. Frank stated, referring to a saying about using a single military execution to incentivize the subject’s peers to behave differently.
He said the same principle applied to the regulators’ handling of Signature. “I think we were executed to motivate the others to stay away from crypto,” the ex-Congressman stated.
Signature bank, which accepted deposits from digital asset companies, was known as a crypto-friendly bank, even though it did not directly deal with cryptocurrency assets.
What attracted Mr. Frank to the bank was its focus on providing loans to developers building affordable housing and accessing the federal low-income housing tax credit, a system for which Mr. Frank advocated during his time in Congress.
“What had drawn me to it, and still does, is its role as a multifamily housing lender,” he stated.
Signature Bank’s collapse was considered shocking and remarkable due to having the financial expert Barney Frank on its board.
During the 2008 financial crisis, Mr. Frank helped institute the short-term rescue plan. He later co-crafted the Dodd-Frank Act, which tightened the regulatory rules to prevent the nation’s largest banks from engaging in risky behavior.
In contrast to Elizabeth Warren, Frank does not attribute Signature Bank’s collapse to the banking regulations in the Trump era.