The Legacy of Congressman Barney Frank

16-term Massachusetts Democrat retiring


This is a rush transcript from "Journal Editorial Report," December 3, 2011. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: This week on the "Journal, Editorial Report," as Newt Gingrich continues to surge, does Mitt Romney's play-it-safe strategy need some rethinking?

Plus, Barney's rubble. The Congressman from Fannie Mae is retiring. We'll take a look at his legacy.

And accusations of insider trading have members of Congress on the defensive, but how big a scandal is it really?

Welcome to the "Journal, Editorial Report." I'm Paul Gigot.

With fewer than five weeks to go for Iowa caucuses, Newt Gingrich continues his surge, pulling ahead by a wide margin in a new national poll that has the former House speaker with the support 38 percent support of likely primary voters. And he is leading in polls in the early states Iowa, South Carolina and Florida. Gingrich has been capitalizing on the momentum this week, pitching himself as the conservative alternative to Mitt Romney.


NEWT GINGRICH, R - PRESIDENTIAL CANDIDATE: I'm clearly the more conservative candidate by any rational standard. I had a 90 percent American Conservative standing for 20 years. I helped Ronald Reagan and Jack Kemp develop the supply-side of economics. I helped lead the effort to defeat communism. I helped the speaker of the House balance the federal budget for four straight years, reform welfare as an entitlement, the first tax cuts in 16 years. And take whatever your list of conservatism is, there's places where I have done that stuff.


GIGOT: Joining the panel, Wall Street Journal columnist, Mary Anastasia O'Grady; columnist and deputy editor, Dan Henninger; and assistant editorial page editor, James Freeman.

Dan, what is behind the Gingrich surge?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: One of the things that is behind it, Paul, I think is that there was always structural weaknesses in the Romney campaign. He was running a campaign that was going to put one foot in the center because I think he understood that, in the general election, he needed to win Independent voters. Part of his appeal has been for them. The other foot has been in the conservative camp. The problem is he had to run in early primary, Iowa, New Hampshire, South Carolina and Florida. These are conservative-based Republican voters. He has been lucky so far, in that most of his opponents were basically pretty weak. I think what we have going on here now is the parable of the tortoise and the hare. Romney has been the hare, racing out in front, the guy with all the experience. Gingrich has been plodding along, slowly making his case, and finally the conservative problem for Romney caught up with him.

GIGOT: What you are saying, the Gingrich surge is not about Gingrich, it's about Romney. It's about Romney's weaknesses, is that what you are saying?

HENNINGER: Yes, I think so.


GIGOT: It's a lot less to do with Gingrich's appeal. Remember, we've had the flavor of the month here.


GIGOT: They all popped up and Newt is the latest?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yes, and I think you have to give Newt some credit. He's good at debating. This has been a primary process that is focused on debates. It's clear, in this race, if you are just looking at Gingrich versus Romney, Gingrich is the conservative. He is the one that is giving a very aggressive defense of free markets, saying cut taxes dramatically, get rid of regulation, repeal Dodd-Frank and repeal Obama-care, Sarbanes-Oxley. So what you're --


GIGOT: He is for cap and trade for a while. He was for the individual mandate. He was --


FREEMAN: OK, we'll get into his history. But look --


FREEMAN: But, look, if you are saying who is giving the conservative message, it is Gingrich. Now, the history is going to be a problem.


MARY ANASTASIA O'GRADY, COLUMNIST: I think Romney has two problems. One is he was out in front. He saw these weak players around him and he thought, I can just hold the ball, even though it's only the second quarter, I will just run out the clock. He is going to have to take the fight to Newt.

GIGOT: How so? How so, Mary? What should --


O'GRADY: The problem that he is facing against Gingrich is what George H. Walker Bush might have called the vision thing. Gingrich is better at communicating a vision, a kind of an exciting change. Whereas, Romney is a technocrat. Data, data, data.

GIGOT: Right.

O'GRADY: He says, with a very disciplined approach, change everything and sort of rearrange it and make it work. I think people are more excited about the vision sense.

GIGOT: OK, but does that mean that Romney has to take -- has to offer a vision of his own, or are you saying that Romney needs to attack Gingrich and find a way to knock him down and say, no, no, no, he is not the real conservative?

O'GRADY: I don't think he should make it about attacking Gingrich. I think that would be very bad. But I think he has to come up with his own version of the vision thing, something that would get people excited. The neat hair and the controlled disciplined campaign, it has just left a lot of people flat. They both have big-government baggage that they will not be able to shed. He shouldn't be afraid of that with Newt. Newt has enough of that on his own.

HENNINGER: I think, in any event, it's a healthy development. Mitt Romney needs better sparring partners than he's had if he's going to run for the presidency. Recall, in the 2008 Democratic primaries, it was Barack Obama versus Hillary Clinton. That was a heavyweight fight. They slugged it out through the entire primary season. If it's going to be Newt Gingrich and Mitt Romney, I think they'll both be better candidates if they have to sharpen their positions. If Newt has to defend himself against the baggage. And Romney has to clarify who he is in the front before he faces voters.

GIGOT: Is there a vision thing that Romney can offer? His political persona is, I think -- I agree with Mary -- is as the technocrat. That's who he presents himself.


His critique of Obama is practical one. He's not been able to create jobs because he's a man of the public sector. I know how to do it because I'm a man of the private sector. But it's a tactical technocratic argument. Gingrich's critique is Obama is radical. He's outside the American mainstream and he offers a philosophical alternative.

FREEMAN: The question for Romney, at this point, would be, is it too late to recast himself and his message? A lot of people coming into the campaign were saying you have to repudiate your Massachusetts health care disaster. You have to say, sorry, I learned from it. Whether he could now at this late day say, OK, I'm going to be a conservative, I'm going to argue as a conservative, run as a conservative, I don't know. He may get to that if he keeps seeing poll numbers like we saw in Rasmussen.

GIGOT: What about the Gingrich baggage, Mary? There is a quote that was reported this week from 2007 where Gingrich was -- even after he had gotten more than a million dollars from Freddie Mac in consulting fees, basically said -- put it in philosophical terms and said, yes, I think the government sponsored enterprises are a good thing, Alexander Hamilton and Teddy Roosevelt would have supported that. Always putting a historical clause on it.


O'GRADY: And hoping the American public doesn't really know their history very well.


I don't think anybody who is a conservative wants to the re-elect a modern-day version of Teddy Roosevelt.

GIGOT: But is that a real vulnerability in this race as voters learn more about Gingrich?

O'GRADY: Well, I don't think so. He is always going to be compared to what? When you compare him to Romney, they both have that problem. Romney says that he should raise taxes on the wealthy. So I don't think it will be a big problem for him, and I do think he will be able to shrug it off by, as I say, going with the vision thing.

GIGOT: All right, we'll see. Thanks.

When we come back, saying goodbye to Barney. That's right. Our favorite Congressman is retiring. We'll take a look at the Barney Frank legacy, next.


BARNEY FRANK, (D), MASSACHUSETTS: One of the advantages to me of not running for office is I don't have to pretend to be nice to people I don't like.




FRANK: I do not choose to run for Congress in 2012. I've spent a very busy and somewhat stressful four years with the financial crisis, first, dealing with the crisis and then dealing with the legislation to make it less likely that we're going to have another one.


GIGOT: That was Congressman Barney Frank, announcing this week that he won't run for re-election in November. The 16-term Massachusetts Democratic has been chair of the Financial Services Committee since 2009 where he co-authored the Dodd-Frank Financial Reform Bill.

So regarding that previous clip we had, James, when did he ever pretend to be nice to people?

FREEMAN: Yes, we don't remember it.


I also take issue with his comments in the second clip, too, talking about how he spent time dealing with the crisis and then writing legislation in its aftermath. He left out his part about creating the crisis.


That would have to do with being part of that Washington mania for more and more for homeownership, more and more subsidies for housing. He said let's roll the dice with Fannie Mae and Freddie Mac and --

GIGOT: We don't want to deal with -- we don't want have to worry about safety and soundness. Let's roll the dice with those?

FREEMAN: And his answer, when people said to him -- Gretchen Morgenson, in her book, "Reckless Endangerment," talks about a moment in 2005 where a reporter said, what if the people who are getting homes can't pay the money back. What if the homeownership drive goes too far? He said, well, we'll deal with it if it happens. It happened.

HENNINGER: Paul, I think another crisis has driven Barney Frank out of politics, honestly. It was the Euro crisis. I'll explain that. Barney Frank is man of the left. He is a man of big government. He has enabled government to be larger and larger. What we have learned from the Euro crisis is the welfare model is breaking apart. I think Congressman Frank understood that, in the future, being a person of the left in Congress was not going to be fun. He is a guy that likes to have fun with his politics. It's going to be grim going forward for the next four or eight years. And he didn't want to be part of that.

GIGOT: But his generation of liberals really -- they had that window of opportunity in 2009 and 2010, the '60s of those who -- they grew up in the '60s but they really came to power in the later generations and they got the sweet spot, with 60 votes in the Senate. They controlled the House. And they had Barack Obama coming in, reveals the crisis. They passed everything they wanted, universal health care. And they fulfilled a lot of their entitlement state dreams.

O'GRADY: Right, and that's how we got Dodd-Frank. And actually --


-- what we still don't know is -- he may be leaving Congress but he may have left us with a ticking time bomb in the form of Dodd-Frank. It pretends to make this not happen again, but, as we know, there's a lot of problems -- I mean we saw it with M.F. Global -- that they haven't cleaned up. I think also --


GIGOT: M.F. Global being the firm that Jon Corzine's ran and recently went bankrupt.

O'GRADY: Right. And it was highly leveraged, even though we were supposed to have regulations to avoid that.


But I think what happened to Barney Frank is the redistricting in Massachusetts. There is a good chance that he wasn't going to win the election. But even if he won, he wasn't going to be chairman.

GIGOT: He was going to have to face a lot more voters he hadn't faced in previous elections.

O'GRADY: Right. But then, he also wouldn't get the chairmanship of a committee. And it's just not that much fun not being able to run a committee.

GIGOT: With Barney Frank leaving, that means Chris Dodd and Frank, both authors of Dodd-Frank, are out of Congress. Does that increase the odds that much of Dodd-Frank could be repealed?

FREEMAN: It certainly increases the odds. I don't think you'd see a wholesale repeal of it. But I think there are a lot of fixes that had to be made. Recall when he was creating the last disaster, it was all about taxpayers behind housing. What Barney Frank and Chris Dodd gave us in this bill is taxpayer-backed derivatives trading, among other problems.


So I think there are a lot of these issues that even -- anyone in the public will understand they need reform. You have to fix too big to fail. You have to fix a lot of these problems that went unaddressed while they spent 2,300 pages pursuing their liberal social policies.

HENNINGER: Well, all these congressmen think they have legacies of one sort of another. And Frank has complained about the repeal of Glass-Steagall. Glass-Steagall, two Congressmen, lasted for about 50 years. Dodd-Frank is not going to last for 50 years.


It's going to be taken apart piece by piece because it doesn't work.

GIGOT: Well, the repeal of Glass-Steagall was signed by Bill Clinton.


GIGOT: So you just can't complain about Republicans on that one.

When we come back, with their approval rating already in the single digits, members of Congress are now battling accusations of insider trading. But is the problem real and are the charges fair? There's a debate ahead.


GIGOT: The Senate held hearings this week on a bill that would ban lawmakers and their staffs from using non-public information in making trades on Wall Street. The bill and similar legislation in the House gained momentum after "60 Minutes" reported last month that members of Congress can legally trade stocks based on information they gain from private briefings, meetings and other official congressional work. That report alleged that House Speaker John Boehner and Minority Leader Nancy Pelosi, among others, enriched themselves by purchasing or trading stocks based on such insider information.

In a recent "Wall Street Journal" op-ed, former Alaska Governor, Sarah Palin, called the practice, quote, "an endemic problem encompassing leadership on both sides of aisle." And "an entire system of public servants feathering their own nests."

Mary, how bad is this scandal?

O'GRADY: It's terrible, Paul.


No, it really is. First of all, no matter how -- what you think about what they are doing, you have to admit that if people in the private sector were doing the equivalent, these people in Congress would not only go after them, they would be leading the lynching party. OK, so they -- number one --


GIGOT: So it's a double standard.

O'GRADY: Number one, they see themselves above the law. But secondly, it's a conflict of interest. They have a meeting in a private room. They have an enormous amount of power to affect the markets and then they can come out and trade on that information?

GIGOT: OK, but they aren't classic insiders under the definition of the law that -- like illegal trading laws, insider trading laws, in the sense that you have to be a corporate fiduciary. You have to be an executive or a board member or a lawyer representing them. Those are classic insiders who have inside information on the -- what a company is going to do.

O'GRADY: OK, in order to --


GIGOT: This is sort of public information about the direction of the economy is and --


O'GRADY: But the information is not in the public sector. In order to make this fair and transparent and ethical, let's do it this way. I had a meeting with Ben Bernanke and Hank Paulson today. I can't tell you what the meeting was about --


-- because only we can run this. But I can tell you that when I came out, I went and called my broker and bought 1,000 puts on the S&P 500.

GIGOT: Which would --


O'GRADY: And every night, they could report that.

GIGOT: And stocks would fall.


O'GRADY: Yes. And they could just report that every night. And then, I'm fine with it.


Are you as outraged by this?

FREEMAN: It is outrageous. It's a double standard. There are lawyers who would say the Securities and Exchange Commission actually can go after members of Congress when -- if they trade on insider information. They just have chosen not to. Inside information has been basically a -- defined by case law. And --

GIGOT: But this isn't insider information.

FREEMAN: And it's not --


GIGOT: Come on. When Ben Bernanke and --


GIGOT: -- Hank Paulson went to Capitol Hill and said, the sky is going to fall if you don't pass the bill, everybody in the world knew the situation --


GIGOT: That's hardly insider information.

FREEMAN: Yes, but it's all about timing, right? Everybody knew after it leaked out.

GIGOT: No, everybody --


FREEMAN: If you're the first one to get that information --


GIGOT: Did you not know that there was a financial crisis brewing? Of course, you did?

FREEMAN: Well, look --


FREEMAN: I think the -- we see it every day. Whenever the fed makes a new policy move, markets react. That is undeniably market-moving information.


GIGOT: But where are you going to draw a line here. This is my problem. Where are you going to draw a line? At congressional hearings? Are you going to draw a line at --

O'GRADY: All I want them to do is give real time information about what they are doing in their stock accounts. Real time. Just at the end of the day, they can tell us.

GIGOT: They want to -- you want to go through 535 members of Congress' stock trades everyday?

O'GRADY: They can put it up on their web sites.

FREEMAN: Well, for people who want to study it. It's journalists, not every citizen is going to do it. But journalists can study it. They can track this and watch how people are voting and then what their transactions are. But it is a problem because it is a double standard. You see these -- the situations where the crisis meetings, where they having them, and then they are making trades before -- I think, in many cases, before these instances have been reported to the press, maybe moments before, but that is all you need.

HENNINGER: I think the cure to this problem is more of the disease. I'm going to disagree with you and give you a really contrarian solution. I think each one of these committee's budgets should be tied to an index of stocks to the industries they are governing, OK?


If you want to pass Dodd-Frank and destroy the financial industry, then your budget is going to fall with their stock.

FREEMAN: You have to keep your own --


GIGOT: They problem is that they will rig the laws so that they help certain firms and they'll define the index as something that they --


-- would help with the legislation. It would be an insider trade another way.

HENNINGER: But you don't want to pull the part of it that they don't know anything about the industry.

GIGOT: Well, that is the problem. You end up with -- if you go too far in this, you'll end up with people who are -- the only people who can go to Congress are people like Ralph Nader, who are above trading in stocks.

O'GRADY: No, I don't want -- I don't want to preclude them from trading. I want to make what they are doing transparent.

FREEMAN: What about if they were in index funds and, again, disclosure. That wouldn't solve everything because you'd still have the issue of timing. When are they buying and when are they selling. Maybe they should not do trades when Congress is in session. That would at least prevent them from acting on the moment they find out that some provision is getting in the final bill.

GIGOT: Should you put it in a blind trust, everything that they have in a blind trust?

O'GRADY: No, I'm not saying that. But I think that they have means, motive and opportunity to basically take advantage of the information they have. And in order to be ethical and to create more confidence in Washington, I think what they are doing in their stock accounts should be transparent. I don't think that's that hard to do.

GIGOT: I'm much more worried about what they are doing with our money than I am what they're doing with their own money.

O'GRADY: But they're affecting your -- they're affecting your money.

GIGOT: They'll find a way around it no matter what rules you enact. I think that is one of lessons of ethics rules is they find a way. So I'm going to give myself the last word.


We have to take another break. When we come back, our "Hits and Misses" of the week.


GIGOT: Time now for "Hits and Misses" of the week.

Dan, first to you.

HENNINGER: Paul, I would like to give a cautionary hit to the people of Egypt who, this week, in parliamentary voting had a very orderly, honest and peaceful vote, unlike the turmoil and violence in Tahrir Square. You have got to be a little bit careful about this. It was the Islamic parties that won big, even the Salafists. But we cannot underestimate the power of being able to cast a free vote. We should have some modest optimism about Egypt going forward, if they are allowed to keep voting.

GIGOT: All right.


O'GRADY: This is a hit for Masao Yoshida who is the crisis manager -- has been at the Fukushima Nuclear Plant in Japan for the last eight months. Anybody that stuck it out there for last eight months, in my opinion, is a hero. Mr. Yoshida has to step down because he is ill. It's not been revealed what is wrong with him. But he said, on leaving, that it breaks his heart to leave the project. I think he is a patriot and a true hero for Japan.

GIGOT: James?

FREEMAN: This a miss to Jon Corzine, the former Democratic Senator and governor from New Jersey, whose bets on European debt destroyed M.S. Global, the big player in the futures market. And here we are, more than a month after the bankruptcy, and still more than a billion dollars appears to be missing from client funds. Mr. Corzine needs to explain where the money went. And if he doesn't know, he needs to tell us what he does know.

GIGOT: A good lesson about regulation here, James?


FREEMAN: It doesn't work.


That's the lesson.

GIGOT: All right.

And remember, if you have your own "Hit or Miss," please send it to us at Visit on the web at

That is it for this week's edition of the "Journal, Editorial Report." Thanks to my panel and to all of you for watching. I'm Paul Gigot. Hope to see you right here next week.