Will the Banks' Word Be Law? Wall Street Drafts Reform Rollback Bills
A dispatch from the Dodd-Frank wars in our nation's capital: Big banks seeking to roll back financial reform have returned to lawmakers' good graces -- not just Republicans, who opposed the regulatory bill in the first place, but many Democrats, too.
The New York Times reports that a bill recently approved by the House Financial Services Committee, despite opposition from the Treasury Department, "was essentially Citigroup's (C)":
In a sign of Wall Street's resurgent influence in Washington, Citigroup's recommendations were reflected in more than 70 lines of the House committee's 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word. (Lawmakers changed two words to make them plural.)
Citigroup was the megabank that received the most taxpayer assistance during the financial crisis, a fact perhaps related to the very same lobbying practices now being used to rein in regulation: According to Reuters, a study published by the National Bureau of Economic Research in 2011 found that "The more aggressively a bank lobbied before the financial crisis, the worse its loans performed during the economic downturn -- and the more bailout dollars it received." Now, despite its former status as the basket case of Wall Street, Citigroup and its hired guns are welcome on Capitol Hill, weighing in on and even drafting bills -- like one the House committee signed off on earlier this month, exempting several classes of derivatives from a rule intended to prevent government insurance from backstopping risky trades.
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In addition to crafting new legislation, bank lobbyists have for the last three years been targeting the regulatory entities tasked with figuring out how to implement the exiting law. The campaign against Dodd-Frank, in other words, is a pincer movement, coordinated and methodical. Its success so far is striking: Of the 398 rules the legislation requires, only 153 have been finalized, according to the Times.
Republicans, as mentioned, never liked Dodd-Frank, but House Democrats seem to have undergone a shift on the issue. While Rep. Maxine Waters (D-Calif.), the ranking Democrat on the House Financial Services Committee, opposed the change to derivatives regulation, most other Democrats on the committee supported it. One self-evident reason why: That committee is an obvious focus for Wall Street's political operations when it comes to campaign contributions. One of its members, and a magnet for bank money, was quite open about this to the Times, offering one of the more remarkable quotes by a denizen of Congress in recent memory:
"I won't dispute for one second the problems of a system that demands immense amount of fund-raisers by its legislators," said Representative Jim Himes, a third-term Democrat of Connecticut, who supported the recent industry-backed bills and leads the party's fund-raising efforts in the House. A member of the Financial Services Committee and a former banker at Goldman Sachs, he is one of the top recipients of Wall Street donations. "It's appalling, it's disgusting, it's wasteful and it opens the possibility of conflicts of interest and corruption. It's unfortunately the world we live in."
The Occupiers and the good governance advocates will have to find new rhetoric: fatalism aside, theirs has been appropriated by an embodiment of what they denounce.
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