Barney Frank was chairman of the U.S. House Committee on Financial Services from 2007 to 2011 and co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act in the wake of the financial crisis. The Dodd-Frank Act’s wide-ranging regulations helped stabilize the financial system and provided a buttress during the coronavirus crisis a decade later.
During his 32-year tenure in the U.S. House of Representatives, Frank, D-Mass., was the most prominent openly gay politician and an advocate for LGBTQ+ rights. In 2019, Frank joined the board of directors of LGBTQ Loyalty Holdings LFAP, which created an index of large-cap companies with a demonstrated commitment to LGBTQ diversity and inclusion. The LGBTQ100 ESG ETF LGBT launched in May.
I recently spoke with Frank about environmental, social, and governance investing, the political process, and his longtime interest in legalizing marijuana. The conversation has been edited for length and clarity.
Laura Lallos: Did the Dodd-Frank Act accomplish what you hoped it would?
Barney Frank: Absolutely. That doesn't mean that there won't be new problems. But without question it has dealt with the old problems. There's been no repeat of them. If you said on the day the bill was signed that 10 years later there would be a terrible jolt to the financial system because of a worldwide lockdown, I think most people would have said, "Oh, jeez, that's going to be a problem." But we who passed that law and administered it can take credit for the fact that financial instability was a non-event during one of the worst crises we've had in many years.
Lallos: What new problems might be on the horizon?
Frank: Crypto could be an issue going forward. If you look at our financial history, the problem has been innovations for which there were no rules. But with Dodd-Frank, we didn't just take specific action to remedy identifiable problems at the time. We created the Financial Stability Oversight Council and gave financial regulators the power to deal with unanticipated problems.
Lallos: Dodd-Frank also created the Consumer Financial Protection Bureau. What would you like to see it address next?
Frank: The student loan area is an important one, and they'll be looking further there. Beyond that, it depends on where the abuses are. They are a complaint-driven agency, and they respond according to what they hear. It's ironic, by the way, that we have a good head of the CFPB today owing to Donald Trump and the Republicans. [The Trump administration argued that limits on the president's power to fire the agency head were unconstitutional, and the U.S. Supreme Court agreed. That enabled President Joe Biden to select a director.]
Lallos: Why did you join the board of LGBTQ Loyalty?
Frank: I obviously had a longtime interest in advancing LGBTQ rights, and I also was an ETF investor. Unless you are full-time professional investor, you can't beat those who are, so I think the ETF vehicle is good. When I heard there was a group putting together an LGBTQ-supportive ETF, that was a no-brainer for me. I also think it is a next step in having LGBTQ people be fully integrated into society. It's a way for us to get off the defensive and offer people an affirmative thing. We have defended people against discrimination, but now we're offering a positive step that you can take to help yourself financially while you're helping your cause.
Lallos: Were you an ESG investor before this?
Frank: When I was in Congress, I bought mostly municipal bonds from Massachusetts because they were double tax-exempt and I had no tax exemptions, and also because I was worried about a conflict of interest. I figured as a Massachusetts representative, nobody could complain if I bought things which gave me an interest in protecting Massachusetts. When I left office and I felt free to get into stocks, I got into what were then advertised as socially responsible ETFs. I also have Signature Bank SBNY stock, as a member of the board of directors.
Lallos: What makes a company eligible for the LGBTQ100?
Frank: There are positive and negative screens. They have to treat their LGBTQ employees fairly. Before same-sex marriage was legalized nationally, a differentiator was whether a company recognized domestic partnerships. Going forward, how companies treat people who are transgender will be critical. There are also some red lines. If a company somehow restricts access to abortion, for example, that would be a disqualification, given the LGBTQ alliance with women's groups.
Lallos: Do you think companies that support LGBTQ employees have an advantage?
Frank: One thing America has done better over the years is intellectual property, and I think there is a correlation between being supportive of LGBTQ issues and the intellectual property area, the creative area. That might be a point in their favor. Beyond that, it's important to make it clear that there's no negative. Twenty years ago, businesses were afraid to step up because they'd be criticized. I remember meeting the former CEO of IBM, Lou Gerstner, at a White House dinner after he had just agreed to give domestic partner benefits to their employees, and he talked about the abuse he was getting for it. He said to me, "You wouldn't believe it," and I said, "Well, yeah, I would."
Lallos: What do you think is driving the explosion of interest in ESG?
Frank: I would give primacy to the "E." I think we've seen an explosion of concern about climate change. It's a cause that makes people feel good, and it's also in their self-interest. Climate change is a serious direct threat, so by addressing it, you're doing the right thing and also protecting yourself.
Lallos: You've tackled issues as an activist, a legislator, and now as an investor. What's the best approach?
Frank: I'm a strong believer in the political process for solving a problem. I am less impressed with demonstrations. After the financial crisis, we had two ideological groups, the Tea Party and Occupy. The Tea Party became a very effective political force; they got involved in primaries. Occupy didn't. Unfortunately, being a legislator gives you the maximum power.
Demonstrations can be a way to mobilize political support, though. I go to a marijuana expo once a year on the Boston Common, and the first time I went, I noticed there was no political booth. I said, “You got to have some signups here for people to write to their legislators.” And now they do that.
I am involved with a company that will sell marijuana, Greentown Beantown. Younger people sometimes challenge politicians who get involved in the marijuana business: “Oh, now you come aboard!” My response is, “I was doing this before you were born!” I filed a bill to legalize marijuana in Massachusetts in 1972.
Lallos: What advice would you give to a young person setting out today to effect change?
Frank: Use your political rights to the fullest. Be informed, and not just with TikTok. Read The New York Times and The Economist. Become very knowledgeable about the issues you are particularly interested in and stay knowledgeable. Then look at the political landscape. I try to energize people to engage politically, to vote for elected officials who will do the right thing, and then lobby them hard, put pressure on them.
One thing I'm working on now is changing the federal law so that banks can do business with marijuana companies in states where they are legal. The House has passed a bill, and I’ve been working with people to press the Senate to do it. It’s a very important goal for regularizing the marijuana industry.
Marijuana is like same-sex marriage. Forty years ago, people said, “Oh, that'll be terrible; it'll ruin society.” And then we had it in a couple of places, and nobody noticed any negative impact. I think it’s likelier than not that this bill will pass. Some people are holding out for federal legalization. I think that is a mistake; there aren’t the votes for that. And Biden is holding back on legalization, unfortunately, but he would sign this.
Lallos: You're pragmatic. What are the prospects for the Equality Act? Are there alternative approaches to the same end?
Frank: The alternative would be what has been done before: Do it in pieces. The Equality Act is all inclusive, but the importance of that has been diminished by the recent Supreme Court decision saying that prohibition on gender discrimination includes discrimination based on sexual orientation. There are very few issues in America as partisan as this one. The Democrats are overwhelmingly for full protection, and the Republicans are overwhelmingly against it. Fifty years ago, Jimmy Carter and Gerald Ford were both starting to move towards protection for gay people. Since then, the country as a whole has gotten more supportive, the Democrats have gotten supportive by an even larger percentage, and the Republicans have gotten more hostile. We won't get the Equality Act until we have a workable Democratic Senate and House majority--that means somewhere in the mid-50s on the Senate.
Lallos: Is bipartisanship dead--and do you have a prescription for reviving it?
Frank: Bipartisanship is dead for now. In the fiscal crisis, you saw good bipartisanship. The Democrats under George W. Bush were very bipartisan. The Democratic Congress worked closely with the Bush people, with Ben Bernanke and Hank Paulson. And then Mitch McConnell came in and said his main goal was to block Obama. He's now repeated that he's 100% dedicated to blocking Biden. Unfortunately, the Republican Party has become totally opposed to cooperation. I am hoping that the Republicans will lose badly because of this. That will give those Republicans who want to go back to a cooperative, conservative-liberal competition the ability to take back their party.
Lallos: How are you spending your time in retirement?
Frank: I'm working on a book and writing a column a couple of times a month for The Hill, and I'm on three boards. But I'm not work-driven. I'm old, and I like to relax and take naps.
Lallos: How was life during the pandemic?
Frank: My husband, Jim, is younger, so he was able to go out and do our shopping and stuff. I missed traveling and seeing people. I lost some income because one of the things I've been doing is paid speeches, and they don't pay you nearly as much for Zoom as for flying out and showing up. One compensation is that you don't have to wear pants, but the money isn't as good!
Lallos: How are you and Jim celebrating pride month?
Frank: We are addressing a town meeting of the LGBTQ employees of Signature Bank. And we’ll make a point of not going anywhere near a gay pride parade that rejects gay police officers marching in the parade. That is a stunningly hypocritical act of bigotry. We fought hard to have gay cops, and gay and lesbian cops have been very constructive. It’s a bigotry on the left that goes unchallenged.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.