There are more than 1800 financial industry lobbyists in Washington. That is more than three lobbyists to hold the hand of each member of Congress. And yet, the financial lobby fears they may be losing control of the financial reform effort.
The Lobbyists Say Congress Is Out of Control
Brady Dennis writes in the Washington Post.
"You've got an environment, six months before an election, where politicians are acting like politicians," said Sam Geduldig, a financial lobbyist and former Republican staffer. "They are viewing any vote as a potential campaign ad. And that might not be good for any of us."
"I think some of this stuff is going to get totally irrational," said one of many lobbyists who spoke on the condition of anonymity to discuss the situation more freely. "Every amendment you hear about is emotionally driven. . . . The Senate has turned from a deliberative body into an emotional reactor."
Among the terms that lobbyists used to describe elements of the legislation: "Draconian." "Crazy." "Insanely unproductive."
What is the Problem?
So, exactly what are the "emotionally driven", "draconian" and "crazy" provisions? Dennis doesn't explain what they are but the inference, reading between the lines, is that these provisions might include:
- Capping the size of banks.
- Separating investment banking, asset management and trading and deposit (commercial) banking into separate business units (essentially reinstitution of Glass-Steagall provisions or the so-called Volcker Rule).
- Establishing a failure process for all financial institutions similar to that of the FDIC (Federal Deposit Insurance Corporation) for commercial banks.
- End the bailout policies that have allowed giant banks to privatize outsized profits and socialize outsized losses.
The Problem for Lobbyists is the Will of the People
Amazing! The above are exactly the things that a majority of American citizens favor. Does that mean that congressional members are actually listening to their constituents? Sometimes that really does happen in the final months before an election.
But still, something that seems quite logical to include in the financial reform legislation was easily voted down this past week. The Kaufman-Brown amendment, which would have required the break-up of the largest banks, was soundly defeated on a bipartisan vote. This caused Barry Ritholtz to propose that there should be new political parties formed based on the vote:
- The Banksters' Party
- The People's Party
- A third group that he left unnamed.
Or should we just draw the conclusion that partisanship is not the only way to do nothing; bipartisanship can get nothing done, as well.
Lobbyists' Solution: Establish Control in the Back Rooms
Dennis reports that lobbyists are now looking to exercise influence over the House-Senate conference process to get more bank friendly provisions incorporated in the legislation. He writes:
Many lobbyists say they are counting on Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) to block what the industry considers extreme or extraneous amendments.
Looking past the Senate debate, industry lobbyists say they hope Frank and the Obama administration can help remove some of the most objectionable provisions that survive the Senate.
"They've got to get this thing off the [Senate] floor and into a reasonable, behind the scenes" discussion, said one lobbyist. "Let's have a few wise fathers sit around the table in some quiet room" and work out the details.
"People are actually saying, 'Well, maybe Barney Frank will fix this in conference,' " added another. "To think Barney Frank would be the voice of reason on this."
The lobbyist chuckled at the thought.
The short version: Remove transparency from the process and we can still get what we want in a back room deal with Reid, McConnell, Frank and a few others.
The Problem for the People is the Lobbies
Matt Taibbi is bemused but not amused by all this. Matt writes in a post at True Slant:
In general, the amount of rhetoric against this bill that sidesteps its actual content is growing to the point of absurdity.
Restated, one could conclude that the lobbyists are the draconian, crazy and extremely unproductive element. But, unfortunately, that doesn't mean they won't end up getting most of what they want, even with an election right around the corner.
Disclosure: No stocks mentioned.