Wall Street is writing its own regulations

Paul Schwietering
By Paul Schwietering

No institution in history is more susceptible to bribery, in the form of campaign contributions, than the U.S. Congress.  The level of corruption is analogous to what one would expect to find in a police department in Mexico, only the price of the bribes is higher.

A perfect example emerges when one examines the machinations of the House of Representatives Financial Services Committee.  According to news reports (“Banks’ Lobbyists Help in Drafting Financial Bills” by Eric Lipton and Ben Protess, The New York Times, May 24th)  “In a sign of Wall Street’s resurgent influence in Washington, bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations.  Instead, the lobbyists are helping to write it themselves.”

Given the history of the Dodd-Frank “Financial Reform” Bill, which was watered down in committee in both Houses (especially in the Senate by Banking Committee Chairman Christopher Dodd, who promptly retired from the Senate and was rewarded with a lucrative job as a lobbyist), then watered down again on the floor of both Houses before it became law, one would think the Dodd-Frank Bill should be strengthened, not “softened.”  However, anyone who expects Congress to strengthen Dodd-Frank just doesn’t understand how Washington works.

According to Lipton and Protess, “One bill that sailed through the House Financial Services Committee this month – over the objections of the Treasury Department – was essentially Citigroup’s, according to e-mails reviewed by The New York Times.”

“The bank’s recommendations, which were reflected in more than 70 lines of the Committee’s 85 line bill, would exempt broad swaths of trades from new regulation.  Two crucial paragraphs, prepared in conjunction with other Wall Street banks, were copied nearly word for word (Lawmakers changed two words to make them plural).”  The article mentions that “three years after Congress passed the most comprehensive overhaul of financial regulation since the Great Depression, Wall Street is finding Washington a friendlier place.”  Indeed.

The article notes that the swinishness currently on display in Washington is bi-partisan: “The cordial relations now include a growing number of Democrats in both the House and the Senate, whose support the banks need if they want to roll back parts of the 2010 financial overhaul, known as Dodd-Frank.”

However, Lipton and Protess are careful to report that what is happening in the Congressional Committee is only one facet of the banks’ “lobbying” effort;  “The legislative push is a second front, with Wall Street’s other battle being waged against regulators who are drafting detailed rules allowing them to enforce the law.”

“And as its lobbying campaign steps up, the financial industry has doubled its already considerable giving to political causes.  The lawmakers who this month supported the bills championed by Wall Street received twice as much in contributions from financial institutions compared with those who opposed them, according to an analysis of campaign finance records performed by MapLight, a nonprofit group.”

“‘I won’t dispute for one second the problems of a system that demands immense amount of fundraisers (sic) 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 fundraising effort 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’.”

What we are getting from Himes is crocodile tears.  If one substitutes the word “pigsty” for “world,” his description of campaign finance is accurate. So, do we see him fighting to change the system?  No, far from being disgusted, he is content, raising campaign money and happy to wallow in the pen with the other hogs as they go grunting and oinking to the trough.

Lipton and Protess finish by describing the bill and the committee’s actions in more detail:  “Under Dodd-Frank, banks must push some derivatives trading into separate units that are not backed by the government’s insurance fund. The goal was to isolate this risky trading.”

“The provision exempted many derivatives from the requirement, but some Republicans proposed striking the so-called push out provision altogether.  After objections were raised about the Republican plan, Citigroup sent around the bank’s own proposal that simply exempted a wider array of derivatives.  That recommendation, put forth in late 2011, was largely part of the bill approved by the House Committee on May 7th and is now pending before both the Senate and the House.”  To her credit, Maxine Waters (D, CA) led a faction of Democrats in opposition to the bill.

“‘The bill restores the public subsidy to exotic Wall Street activities,’ said Marcus Stanley, the Policy Director of Americans for Financial Reform, a nonprofit group.”

So there it is.  A bank writes its own subsidy plan and sends it to the House Financial Services Committee, which adopts it word for word into legislation which is now pending before both Houses.  90% of Americans have yet to recover from the recession caused by the last Wall Street crash, and Congress is already laying the groundwork for another one.

A couple of years ago Senator Bernie Sanders (I) of Vermont said, “The Senate doesn’t regulate Wall Street, Wall Street regulates the Senate.”  Sanders could have included the House in his statement and it would have remained accurate.

Paul Schwietering is a former Democratic state central committeeman for the 14th state senate district.