Saturday, July 23, 2011

H.R. 1315-- Wall Street's Revenge


Even if the exact figures aren't in your head, it probably comes as no surprise that Wall Street and the Financial, Insurance, Real Estate sector has poured more legalistic bribes into American politics than any other interest group-- $1,590,799,311 in direct "contributions" to people running for Congress since 1990. That doesn't count lobbying, an even greater amount. It should surprise no one that so far this year the two top recipients of these bribes in the House are Republican Majority Leader Eric Cantor ($378,700) and Republican Speaker John Boehner ($355,325). Among the top 10 recipients of these massive bribes from Wall Street are 9 Republicans, all members of committees dealing with financial matters and banking regulations-- Jeb Hensarling (R-TX), Spencer Bachus (R-AL), Ed Royce (R-CA), Pat Tiberi (R-OH), Steve Stivers (R-OH), Scott Garrett (R-NJ), Kevin McCarthy (R-CA). And, remember, that just this cycle. Since 1990 Wall Street has lavished $5,349,215 on Cantor, more than to any other Member of the House. House Financial Services Committee chairman Spencer Bachus has been the recipient of $4,900,624 and Boehner's cut was $4,678,643. Banksters don't give away their profits because they had a nice game of golf with someone. These are the men who pushed through Bush's TARP bailout and these are the people who voted this week to eviscerate Dodd-Frank, the bill passed last year in response to Wall Street greed nearly driving the world into another Great Depression.

H.R. 1315 passed Thursday 241-173. Only one Republican, Walter Jones of North Carolina, voted against it and Cantor had already instructed the leaders of North Carolina Republican legislature to redistrict Jones' seat to make it more Democratic-leaning. This year, Jones' voting record is more progressive than 17 Democrats, including 8 of the 10 Democrats who followed Cantor's lead in passing a bill to make sure Wall Street predators could rob the public blind-- John Barrow (Blue Dog-GA), Dan Boren (Blue Dog-OK), Ben Chandler (Blue Dog-KY), Henry Cuellar (Blue Dog-TX), Jim Matheson (Blue Dog-UT), Mike McIntyre (Blue Dog-NC), Bill Owens (NY), and Mike Ross (Blue Dog-AR).

Former Labor Secretary Robert Reich, gave an appropriate, spot on eulogy for the bill:
One full year after the financial reform bill spearheaded through Congress by Christopher Dodd and Barney Frank was signed into law, Wall Street looks and acts much the way it did before. That’s because the Street has effectively neutered the law, which is the best argument I know for applying the nation’s antitrust laws to the biggest banks and limiting their size.

Treasury Secretary Tim Geithner says the financial system is “on more solid ground” than prior to the 2008 crisis, but I don’t know what ground he’s looking at.
Much of Dodd-Frank is still on the drawing boards, courtesy of the Street. The law as written included loopholes big enough to drive bankers’ Lamborghini’s through-- which they’re now doing.

What kind of derivatives must be traded on open exchanges? What are the capital requirements for financial companies that insure borrowers against default, such as AIG? How should credit rating agencies be funded? What about the much-vaunted Volcker Rule requiring that banks trade their own money if they’re going to gamble in the stock market-- how should their own money be defined? What “stress tests” must the big banks pass to maintain their privileged status with the Fed?
The short answer: whatever it takes to maintain the Street’s profits and perquisites.
The law included a one-year delay, ostensibly to give regulators time to iron out these sorts of details. But the real purpose of the delay, it’s now obvious, was to give the Street time to expand the loopholes and fill the details with pablum-- when the public stopped looking.
Since Dodd Frank was enacted a year ago, Wall Street has spent as much-- if not more-- on lobbyists and political payoffs designed to stop the law’s implementation than it did trying to kill off the law in the first place. The six largest banks spent $29.4 million on lobbying last year, according to firm disclosures-- record spending for the group. This year they’re on track to break last year’s record. 

According to the Center for Public Integrity, the Street and other financial institutions engaged about 3,000 lobbyists to fight Dodd-Frank-- more than five lobbyists for every member of Congress. They’ve hired almost the same number to delay, weaken, or otherwise prevent its implementation.
Meanwhile, the portion of the law that’s now supposed to be in effect is barely being enforced. That’s because the agencies charged with enforcing it, such as the Securities and Exchange Commission, don’t have enough money or staff to do the job. Congress hasn’t seen fit to appropriate these necessities.

Several of these agencies are still lacking directors or commissioners. Senate Republicans have refused to confirm anyone. They wouldn’t even consider Elizabeth Warren to run the new consumer bureau.
Many of same business leaders who blame the sluggish economy on regulatory uncertainty are complicit in all this. A senior vice president of the Chamber of Commerce told the New York Times that “uncertainty among companies about the rules of the road is keeping a lot of capital on the sidelines.” The Chamber has been among the groups responsible for keeping Dodd Frank at bay.
But it’s the biggest Wall Street banks-- the ones that got us into this mess in the first place, and got bailed out by the public-- that have taken the lead in killing off Dodd-Frank. They can afford the hit job.

At the same time, their executives-- enjoying pay and bonuses as large as in the boom days of the housing bubble-- are busily bankrolling both political parties, although Republicans are favored in this election cycle. A significant portion of Mitt Romney’s sizable war chest has come from the Street. President Obama is no slouch when it comes to pulling at the Street’s purse strings.
Bankers try to justify their shameful murder of Dodd-Frank by saying tightened regulatory standards will put them at a disadvantage relative to their overseas competitors. JP Morgan’s Jamie Dimon had the nerve to publicly accost Ben Bernanke recently, complaining that the law’s implementation would harm the Street’s competitiveness.
The argument is pure claptrap. In the wake of global finance’s near meltdown, Europe has been more aggressive than the United States in clamping down on banks headquartered there. Britain is requiring its banks to have higher capital reserves than are so far contemplated in the United States. In fact, senior Wall Street executives have warned European leaders their tighter bank regulations will cause Wall Street to move more of its business out of Europe.
Wall Street is global because capital is global. JP Morgan Chase, Goldman Sachs, Citigroup, Bank of America, and Morgan Stanley are doing business in every corner of the world. Goldman even advised Greece on how to hide its growing indebtedness, before the rest of the world got wind, through a derivatives deal that circumvented Europe’s deficit rules.
The real reason Wall Street has spent the last year bludgeoning Dodd-Frank into meaninglessness is the vast sums of money it can make if Dodd-Frank is out of the way. If you took the greed out of Wall Street all you’d have left is pavement.
Wall Street is the richest and most powerful industry in America with the closest ties to the federal government-- routinely supplying Treasury secretaries and economic advisors who share its world view and its financial interests, and routinely bankrolling congressional kingpins.

How else can you explain why the Street was bailed out with no strings attached? Or why no criminal charges have been brought against any major Wall Street figure-- despite the effluvium of frauds, deceptions, malfeasance and nonfeasance in the years leading up to the crash and subsequent bailout? Or why Dodd-Frank has been eviscerated?
As a result of consolidations brought on by the bailout, the biggest banks are bigger and have more clout than ever. They and their clients know with certainty they will be bailed out if they get into trouble, which gives them a financial advantage over smaller competitors whose capital doesn’t come with such a guarantee. So they’re becoming even more powerful.
Face it: The only answer is to break up the giant banks. The Sherman Antitrust Act of 1890 was designed not only to improve economic efficiency by reducing the market power of economic giants like the railroads and oil companies but also to prevent companies from becoming so large that their political power would undermine democracy.
The sad lesson of Dodd-Frank is Wall Street is too powerful to allow effective regulation of it. We should have learned that lesson in 2008 as the Street brought the rest of the economy-- and much of the world-- to its knees. Now we’re still on our knees but the Street is back on top. Its leviathans do not generate benefits to society proportional to their size and influence. To the contrary, they represent a clear and present danger to our economy and our democracy.
They should be broken up, and their size must be capped. Congress won’t do it, obviously. So we’ll need to rely on the nation’s two antitrust agencies-- the Federal Trade Commission and the Antitrust Division of the Justice Department. The trust-busters are now investigating Google. They should be turning their sights onto JPMorgan Chase, Citigroup, and Goldman Sachs instead.

Matt Stoller a former policy staffer for Alan Grayson when Grayson served on the House committee that originated the bill now works for the Roosevelt Institute. He has always felt that the bill didn't go nearly far enough towards desperately needed Wall Street reform. "There was," he writes, "no attempt initially to ask the question, 'what happened and what should we do about it?' There was no examination of the purpose of a banking system, and how to rebuild a system that aligns the public with the financial industry. There was no attempt to build legitimacy through a public education campaign about what Congress and the administration was doing, and why. Instead, legislators and very serious men in suits started throwing around terms like 'systemic risk regulator' and 'resolution authority,' and then used the idea of a Consumer Financial Protection Bureau as a palliative for liberals.
While a shadow bailout took place through the Federal Home Loan banks and the Federal Reserve from 2007 onward, eventually a fiscal and regulatory solution would become necessary. The first significant legislation in this thrust was the famous Bazooka bill (or Housing and Economic Recovery Act) signed in June 2008 that allowed Treasury Secretary Hank Paulson to take over and pump unlimited sums into Fannie and Freddie. The second was the TARP. Both of these bills were pivotal to providing the government with enough firepower to overcome the solvency crisis.

After the immediate crisis was contained, losses were socialized, and profits returned to financial executives, Congress had to put together a “solution." It would have a giant bite at the apple in restructuring our regulatory apparatus. But in order to perpetrate the oligarchic banking structure, it would be important that no structural changes to the industry be implemented. Not one regulator was fired for his or her part in the crisis. The Justice Department adopted a posture of legalizing financial control fraud by refusing to prosecute anyone involved in the meltdown, and continues to allow millions of cases of foreclosure fraud to continue. Ben Bernanke was renominated, and the administration fought a bitter below-the-radar battle to secure his confirmation. With a few modest exceptions, the risk-taking and leverage in our financial markets continues apace, and the deregulatory neoliberal mindset is still dominant. The Federal Reserve has been audited, but the system is now accountability-free for high level operatives in finance and politics. And now that Elizabeth Warren has been thrown overboard by the administration, the lockdown of the financial system is nearly complete.

And mostly, that’s what Dodd-Frank accomplished. It rearranged regulatory offices and delivered a new set of mandates, but effected no structural changes to our banking system. Congress never asked what happened, or why, or even, what kind of banking system do we want? And that’s because Obama’s Treasury Secretary already had the answers to these questions.

Lisa Donner, the executive director of Americans for Financial Reform, reminds Americans what is at stake in this battle over financial reform and has the polling to back up her claim that voters don't buy Wall Street’s arguments against reform, and that they do want effective cops on the beat policing the financial marketplace, regardless of the lies coming out of the paid off Wall Street shills like Cantor and Boehner.
Two years ago at this time we were in the midst of a major battle about whether and to what extend Congress would stand up to Wall Street and financial industry special interests and change the failed program of deregulation that led to the financial crisis. One year ago we applauded the progress made with the passage of the Dodd Frank Wall Street Reform and Consumer Protection Act. Today we are celebrating the new Consumer Protection Bureau officially opening its doors-- so that for the first time there is a cop on the beat ensuring fair play for consumers in the financial marketplace.

But the battle for accountability and transparency is anything but over. Today the House has passed H.R. 1315 the ‘Consumer Financial Protection Safety and Soundness Improvement Act’-- a bill title that would make George Orwell blush. In fact, HR 1315 would cut the CFPB off at the knees, and make it impossible for it to do the job we need it to: standing up for Main Street, even when Wall Street doesn’t want it to.

Earlier this week, we released a poll with AARP and the Center for Responsible Lending that demonstrates widespread support for the CFPB and Wall Street reform. By a 3 to 1 margin Americans want financial firms held accountable and financial reforms to take effect. And they want the CFPB-- created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010-- to be up and running. By overwhelming margins and across the political spectrum they want the CFPB to make credit offers clearer, they want rules the road for all kinds of financial companies, and they want an end to tricks and traps.

Public Citizen was even more brutal in its assessment-- and even more on target. Bartlett Naylor, Public Citizen's Financial Policy Counsel:
Public Citizen deplores the shameful vote in the House of Representatives today to emasculate the new Consumer Financial Protection Bureau. A House majority that votes against the interests of its own constituents who continue to suffer massive unemployment from the bank-caused recession has clearly lost its moral compass.
There’s only one constituency that favors gutting the CFPB-- abusive bankers. Unfortunately, the banking industry continues to funnel some of its profits into a lobby offensive to dismantle the new consumer agency so as to shield itself from the new cop on the beat enacted in the year-old Dodd-Frank law. And it paid off today.

Obama claims he will veto the bill if it ever gets through the Senate.

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At 6:07 AM, Blogger Stephen Kriz said...

The Garn-St. Germain Act of 1982 set in motion the S&L debacle of the late 1980s and early 1990s. The repeal of Glass-Steagall and passage of Gramm-Leach-Bliley in 1999, set in motion the forces that led to the economic meltdown of 2008. When are people going to understand that sensible financial regulation is absolutely necessary or these banksters will take down the American economy every time, left to their own devices?


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