Former US Rep. Barney Frank defends decision to take board seat at failed Signature Bank

Former US Representative Barney Frank, who co-sponsored landmark reforms to banking regulation after the 2008 financial crisis, has spoken out to defend taking a board seat at recently failed Signature Bank.

'I need to make some money,' Frank, 82, told the Financial Times on Wednesday of his decision to join Signature's board in 2015, two years after retiring from Congress, where he was best known for the Dodd-Frank financial regulation law.

Frank said following Signature Bank's collapse on Sunday he felt 'chagrined because obviously people will say, 'Oh, hey mister, you told everybody else how to run a bank and the bank you were helping run failed'.' 

The former lawmaker made about $2 million in cash and stock sales from his work at Signature over the years, according to an analysis of public filings. 

Former US Representative Barney Frank has spoken out to defend taking a board seat at recently failed Signature Bank

Frank joined the Signature board in 2015, and went on to argue in favor of relaxing the banking regulations that were part of his landmark Dodd-Frank law

'I worked as a member of Congress for a certain objective. And then having retired, not having a pension by my choice, not wanting to be a lobbyist for reasons personal, I need to make some money,' he told FT. 

'I do it in part by writing. But I also do it by joining boards. Logically, I'm asked to join boards on subjects with which I was identified,' noted Frank.

Frank, a Democrat who served in Congress from 1981 until 2013, coauthored the Dodd-Frank act that boosted government oversight of banks following the 2008 financial crisis. 

However, after joining Signature's board, he publicly argued in favor of relaxing Dodd-Frank's strict capital requirements for banks, which originally applied to any bank with assets of more than $50 billion.

Signature's assets surpassed $50 billion in 2019, and by the end of last year it had more than $100 billion in assets.

In 2018, Frank penned a column calling the $50 billion limit a 'mistake' and the Republican-controlled Congress later raised the limit to $250 billion, relaxing requirements for banks like the two that collapsed in recent days.

Silicon Valley Bank had assets of $209 billion when it collapsed on Friday, and Signature had more than $110 billion in assets, making them the second-largest and third-largest banking failures in US history. 

Federal regulators have guaranteed all deposits at both banks, even those in excess of the FDIC's $250,000 limit on deposit insurance.

Frank, a Democrat who served in Congress from 1981 until 2013, coauthored the Dodd-Frank act that boosted government oversight of banks following the 2008 financial crisis

As worries mounted about Silicon Valley Bank last week, Signature put out a statement seeking to reassure clients and investors that it was stable. 

The statement included a reminder that despite its efforts to cater to cryptocurrency holders, it 'does not invest in, does not trade, does not hold, does not custody and does not lend against or make loans collateralized by digital assets.'

But by Friday, there were more withdrawals, which Frank previously said were 'based solely on the contagion from SVB.'

He said the situation had stabilized by the time Sunday that New York regulators took it over.

'I think part of what happened was that regulators wanted to send a very strong anti-crypto message,' Frank told CNBC on Monday. 'We became the poster boy because there was no insolvency based on the fundamentals.'

But NYDFS denied Frank's claims in a statement on Tuesday, saying that its decision to close Signature Bank on Sunday and appoint the Federal Deposit Insurance Corp as receiver 'was based on the current status of the bank and its ability to do business in a safe and sound manner on Monday.'

The FDIC declined to comment. Signature Bank did not immediately respond to a request for comment.

'The decisions made over the weekend had nothing to do with crypto. Signature was a traditional commercial bank with a wide range of activities and customers,' an NYDFS spokesperson said.

The bank's top executives were ousted and it reopened Monday under operational control of the FDIC as Signature Bridge Bank.