* Pragmatic liberal Frank leads financial reg talks
* Frank has keen understanding of financial markets
* Industry confident will get fair hearing
By David Morgan and Rachelle Younglai
WASHINGTON, June 6 Barney Frank is among Wall
Street's fiercest critics in Congress. But he could be its best
hope against an angry tide of election-year populism as
regulatory reform heads into a legislative finale this week.
For all his tough talk against the financial industry since
its 2008 meltdown, Wall Street expects the brainy Massachusetts
liberal will give its interests proper review.
Frank is chairman of the bipartisan committee charged with
merging separate House and Senate reform bills into a single
piece of legislation for President Barack Obama's signature.
"There's certainly a sense of confidence that everybody
will get a fair hearing from him as chairman. And really, in
statecraft, that's all you should hope for," said Kenneth
Bentsen, chief lobbyist for the Securities Industry and
Financial Markets Association.
Frank's mission is to captain the launch of a new
regulatory era for the U.S. financial industry in response to
its role in the credit crisis that sent the U.S economy into
recession, taking much of the world with it.
The push comes at a time when the political debate has
become increasingly clouded by the approach of November's
congressional elections and widespread anti-Wall Street
sentiment among American voters.
The famously quirky and cantankerous Democrat, described in
a 2009 biography as "America's only left-handed, gay, Jewish
congressman," is a worry for some financial lobbyists. They
fear he may bow to anti-business pressures from leaders on the
political left, including House Speaker Nancy Pelosi.
"He's a pragmatic liberal. But he's still a liberal. A lot
depends on his behind-the-scenes relationship with Pelosi and
whether he does what she wants or can say 'no'," said one
lobbyist who spoke on condition of anonymity.
Born the son of a truck-stop owner in industrial Bayonne,
New Jersey, the now 70-year-old Harvard-trained lawyer was
first elected to Congress in 1980 and has spent decades working
on financial legislation. Like other senior U.S. lawmakers, he
has received campaign funding from the financial sector.
REFORM IN THE BALANCE
Those who have witnessed his work chairing the House
Financial Services Committee, and as a lead negotiator in the
crises that engulfed U.S. banks and auto companies, seem
confident Frank's razor-sharp intellect and knowledge of
financial markets reduce the risk of over-regulation.
Bankers say that too many new rules could throttle credit
just as the economy is struggling to recover from recession.
Frank has already signaled that Wall Street may be spared a
radical reform of the derivative industry which emerged from
the Senate -- Democratic Senator Blanche Lincoln's proposal
that could force banks to spin off their swap desks.
Banking interests also hope he will either torpedo or water
down another Democratic measure to limit debit card fees for
merchants, introduced by Senator Dick Durbin
Other controversial reform proposals still unresolved
include the way the Federal Reserve banks are governed and how
to protect consumers from the kind of risky mortgages and other
lending practices that helped trigger the credit crisis.
"He will understand the impact (reform) has on markets,"
former Treasury Secretary Henry Paulson told Reuters.
"He knows how to get over the goal line," added Paulson,
who is also a former chairman of Goldman Sachs(GS.N). "At the
end of the day, I think the country will fare well."
Frank's understanding of markets has not protected him
from charges that he is partly responsible for the housing
bubble that ignited the Wall Street meltdown.
An advocate of affordable housing, Frank fought efforts by
the George W. Bush administration to restrict
government-chartered mortgage finance giants Fannie Mae and
Freddie Mac, which later were at the center of the housing
Frank has said Congress will tackle the "helter-skelter
scheme of housing finance" after financial regulation passes.
Frank shepherded a broad financial reform bill through his
House committee to a 223-202 vote in December. The Senate
approved its version last month by a 59-39 margin.
A "conference" panel of more than 20 Democrats and
Republicans will be named this week and Frank hopes it will
complete its work by June 24. That would give the House of
Representatives and the Senate time to render final approval
and send the legislation to Obama before July 4.
The real negotiations will occur privately between the
Obama administration, Frank and his counterpart in the Senate,
Connecticut Democrat Christopher Dodd.
"There's been a lot of coordination," Frank told Reuters in
a telephone interview. "I've rarely seen two major pieces of
legislation go through both houses in such similar forms."
He declined to talk about the dozens of measures that must
be hashed out before the definitive bill emerges.
"I can't confer with anyone who doesn't have a vote," he
With his legislative experience and knowledge of Congress,
Frank will likely demand that the conference proceedings adhere
strictly to the rules of the federal legislature.
In the past several years it has become routine for
lawmakers to negotiate major bills behind closed doors. Frank
told Reuters he pushed for a formal open-door conference to
strengthen the House's hand in negotiations with the Senate.
(Additional reporting by Jonathan Stempel; Editing by Donna
Smith and Gunna Dickson)