It's been six years since Wall Street's recklessness and criminal fraud caused trillions of dollars in economic damage and nearly shattered the global economy. The 2008 financial crisis opened millions of Americans' eyes to the widespread corruption and mismanagement in the financial industry, and built public support for stronger bank oversight. Initial steps were taken in that direction, primarily in the Dodd/Frank financial reform bill, and more remains to be done.
But today Wall Street is on the offensive. Banks are expanding their political influence, fighting to roll back the measures already in place and working to block further reforms. In our money-driven political system, they have plenty of ammunition with which to wage their battle.
Bankers still hold powerful government positions, just as they've done in the last several Republican and Democratic administrations. “Regulatory capture” has led top banking watchdogs to claim that they are not “cops on the beat,” when that is exactly what they're supposed to be. And after this year's Republican electoral sweep, Wall Street is moving to consolidate its wins.
This week its allies were trying to kill a Dodd/Frank provision designed to reduce the need for future big-bank bailouts. Negotiators seeking to avert a government shutdown had inserted a provision into the compromise agreement which would once again allow the country's too-big-to-fail banks to gamble on derivatives – the exotic financial instruments which helped precipitate the last crisis – with funds that are insured by taxpayers.
The amendment in question, which would have repealed a measure known as the “swaps push-out rule,” was largely written by lobbyists for Citigroup. It was backed by Republican Rep. Jeb Hensarling, Chair of the House Financial Services Committee. Hensarling's Democratic counterpart, Rep. Maxine Waters, released a statement that said in part:
“I am disgusted that in a back room deal, some members and lobbyists for the largest banks are trying to undo a seminal component of the Wall Street Reform Act … I'm disheartened that, by trying to pass this repeal, this Congress is risking our homes, jobs and retirement savings once again."
Republicans, led by Hensarling, are the bad actors in this week's drama. But party lines get murky where Wall Street money is concerned. The Citigroup amendment was originally introduced by Rep. Jim Himes, a Democrat, and there are Democrats on both sides of this battle. As Rep. Waters declared in her statement,
“Although Democrats enacted comprehensive oversight and changes for our derivatives markets as part of Dodd-Frank, some are using critical legislation that is necessary to keep our government open as an opportunity to ram through harmful deregulation.”
This issue is extremely important on its own merits. But it's also a test of Wall Street's influence as Republicans prepare to assume control over the Senate. Bankers have the opportunity to consolidate their control over government to an extent we haven't seen since 2008. The only thing standing in their way is a phalanx of progressive leaders on the Hill.
No wonder they and their media allies have been so vituperative and personal toward Sen. Warren lately. They have attempted and failed, sometimes embarrassingly, to discredit Warren for opposing the appointment of yet another banker to a senior opposition post. That banker, Antonio Weiss, isn't qualified for the job he's being offered. He has helped corporations evade US taxes and is being offered $20 million by his Wall Street employer should he succeed in becoming a “public servant.”
The viciousness of the attacks on Warren should be seen for what they are: the frustrated outcries of Wall Street sycophants who saw the financial industry's complete political resurrection at hand, only to be thwarted by what they perceive as the obstinacy of progressives like Warren.
We are at a pivotal moment in the struggle to restrain the financial industry's toxic blend of recklessness and political influence. Bankers have escaped criminal or financial accountability for their crimes, despite failures and frauds on a scale so epic it's difficult for most of us to envision. And, although the 2008 crisis discredited the bank-friendly ideology of deregulation, that ideology is once again being promoted aggressively in politics and the media.
Bankers have had many political victories since their moment of financial failure, but those victories have been incomplete -- until now. Has their hour come around at last?
If there's one thing bankers understand, it's timing. Wall Street isn't just trying to get another friend into a powerful position and win back its taxpayer guarantees. It wants to make its own agenda appear inevitable. It wants to crush an incipient populist resistance before it gains more momentum. It's moving in for the kill.
That's why it's so important to stop the Citigroup amendment and block the appointment of Antonio Weiss. Both actions are more than justified on their own merits. But the stakes are even larger than they may initially appear. And if the banks win, everybody else loses.