Rep. Frank Offers Business a 'Grand Bargain'

Rep. Frank Offers Business a "Grand Bargain"
Reduced regulations for more job benefits.
By Michael Kranish and Ross Kerber
The Boston Globe
Sunday 19 November 2006

Representative Barney Frank has proposed in a series of meetings with business groups a "grand bargain" with corporate America: Democrats would agree to reduce regulations and support free-trade deals in exchange for businesses agreeing to greater wage increases and job benefits for workers.

Frank, the Newton Democrat who is in line to chair the House Financial Services Committee, has struck a conciliatory posture with financial-industry leaders in recent years. But since the morning after Election Day, he has moved quickly to lay out an ambitious plan to try to end the political stalemate between Republicans and Democrats on broad economic issues.

"What I want to do is break that deadlock," Frank said in an interview. "A lot of policies that the business community wants us to adopt for growth are now blocked. On the other hand, the business community is successfully blocking the minimum wage [increase] and created a very anti union attitude in the Congress."

Frank proposes that if businesses support a minimum wage increase and provide protection for workers adversely affected by trade treaties, Democrats would be more willing to ease regulations and approve free-trade deals. Frank also would support changes to immigration rules favored by businesses, and noted that allowing more immigrants would put needed funds into the Social Security system.

Frank casts his proposal as a way for capitalists to quell some of the populist fervor that was expressed in last week's election, when many Democrats vowed to crack down on companies moving jobs overseas.

"I'm a capitalist, and that means I'm for inequality," Frank told Boston business leaders on the morning after Election Day, in a speech about his grand bargain. "But you reach a point where you get more inequality than is healthy, and I believe we're at that point.

"What we want to do is to look at public policies that'll get some bigger share of the increased wealth into wages, and in return you'll see Democrats as internationalists.... I really urge the business community to join us."

After 26 years in Congress, Frank's ambition - and his ability to broker such a deal - is at an apex. His power will take a quantum leap when his chairmanship is approved by House Democrats - an approval that is little more than a formality. The 70-member Financial Services Committee oversees everything from banking to housing to urban affairs.

Frank is also a close adviser to Speaker-elect Nancy Pelosi, with whom he bonded during the campaign when Republicans deemed both of them reasons to be fearful of Democrats.

But while Frank has won support in Massachusetts among financial-services executives, some national business leaders are skeptical. Bruce Josten , chief lobbyist for the US Chamber of Commerce said he is worried that Frank's grand bargain would mandate costly benefits to employees, including health care , in exchange for support of free trade.

"His grand bargain ... certainly is not going to sail with the American business community," Josten said in an interview. Josten noted that Frank historically has been at odds with the US Chamber due in part to opposition to trade deals. In 2005, for example, Frank supported the chamber's issues only 33 percent of the time.

Frank, for his part, is unconcerned. Asked about the chamber's low ranking of him, he responded with one of his classic zingers: "That's more than I give them."

Frank said he will work out details of his grand bargain after conducting a series of hearings starting early next year. "I am not claiming I have majority support," he said. "I expect to spend much of the next year in the committee documenting this." But he said he has general backing from Pelosi and other top Democrats.

A starting point could be health care. Many businesses are trying to shed high health care premiums. Frank hopes that workers and businesses can agree on a government-administered plan paid for by workers that would reduce burdens on businesses, which would pass on savings to employees through higher wages.

"I think employer-paid health care is a mistake," he said. "I think it depresses wages."

Stephen J. Collins , president of the Automotive Trade Policy Council, which represents Detroit's Big Three automakers, said business leaders would welcome such a discussion with Frank. "Our companies are very open about the fact that they are facing massive competitive challenges of a global nature that need big answers," Collins said. "There has to be a partnership between government and industry to solve some of these problems, and health is one of them."

Much of Frank's work on economic issues has been behind the scenes until now. In the months before the election, Frank wrote a series of strategy memos to Democratic colleagues in which he urged them to campaign on "how poorly most workers have fared under the Bush economy."

In one memo, Frank went through a point-by-point rebuttal of a White House report on how workers fared under the Bush administration, arguing that only the wealthiest Americans have seen a significant income gain.

While it might seem like a stretch for one of the most liberal members of Congress to believe he is in position to strike a monumental deal with big business, Frank said he has a track record of working with banking and financial companies that should allay such concerns.

For example, he said, he put pressure on Bank of America to retain jobs in Massachusetts, but he also helped pass rules allowing banks to process more money electronically. He also has backed measures to help banks by making it harder for Wal-Mart and similar national chains to enter the retail banking business.

For Boston's large money-management industry, meanwhile, Frank has served as an important ally. For instance, he once sided with Fidelity Investments chief executive Edward C. Johnson III in arguing against a law that would require mutual-fund boards to have independent chairmen.

Many national representatives of the financial industries have become major Frank supporters. In the 2006 election cycle, banking and financial industries poured $457,299 in Political Action Committee money to Frank's campaign fund, accounting for the majority of the $721,561 in committee funds that he received. By comparison, labor union committees , a more traditional ally of liberal Democrats, gave Frank $83,000.

At the meeting with Boston business leaders, Frank was lauded as a liberal who has helped the financial industry. "I believe he's one of the voices in the Democratic party that is trying to reposition the party as a pro-growth, pro-jobs party as opposed to simply being against things," said Paul Guzzi , president of the Greater Boston Chamber of Commerce, which sponsored the speech.

Former representative Steven Bartlett , a Texas Republican who served with Frank in Congress and who now represents businesses as the president of the Financial Services Roundtable, said Frank's ability to work with business leaders and Republicans should not be underestimated.

"I'm a very conservative Republican and Barney is a very liberal Democrat, but we worked a lot of legislation together," Bartlett said in an interview.

But even Bartlett wonders whether Frank will be able to broker something so large as a grand compromise between business and labor and Democrats and Republicans. Bartlett said Frank's effort sounds more like a political framework than legislation.

Frank, however, is optimistic. Asked how much his power increases by going from ranking minority member to committee chairman, he responded: "It's a quantum difference. It is the difference between 'I wish I could do this' and 'I'm going to do this.'"