Just over a year after the financial meltdown spurred government bailouts, loans and guarantees worth a staggering $17.5 trillion to the financial industry, leaders in the field are finally paying consumers back.
How? They're fighting hard against a Consumer Financial Protection Agency and gutting what reform advocates say is any meaningful oversight of the wild-and-wooly $450 trillion "derivatives" market that sunk the world economy.
The House Financial Services Committee will be marking up the bills addressing these controversies this week.
"This is a David and Goliath fight," says Heather Booth, executive director of the Americans for Financial Reform coalition, which includes major labor groups and aims to push for genuine reform. "The biggest banks that created the circumstances that led to greater misery, people losing their jobs and seeing their communities deteriorate, those circumstances have not been changed and there needs to be real reform and structural change."
The financial industry has already found willing Democrats and Republicans on that key House financial committee, often boosted with large campaign donations, willing to help water down key elements of the president's reform proposals. Among other measures that have been stripped out already is a provision guaranteeing that consumers can get simplified, "plain vanilla" loans, and now there's a push underway to exempt in practice most derivatives from oversight through an assortment of clever loopholes.
As Public Citizen reported, there have been plenty of opportunities to get the industry perspective since lobbyists affiliated with the industry have hosted 70 fundraisers for members of Congress since inauguration day through June, and these TARP-receiving execs and their DC lobbyists have forked over at least $6 million in campaign donations during the same time period.
One of the leading recipients is Rep. Melissa Bean (D-IL), who received 43% of her $640,000 in donations in 2009 from the financial services industry, according to the Sunlight Foundation. Coincidentally, she's also a leader of the centrist New Democrats in Congress working in a few ways to weaken the president's plans: by exempting derivatives from regulatory oversight if they've been issued for vaguely defined "risk management" purposes, and undermine the goal of the consumer protection agency by allowing it to pre-empt stronger state laws and enforcement.
And some observers, including the reformist former IMF economist Simon Johnson , say the political will for sweeping changes has ebbed as the stock markets and big banks have stabilized -- even as unemployment, foreclosures and credit shortages mount. So there's a daunting public awareness, messaging and mobilizing challenge that lies ahead for progressives.
Despite the odds they're facing this week, Public Citizen, among other groups,, sent out alerts to its 100,000 members calling for them to contact their representatives to back a strong bill:
Unbelievable. The corporate banks and financial institutions on Wall Street that took our economy to the brink of collapse are now spending millions to defeat reform that would crack down on their predatory practices. They don't want a federal agency looking out for consumers, so they are swarming Capitol Hill in an attempt to defeat the much-needed Consumer Financial Protection Agency.
This week, a House committee holds an important vote on Rep. Barney Frank's (D-Mass.) bill to create a watchdog agency for us. Help us urge lawmakers to pass the strongest possible Consumer Financial Protection Agency Act (H.R. 3126) on Wednesday!
Shockingly, some in Congress are siding with the big banks to undermine reform. Rep. Melissa Bean (D-Ill.) is planning to introduce an amendment that would strip the right of states to protect their consumers more than federal law. This is exactly what got us into this mess: The financial industry concentrated on lobbying in Washington, while consumers living in states where voters want more consumer protections and a better environment for community banks were powerless.
Too much is at stake to allow Congress to cave in to Wall Street lobbyists. Contact your member of Congress today!
The pre-emption issue has sharply divided Democrats, the Wall Street Journal reports:
Democrats are split over whether the proposal should allow states to trump federal regulations and enforce their own, often tougher consumer rules against national banks, such as Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co. This would permit states to bar certain fees and late charges otherwise allowed by federal regulators.
The issue has become a flashpoint in the debate and a problem for divided Democrats, who are trying to marshal support for a White House proposal struggling for momentum. And it comes as Treasury Department officials plan their own push this month to revive interest in their overhaul effort. They fear a drawn-out debate could bog down the process. Treasury Secretary Timothy Geithner is holding a series of meetings with Democrats to bolster support...
This week before the House Financial Services Committee could be an important first test of the clout of President Obama and grassroots groups to secure a strong consumer agency against the wishes of sophisticated, well-funded business lobbyists who are draping themselves in the mantle of reform. Even while saying they're for reform, the Chamber of Commerce is spending $2 million in attack ads claiming that the new agency would hamstring even your local butcher (as if they still exist) from extending you credit for a week. It's the "death panels" approach brought to the even more arcane issue of financial reform.
Obama essentially called out the Chamber of Commerce Friday in a speech renewing his demand for reform that was, unfortunately for advocates, largely swamped by the far bigger news of the President winning the Nobel Prize for Peace.
But despite the overwhelming business firepower aimed at financial reform, as Heather Booth reminds audiences, in the David vs. Goliath battle, "We know how that turned out."
To learn more about this upcoming battle over financial reform, see my article in the Working In These Times blog.