Rather than providing a terrifying wakeup call to reshape our financial system, the economic meltdown turned out to be a boon to bank lobbyists.
The fight for financial reform looks like it will be a long war.
Who won the first battle? The too-big-to-fail bankers, who spared no expense in protecting their interests. Now they’re stronger than ever, and the job of regulating them has largely been turned over to the same regulators who failed to protect the country from the recent debacle.
House and Senate conferees are still haggling over the final details. In the latest “compromise” to emerge, Rep. Barney Frank has given up fighting for an independent consumer financial protection agency, agreeing with the Senate proposal to house consumer protection within the Federal Reserve.
It hasn’t helped that the man who was supposed to lead the charge – President Obama – has largely been missing in action. An independent consumer financial agency was once a linchpin of President Obama’s financial reform package. But it’s gone the way of other provisions that the big banks opposed. The president also once threatened to veto reform if it didn’t contain strong derivatives regulation, now the administration is actually working to undermine it.
One of the most articulate advocates of a stronger overhaul of the financial system isn’t waiting around to see the final bill to declare a verdict. Baseline Scenario’s Simon Johnson declares the reform effort a failure. Rather than joining with a handful of congressman and senators fighting for a more robust overhaul, Johnson concludes that the White House “punted, repeatedly, and elected instead for a veneer of superficial tweaking.”
Now the focus of financial industry lobbying will shift to the regulators, who will have the task of writing the new rules the administration and Congress balked at providing. The conference committee is televising its proceedings. It’s not a pretty picture, as when Texas Republican congressman Jeb Hensarling argued to gut some controls on bankers’ compensation out of concern that the federal government would be setting bank tellers’ pay.
If you have a strong stomach, you can view the remaining sessions here. The Democrats want the negotiations wrapped up by July 4.