Why Barney Frank Thinks Democrats Will Wrest Corporate America From The GOP

WASHINGTON - NOVEMBER 18:   House Financial Services Committee Chairman Barney Frank (D-MA) questions Bush Administration fin
WASHINGTON - NOVEMBER 18: House Financial Services Committee Chairman Barney Frank (D-MA) questions Bush Administration financial leaders during a hearing on Capitol Hill November 18, 2008 in Washington, DC. Facing tough questions from Congress, Treasury Secretary Henry Paulson said the crisis on Wall Street has changed since the $700 billion bailout was first passed by Congress and he now wants to use the money to directly shore up banks instead of buying up bad loans. (Photo by Chip Somodevilla/Getty Images)

WASHINGTON -- Congressional battles over the Export-Import Bank and terrorism insurance are an opportunity for Democrats to win back corporate elites who abandoned the party after the passage of the 2010 Dodd-Frank financial reforms, according to one of that law's primary architects, former Rep. Barney Frank (D-Mass.).

Business leaders, Frank said, have begun to focus on the "increasing domination by the Republican Party now by the people who don't believe in reasonable governance of the sort that the business community needs."

"I think this is finally starting to get to the business community now," he told HuffPost during a July interview. "Part of this was the real significance of the defeat of [then-House Majority Leader] Eric Cantor. Eric Cantor was one of [Goldman Sachs CEO Lloyd] Blankfein's best friends in government. His wife used to work [at Goldman] and they were personally friendly -- of course, a great recipient of money. And then Cantor loses and now Kevin McCarthy shifts his position on the Export-Import Bank."

The Export-Import Bank is a government agency that backs cheap loans to foreign companies that want to buy American-made goods, effectively providing a trade subsidy. The U.S. Chamber of Commerce and other corporate interest groups strongly support it.

Many liberals in the past have criticized the Ex-Im Bank as an engine of corporate welfare, since a tremendous portion of its work benefits just a handful of large companies. But in recent months, Democrats have closed ranks in defense of the agency, as the conservative groups Club for Growth and Heritage Action have pressed to let its authorization expire at the end of September. McCarthy, the new House majority leader, has also come out in favor of closing down the bank. The agency finances about 2 percent of U.S. exports.

"I wish we lived in a world where there were no export subsidies," Frank said, but shutting the bank would be "a clear case of unilateral disarmament."

"Let me put it this way," he said. "If I knew that there were subsidies being cut off to Boeing, I would recommend that people buy stock in [French airplane manufacturer] Airbus. ... As long as other countries subsidize their exports, we would be putting our guys at a competitive disadvantage."

While many members of the business elite are die-hard Republicans, some are Democrats, and even those allied with the GOP often side with Democrats on social issues. Nearly all of them, however, lobby for government help in the form of tax loopholes or more direct subsidies. With GOP hardliners trying to eliminate government aid on exports, housing and terrorism insurance, Frank sees an opportunity to bring more corporate titans into the Democratic fold.

"Some of the ... business guys say, 'Okay, I don't agree with [Republicans] on abortion and gay rights, but those aren't their real issues. Their real issues are the economy.' And now I think they have a serious problem," Frank said. "A lot of the business people supported Obama in '08 ... and then we really pissed them off mightily with the financial reform bill."

"I believe one of the major things people want from politicians is psychic income," Frank continued. "They want to be told that they are wonderful people, that their jobs are important for the human race, that they contribute greatly. Lloyd Blankfein was not really kidding when he said that, 'We are doing God's work.' That's his inner feeling. I don't think that the [Dodd-Frank] legislation really hurt them much, and I think a lot of them, frankly, some of them welcome it because they're not under competitive pressure to do stupid things -- now, nobody can do them. But we really hurt their feelings mightily, particularly the president. You've seen that with these ridiculous statements from [Blackstone Group CEO] Steve Schwarzman going on about Nazis."

That thin skin, according to Frank, led a lot of wealthy business executives to back politicians who didn't have the best interests of their pocketbooks at heart.

"And so in '10 and '12, they went overwhelmingly to the Republicans. And I said to Blankfein and [JPMorgan Chase CEO Jamie] Dimon and the others, 'You know, this is a little frustrating to me, because you're giving money to people who take irresponsible positions and then you are looking to me to protect you from them -- people you've given money to. But I think that's now become an increasing problem for them."

More than a year ago, the House Financial Services Committee passed a bill that would eliminate Fannie Mae and Freddie Mac without providing any other government support for the housing market. The legislation is vehemently opposed by the banking industry and has not been taken up for a vote on the House floor. House Republicans are also tussling over a program started in the aftermath of Sept. 11, in which taxpayers shoulder most of the losses from terrorist attacks. The private sector has struggled to find ways to price insurance and mitigate the financial risk associated with terrorism.

"The notion that a private business should have the responsibility of deterring terrorism is dumb," Frank said. "What, do you put drones on the roof?"

But the biggest battle is currently over the Ex-Im Bank. While Rep. Alan Grayson (D-Fla.) and some old-guard liberals remain critical of the agency, Frank's position is carrying the day among congressional Democrats. In addition to corporate lobbying groups like the Chamber of Commerce, labor unions strongly support the bank.

To illustrate the value of the Ex-Im Bank, Frank described a project from the Clinton years: "Here's the deal. When you're making things for the Pentagon, you're not going to have to worry about costs. But when you're making things for the private market, that's tougher. And the habits and factories that make military equipment are not really nearly efficient enough to compete in the private sector because the Pentagon has had this lavish flow of funds. But Raytheon was bidding on a project in Brazil ... to keep the rainforests from being depleted. ... They had what they thought was the best project, but they were being undercut by heavy subsidies from the Italian and French governments for their companies. And we got Ex-Im, I called the guys at Ex-Im at the time and said, 'All I want you to do is equal what the Italians and French are doing. I would like for us to take their subsidies out of the equation and let them compete on the merits.' And they won."

That very process, of course, is what bothers the bank's critics.

"I don't think the Ex-Im Bank is ... very open. It's too secretive," Ralph Nader told the Heritage Foundation's Daily Signal in June. "And also it doesn't have a real strategy other than who knocks on their door the hardest and who gets someone to make calls from members of Congress."



Dodd-Frank Players