By Matthew Bechard

A veteran politician, Rep. Barney Frank (D-MA) was first elected to Congress in 1980 and is currently the ranking Democrat on the House Financial Services Committee. Frank is also a member of the House Select Committee on Homeland Security, where he serves on the Subcommittee on Infrastructure and Border Security and the Subcommittee on Intelligence and Counterterrorism.

Frank has supported several issues relating to the real estate industry, and he maintains that real estate is a major factor in the U.S. economy.

"As for REITs, I believe they have been very useful ways of channeling money into productive investments and of giving people a place in which to invest their money with some sense of security," Frank says.

Before his tenure in Congress, Frank was a Massachusetts State Representative and an assistant to the mayor of Boston. He has also taught at several Boston area universities.

Frank recently spoke with Portfolio about a number of issues including homeland security, extending the Terrorism Risk Insurance Act, the Fair Choice and Competition in Real Estate Act and implementing the Takings Clause of the Fifth Amendment.

On Homeland Security

As a member of the Select Committee on Homeland Security, Frank spends a great deal of time looking at what additional steps the government can take to ensure its citizens are safe. One of the primary challenges, in Frank’s opinion, has been the fiscal limitations placed upon state, local and federal agencies to provide the necessary protection.

"This has been especially problematic for state and local governments, who continue to bear a large part of that (financial) burden," Frank says. "I would stop celebrating every time government resources are reduced. Some government functions are unnecessary, and some are done badly, but some—in the security area, for example—seem to me to be things that should be enhanced not reduced."

First among Frank’s recommendations for enhancement would be monitoring cargo that comes into the U.S. via ships, adding that the country’s maritime defenses are "negligible." In addition, U.S. border security, in general and along the Mexican border specifically, need to be strengthened. Lastly, Frank says law enforcement at all levels needs to be improved.

"Policing is very difficult at best, especially in a free society where we put extra burdens on our enforcement people to preserve our liberties as well as protect us," Frank says. "We have not done enough in this regard, and we should be making more resources available for law enforcement on all levels."

On TRIA

As the threat of another terrorist attack on U.S. soil remains high, the need to provide a federal backstop for ensuring that terrorism insurance will be available to all who need it continues to be a necessity. The Terrorism Risk Insurance Act (TRIA) has been a tremendous success since its inception in November 2002. In a changing and uncertain world, it has provided real estate owners, including REITs and their financial partners, one of the tools needed to finance, acquire, sell and develop real estate nationwide.

TRIA requires insurers to make terrorism coverage available to commercial policy-holders on the same terms and conditions as other offered insurance. In return, TRIA provides reinsurance above certain levels to the insurers who make available coverage against acts of foreign terrorism. However, TRIA is currently set to expire on Dec. 31, 2005, creating a great deal of uncertainty in the insurance marketplace.

"The information that I get has led me to believe that TRIA has worked, because I have heard primarily from people who fear the negative consequences of allowing it to expire," Frank says. "I want to stress that my main concern here has not been for the insurers but for the insured ... The absence of a federal terrorism risk insurance program would mean that those engaged in the construction of large projects would be unable to get terrorism insurance, and therefore be unable to get loans."

For this reason, Frank says he is a strong supporter of indefinitely extending TRIA.

"I am skeptical that the private market is ready in the near term to take on this set of insurance responsibilities, and the insurance companies themselves have pointed out how difficult this would be," Frank says. "Moreover, even if private insurance could be set up to cover all of the risks of terrorism, I think that would be a mistake."

Frank says if this were to happen an unfair burden of the cost of terrorism risk would fall on one segment of the society. "In the absence of a federal program, even if we were to get a private market program, it would impose much heavier premiums on those who want to do buildings in various cities, and this would give the terrorists far more influence over American life than it seems appropriate," Frank says.

On Fair Competition

In another issue related to the real estate industry, Frank and House Financial Services Chairman Mike Oxley (R-OH) introduced H.R. 2660, the "Fair Choice and Competition in Real Estate Act of 2005." This bill, introduced on May 26, 2005, would authorize financial holding companies and national bank subsidiaries to conduct real estate brokerage and property management activities.

While some, including the National Association of Realtors, fear this legislation would give banks an unfair advantage and squeeze out independent real estate brokers, Frank says he understands those concerns but feels that giving consumers greater choices is a good thing.

"There are potential dangers when banks are both the lender and the broker, but I do believe that we have had experience in dealing with these kinds of potential problems," Frank says. "In general, I believe competition is beneficial in our economy, and I do not see any reason for making an exception with regard to the sale of real estate."

On Use of the Takings Clause

Another real estate-related issue that has garnered attention is the Supreme Court’s June ruling focused on the Takings Clause of the Fifth Amendment. At the center of this property rights issue is the government’s ability to take private property under eminent domain for public use. In the case in question, New London, Conn. city officials were taking the private property to build a hotel and office buildings as part of the city’s revitalization efforts.

Frank opposed the Supreme Court’s decision and says that private property should not be taken for "purely economic enhancement."

"I favor at the federal level, where we have jurisdiction, restricting federal funding from being used in ways that would simply allow private property of one individual or group to be taken and made available for economic enhancement in the hands of other private entities. Some broader social purpose must be shown," Frank says. "And while that would primarily be the construction of public facilities, it would allow for some use of federal funding for property takings where there was an important social purpose."