TEXT OF COMMENTARY
Kai Ryssdal: House Financial Services Committee Chairman Barney Frank struck a blow against Washington’s revolving door today. He publicly blasted a former staff member who quit to go work for the derivatives industry. Frank said nobody who’s on his staff now can even talk to the guy.
Before he went to work for Frank, by the way, the guy lobbied on Capitol Hill for the Bond Market Association. Point being that despite the financial crisis, the financial lobbying industry’s doing just fine.
So well, in fact, that commentator Mike Konczal says given the way the various reform bills are shaping up, their lobbying work is done.
Mike Konczal: The financial industry poured $500 million into lobbying lawmakers on the new financial reform bill. And it was money well spent.
They derailed President Obama’s idea of an independent agency to protect consumers from abusive financial products.
Instead, a bureau at the Federal Reserve is supposed to protect consumers. By definition, these regulators worry more about banks than about families. And a separate council of bank regulators will be able to veto whatever that bureau does.
This law doesn’t limit the size of the largest banks or the types of risks they can take. Instead, that’s left to reluctant regulators who won’t want to take away the punch bowl while the party’s going.
President Obama wanted to adopt something called the Volcker rule. Banks would have to stop taking the sorts of risks that almost toppled our system. And bank size would be capped against GDP. But that’s not in the bill.
Instead regulators are supposed to study the proposal, and then vote on it. These are the same Fed regulators that let banks take all kinds of risks in the first place. So, there’s no need to fear any real structural changes to the financial markets.
As far as dismantling a failed bank, the industry will have to pay $50 billion into an SOS fund. But there’s no way that kind of money will cover the real costs. And just how regulators would unwind a major bank is untested.
That just emboldens the banks to keep taking financial risks while figuring taxpayers will pick up the tab.
This legislation doesn’t do the very thing it was supposed to: prevent another financial meltdown that takes us down with it. There’s only one clear winner here and that’s the financial services industry. So their lobbyists can just say, eh, and go home.
RYSSDAL: Mike Konczal is a research fellow at the Roosevelt Institute in New York City.
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