Barney Frank Scandal Irony At Its Peak

• The former Congressman who came up with the Dodd-Frank Act was sitting on the board of the failed Signature Bank. 
• The scourge of Wall Street, co-author of the Dodd-Frank Act that was supposed to keep the banking system safe, couldn’t prevent his bank from becoming one of the first casualties of the latest bank panic.
• On Monday, Frank, who had been a board member since 2015, said that he was disappointed in the decision of regulators to shut down Signature Bank.
• Regulators, he believed, took control of Signature to send a message to other banks to stay away from cryptocurrencies.

The Barney Frank scandal is the most accurate example of unthinkable irony. The former Congressman who came up with the Dodd-Frank Act was sitting on the board of the failed Signature Bank. 

The man who was the scourge of Wall Street, co-author of the Dodd-Frank Act that was supposed to keep the banking system safe, couldn’t prevent his bank from becoming one of the first casualties of the latest bank panic.

On Monday, Frank, who had been a board member since 2015, said that he was disappointed in the decision of regulators to shut down Signature Bank. 

Mr. Frank said in an interview a day after the bank was shut down that its failure had shocked him because its situation seemed to have stabilized by Sunday. 

Regulators, he believed, took control of Signature to send a message to other banks to stay away from cryptocurrencies.

“They shoot one man to encourage the others,” Mr. Frank said, referring to a saying about using a single military execution to incentivize the subject’s peers to behave differently.

He said the same motto applied to the regulators’ handling of Signature. “I think we were shot to encourage the others to stay away from crypto,” said the former Congressman. 

Signature bank, which took 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 giving loans to developers building affordable housing and accessing the federal low-income housing tax credit, a system for which Mr. Frank held a torch during his time in Congress.

“What had attracted me to it, and still does, is its role as a multifamily housing lender,” he said.

Signature Bank’s failure was deemed shocking and unthinkable because it had the finance maestro Barney Frank on its board.

During the 2008 financial crisis, Mr. Frank helped establish the short-term rescue plan. He later co-wrote the Dodd-Frank Act, which toughened the regulatory rules to prevent the nation’s biggest banks from engaging in risky behavior. 

Contrary to Elizabeth Warren, Frank does not blame the Trump-era banking rules for Signature Bank’s collapse. 

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