"We've seen battalions of financial industry lobbyists...firms spend[ing] millions to influence the outcome of this debate....I believe we can and must put this kind of cynical politics aside." -President Obama's speech to Wall Street, Cooper Union, April 22, 2010.
Put cynical politics aside? Clearly, that is so 2010. The New York Times reported Monday that Mr. Obama had a recent White House meeting with two dozen deep-pocketed Wall Street executives to get their thoughts on fixing the economy. And it's unlikely he will use the phrase "fat cat bankers," as he did in late 2009, when he dines later this month with members of the financial elite, i.e., potential campaign donors, at the famed Manhattan restaurant Daniel.
This news is just the latest example of how the "wizards" of Wall Street and their Washington allies continue to win -- their clout seemingly undiminished -- in the face of spectacular failure. Here's a round-up.
Gaming Financial Reform
Last year, those lobbying "battalions" were trying to gut financial reform legislation. Now they're busily trying to weaken enforcement and find loopholes. The HuffPost's Marcus Baram reported last week that regulators are giving Wall Street "temporary relief" on certain derivatives -- "security-based swaps" -- after what he called "intense lobbying." The New York Times this weekend had a near farcical tale of financial firms trying to convince regulators that they are not "too big to fail", that instead they are too small and too insignificant to regulate. Being too big now triggers various rules that these firms want to avoid. The Times quotes one government official as saying the firms present themselves "...as if they are the Sisters of the Charity." The paper notes that the final decisions on who is "too big" won't come until mid-next year -- earliest - with the delay, of course, benefitting the firms. And meanwhile the biggest of the big, those that don't have a chance in successfully arguing they're too small to regulate, remain dangerously large, according to the former Special Inspector General for the Troubled Asset Relief Program. Neil Barofsky tells Corporate Crime Reporter that "[t]he largest banks are now 20 percent larger today than they were going into the crisis." He blames Treasury Secretary Tim Geithner (who has intimate Wall Street ties) for lobbying Senators against a bill that would have limited bank size.
Ms. Warren Goes To Washington
Banking lobbyists and allied politicians have attempted to brand financial consumer advocate Elizabeth Warren an enemy to business for succeeding in her push to create a Consumer Financial Protection Bureau. At a House hearing last month, Rep. Patrick McHenry (R-NC) effectively called Warren a liar over a scheduling dispute. This came two weeks after the House Financial Services Committee passed three bills aimed at weakening the CFPB before the agency even gets off the ground. Warren's opponents are determined to keep her out as the agency's head. Whether Mr. Obama nominates her or not, Warren has become of a hero of progressives and has been urged to consider a Senate run in Massachusetts next year.
The Revolving Door Goes Round and Round....
Last month came word that former New Hampshire Senator Judd Gregg (and TARP negotiator) would be joining Goldman Sachs as an "international advisor". Goldman touted Gregg's relevant "experience" -- which isn't in finance, of course, but in the halls of Congress. He was ranking Republican on Appropriations, Banking, and other committees. Gregg follows former Obama budget director Peter Orszag, who joined Citigroup late last year -- proof that Wall Street is keen on collecting influential operators from both parties. And research described this week by the Huff Post's Dan Froomkin shows why financial firms seek out insiders - from top players to lower-level staffers. He cites recent work by IMF economists Deniz Igan and Prachi Mishra, who found that when it came to watering down financial regulation leading up to the crash, "what mattered even more than the amount of lobbying was whether legislators were being lobbied by former members of their own staff." In other words, when a firm like Goldman offers high salaries for highly-connected Washington staffers, or better still, former Senators like Judd Gregg, it is money very well spent.
Later this month, a few miles uptown from Goldman headquarters, the president will reportedly gather for a meal with Wall Street donors. Daniel has a menu with things like "Crispy Scottish Langoustines" and "A Trio of Milk-Fed Pig from Quebec", the kind of place where a single dinner can cost more than some struggling families spend on food in a whole month. While average citizens sit around their dinner table talking about unemployment, the finance folks who dine regularly at Daniel are typically far more concerned about, say, hedge fund regulation and capital gains tax rates. Wall Street -- and cynical politics -- wins again.