Why do Wall Street lobbyists make the big bucks? One reason may be the unembarrassed ability to spin, to cast bad policy as good medicine. Sometimes, they even proffer “facts” from an alternate universe.
On June 8, the House of Representatives debated HR 10, the Financial CHOICE Act. This 600-page measure largely repeals the 2010 Wall Street Reform and Consumer Protection Act. The Volcker Rule restriction on bank gambling with consumer deposits? Gone. Power for regulators to respond to new financial shenanigans? Gone. Limits on banker pay that promotes reckless bets? Also gone.
To all Americans, especially the millions who lost their homes, their jobs, and their savings, Wall Street is no easy industry to champion on the floor of the House.
To defend this Wall Street gift, House Republicans adopted gymnastic rhetoric, even fabrication. Undoubtedly, the 3000+ bank lobbyists swarming Washington billed overtime with talking points.
Here are some:
Predatory lenders seduced homebuyers into expensive loans, inflating a housing bubble. When enough homeowners defaulted and the bubble burst, the economy entered a Great Recession, erasing $20 trillion from the economy. In response, Congress created the Consumer Financial Protection Bureau, mandated to protect consumers. The CFPB has returned some $12 billion to 29 million consumers scammed by financial firms.
Republican spin: The CFPB is unaccountable, a rogue Washington agency.
Since the Great Recession following the 2008 Wall Street crash and enactment of reform in 2010, the economy has added jobs for 85 straight months and the stock market is at record highs on strong corporate profits.
Republican spin: This is the most tepid recover in history.
Bank lending has hit record highs.
Republican spin: Regulation has clotted the arteries of loan making.
Community bank lending is robust.
Republican spin: Community banks are buried under a mountain of new rules, and have replaced loan-makers with compliance officers.
Since Congress approved interstate banking, mergers have led to a reduction in the total number of banks.
Republican spin: Wall Street reform has reduced the number of banks.
During the 2008 crisis, officials in the Bush Administration arranged mergers between some of the biggest financial institutions. For example, Washington Mutual and Bear Stearns became part of JPMorgan Chase. The 2010 Wall Street Reform Act empowered regulators to break up the mega-banks.
Republican spin: Wall Street reform made the big banks bigger.
Wall Street brokers skim an estimated $17 billion a year from retirement savers by steering them to more expensive investments that pay the brokers a better commission. The Department of Labor’s new rule requires these brokers to put their customers’ interests first.
Republican spin: This measure hurts lower income savers (since they’re less profitable).
Mandatory arbitration clauses in contracts such as for a banking account bar victims from suing for misconduct in court, either separately or in class actions. That even applied to Wells Fargo, which created millions of unwanted accounts for existing customers.
Republican spin: This bill gives consumers “choice” by permitting mandatory arbitration.
Shareholders have the right to file proposals with companies they own. One common reform calls for separating the positions of chair and CEO of a firm, given that the CEO can hardly supervise himself.
Republican spin: Managers should focus on business, not nettlesome shareholder proposals.
Bankers made reckless loans and gambles to pocket enormous bonuses. Even the five senior executives at Bear Stearns and Lehman Brothers pocketed some $200 million each in the eight years before the firms failed. Among the reforms is disclosure of the CEO pay as a multiple of the median-paid employee. More than 200,000 investors have petitioned in support of this modest disclosure.
Republican spin: Investors don’t care about CEO disclosure.
Zero Democrats voted for this bill. They labelled the bill “rotten to the core” (Rep. Maxine Waters, D-Calif.); a “bloodthirsty predator” (Rep. Gwen Moore, D-Wisc.); “dangerous” (Minority Leader Nancy Pelosi, D-Calif), the “single worst legislation I’ve seen” (Rep. Stephen Lynch, D-Mass); a “pharmacy of poison pills” (Rep. Brad Sherman, D-Calif.); and more. All of them called it the “Wrong Choice Act.”
One Republican, namely, Rep. Walter B Jones (R-N.C.), also vote against the Choice Act. Earlier, he joined with Rep. Marcy Kaptur (D-Ohio) to propose substituting the Choice Act with a bill to reinstate the Glass-Steagall separation of commercial and investment banking. The House Rules committee blocked it from coming to a vote on the House floor. Restoring banking to its core function of directing customer deposits made cheap and abundant by taxpayer-backed insurance (through the Federal Deposit Insurance Corp.) to business and consumer lending make sense. It also breaks up the very largest banks.
No amount of cosmetic surgery by Wall Street lobbyists can mask the existing problem that the behemoth banks remain too big to fail. Even Rep. Jeb Hensarling, (R-Texas), chair of the House Financial Services Committee and chief author of the bill, refers to the “too big to fail banks.” Other Republicans also use the phrase. The Choice Act contains a tissue of protection, namely an invitation for banks to maintain assets 10 percent greater than liabilities, in exchange for less reporting. If they decline the invitation, then even the Choice Act can’t pretend to solve the problem of “too big to fail.”
Sentient Republicans must have been uncomfortable with this tightly spun bill. Perhaps the most persuasive talking point left unspoken: the bill isn’t going anywhere. In other words, as with the 60+ times the House repealed Obamacare before the Trump administration, since the vote to repeal Wall Street reform wouldn’t actually change law, supporters won’t be held to account for the damage. As is the discourse on much of financial policy, the Choice Act and its fabricated promises won’t interrupt any dinner conversations in the heartland. Instead, it remains a profitable if dangerous spin class for Washington’s bank lobby.