Barney Frank: Warren wrong on Glass-Steagall

Former Rep. Barney Frank (D-Mass.) says Sen. Elizabeth Warren (D-Mass.) is wrong for seeking to reinstate the Glass-Steagall Act, a Great Depression-era law that divided commercial and investment banking, as a means to break up the biggest banks.

Frank co-authored the 2010 Dodd-Frank Wall Street reform law and now sits on the board of directors at Signature Bank. He said that Warren’s bid to bring back Glass-Steagall isn’t the right prescription to prevent a repeat of the 2008 financial crisis.

He praised Democratic presidential front-runner Hillary Clinton for recent remarks indicating that more financial regulation might be needed.

“I do think further steps are wise, as Hillary Clinton has talked about, for de-complicating some of these large financial institutions. But going to [Glass-Steagall] and doing that in a uniform way that applies to every financial institution is not the best way to do it,” Frank told The Hill in an interview.

Warren reintroduced legislation to bring back the landmark statute earlier this month with Sens. John McCain (R-Ariz.), Angus King (I-Maine) and Maria Cantwell (D-Wash.).

“Even if we did Glass-Steagall, you’d still have institutions that are too big to fail,” Frank said earlier Tuesday during an economic forum hosted by center-left think tank Third Way.

Progressives have long criticized President Bill Clinton for repealing Glass-Steagall in 1999, arguing that it helped lead to the financial crisis. Most economists and Federal Reserve policymakers argue that Glass-Steagall’s repeal did not contribute to the crisis.

Senate Banking Committee Chairman Richard Shelby (R-Ala.) said at a separate forum on Tuesday that he was skeptical of reinstating Glass-Steagall.

“I voted against the repeal of Glass-Steagall [in 1999],” Shelby said at a forum hosted by conservative think tank The Heritage Foundation. “The question is can you put it back on the shelf. It’d be difficult to do.”

Frank told The Hill that the Clinton administration did shoulder some blame for the crisis.

“I think there was a general national failure to understand the importance of new regulation. I think some of the people — his appointees — were wrong,” Frank said.

He touted his namesake law as ending the fiscal policies that helped to usher in the Great Recession.

“The answer is yes, it’s over,” Frank said. “Too big to fail meant that if an institution was so large that its inability to pay its debts was going to cause systemic reverberations the federal government would have to pay its debts.”

He said that Dodd-Frank requires the federal government now to take over a failing financial firm, meaning it would “no longer be a private institution.”

“Given that, how is it not over?” Frank asked.