Financial Reform Newsletter
January 23, 2014
Don’t be misled by the spin: Wall Street’s war on financial reform continues. The too-big-to-fail Wall Street banks that would have all collapsed into bankruptcy if taxpayers hadn’t bailed them out of their reckless trading and investments in 2008 are pushing a new fairy tale: Washington went to war against Wall Street (after Wall Street caused the worst financial crash since 1929 and the worst economy since the Great Depression). What is the end of this fairy tale? Washington won; Wall Street lost and there’s little for regulators or Main Street to worry about now. Those big, bad Wall Street banks are now regulated and humbled. This would be a great story if it were true, but, as Better Markets President and CEO Dennis Kelleher points out, Wall Street has fought and continues to fight every new law, rule and regulation necessary to protect Main Street from Wall Street and prevent another financial crisis. Wall Street’s fairy tale is designed to prevent it from being properly regulated and policed. As others have also pointed out here, here and here, this fairy tale ignores that “Wall Street’s too big to fail banks simply have too much money at stake, literally hundreds of billions if not trillions of dollars, to stop fighting” even the most sensible reform.
The cost to America’s families of the Wall Street-caused financial crisis continues to rise. In 2012, Better Markets published the first report on the cost of the financial crisis to the U.S., showing it was going to be more than $12.8 trillion. That cost of course will never reflect the human suffering of tens of millions of Americans who lost jobs, medical care, college educations, savings, retirements, homes and so much more. The Federal Reserve Bank of Dallas and the GAO also issued reports putting the costs at a similar or higher number. A column in the New York Times discusses these studies and highlights the fact that many of those costs continue to rise, maybe resulting in “as much as $120,000 for every man, woman and child in the U.S..” This is critically important because the whole point of financial reform is to make sure that such a catastrophe never happens again to our country. It is also an important rebuttal to Wall Street’s unending complaints about the supposed costs of financial reform to it, never mentioning the staggering costs of the crisis to America. So, “every time you hear about the need to balance the costs of new financial regulation [to Wall Street] against their benefits [to Main Street], it might do well to think about” the real costs of the crisis.
Who’s got the lust? As we approach February 14th, you’ll hear a lot about lust. However, few will think of “bloodlust” and even fewer would think the following statement would be an example of it: “By any objective measure, [JP Morgan Chase’s CEO] Jamie Dimon should be fired. The compliance failures are egregious and systemic.” On its own and in context, that statement by Dennis Kelleher hardly constitutes “bloodlust.” Yet, that is exactly what New York Times columnist and Dealbook Editor in Chief Andrew Ross Sorkin wrote about Mr. Kelleher’s comment in a column defending Mr. Dimon. While others have taken issue with the column, no one has analyzed the “lust” aspect as well as Professor William K. Black in a brilliant piece that is equal parts hilarious and outraged.
Better Markets continues to lead the charge for Congress to fully fund the Wall Street cops. When Congress voted last week on the federal budget, it once again refused to fully fund the SEC and CFTC. While much of the media coverage focused on the budget bill itself, Better Markets’ position that the agencies must be better funded to police Wall Street received significant coverage. The agencies “have been given responsibility for some of the most important regulation to protect against another crash,” quoted the New York Times. The Financial Times quoted that Wall Street regulators are “funded at a level to fail.” And, the Guardian quoted, “The only reason not to fully fund the CFTC and the SEC is to protect Wall Street profits, bonuses and reckless trading.” Finally, and most importantly, as USA Today quoted, underfunding the SEC and CFTC “puts Americans at needless risk of another financial crisis.” If Congress is serious about protecting its constituents from the Wall Street crime spree, it must support full funding for the financial regulators to get enough cops back on the beat.
Some recent Better Markets news coverage:
Recession’s True Cost Is Still Being Tallied: The New York Times by Eduardo Porter 1/221/2014
US Regulators ‘Funded at a Level to Fail: Financial Times by Joe Morris 1/19/2014
Budget Deal Puts Squeeze on Financial Regulators: USA Today by Paul Davidson 1/14/2014
Wall Street Regulators Still “Funded at a Level to Fail”: Moyers & Company 1/21/2014
New Spending Deal Stiffs Agencies that Protect Taxpayers from Corporate Greed: Think Progress by Alan Pike 1/15/2014
Why Wall Street Wants You to Think It Lost the War Over Regulation: The Los Angeles Times by Michael Hiltzik 1/20/2014
Politico Celebrates Washington’s Imaginary Victory Over Wall Street: Huffington Post by Mark Gongloff 1/16/2014
What Would It Take To Get Andrew Ross Sorkin To Call For Jamie Dimon To Resign?: New Economic Perspectives by William K. Black 1/17/2014
Trade group backs down on lawsuit as regulators revise Volcker rule provision: The Washington Post by Danielle Douglas 1/15/2014
An Occupy Wall Street Offshoot Has Its Day: The New York Times by Simon Johnson 1/16/2014
Some other things that might interest you:
Nothing Can Dent the Divine Right of Bankers: Financial Times by Philip Stephens 1/16/2014
Too Small to Matter?: Bloomberg by Simon Johnson 1/14/2014
To Gut Conflict Minerals Rule, Trade Associations Turn to First Amendment: Al Jazeera America by Ciara Torres-Spelliscy 1/18/2014
Why Are Banks Being Let Off the Hook?: Financial Times by Cornelius Hurley 1/17/2014
I Thought Deutsche Bank Swore Off Crime for Two Years: Bloomberg by Jonathan Weil 1/15/2014
January 23, 2014
Financial Reform Newsletter – January 23, 2014