Wall Street’s appetite for profits is insatiable. Don’t expect the titans of finance to say “Enough” when it comes to their “earnings.” The word isn’t in their vocabulary.
Here’s a case in point, an outrageous one.
Last year the Democratic-controlled Congress passed the Dodd-Frank bill (named after its two principal sponsors, then-Sen. Chris Dodd and Rep. Barney Frank) that placed some limits on the power of Wall Street.
It wasn’t a tough bill by any means. It didn’t kill the goose laying the golden eggs. Wall Street, in fact, is still making record profits, doling out lavish compensation packages to its executives, and doing many of the same things that got us into this crisis in the first place.
What the bill did do is increase capital requirements (the amount of money financial institutions have to put aside for losses); impose some restrictions on executive compensation; put some limits on risky trading; and rein in rating agencies such as Standard and Poor’s that in the lead-up to the crisis received fees from the very financial institutions whose creditworthiness they were supposed to rate.
Dodd-Frank also set up an oversight board composed of members of the existing regulatory agencies led by the Federal Reserve Bank. The board has two roles, according to the bill. One is to assess the level of so-called systemic risk – the danger of a system-wide financial implosion like what occurred in 2008. The other is to take preventive measures against financial institutions – investment and commercial banks, mutual funds, hedge funds, etc. – including shutting them down, if their actions endanger the economy.
Dodd-Frank also established a Consumer Financial Protection Bureau to write and enforce requirements for consumer loans and other consumer credit products in order to prevent fraudulent lender practices.
The passage of this bill was a good day’s work. But again, it is modest in its impact and scope.
It could have drastically curbed the use of derivatives – Warren Buffet’s “financial weapons of mass destruction.” It could have illegalized hedge funds. It could have established an independent regulatory board rather than one picked from the Federal Reserve Board and other existing regulatory agencies. And it could have either broken up mega financial institutions or, better yet, turned them into public utilities.
But it regrettably, though not surprisingly, stopped far short of enacting these more radical, but necessary and democratic, measures. The financial industry was given a slap on the wrist, but it wasn’t taken to the woodshed.
Still, even this bill was too much for the lords of finance capital to stomach. No sooner had it passed than the Wall Street machine went into overdrive to drastically weaken, if not crush, its implementation.
If you don’t believe me, look no further than the industry’s first-quarter lobbying tally this year. It is the second highest ever spent on political lobbying, according to the Center for Responsive Politics.
A review of the data shows that the biggest financial firms and trade associations collectively spent $27 million in the three months ending March 31 this year. That’s a 2.7 percent increase from the $26.3 million spent in the comparable period in 2010.
In other words, finance capital is spending more to weaken Dodd-Frank and its implementation than it spent in the first quarter a year ago when Congress was writing the bill.
Like foremen in industry who are paid to gut the spirit and letter of provisions in a union contract that favor labor, this gang of lobbyists is doing everything that they can to do the same with respect to Dodd-Frank.
Joining them in this full-bore attack are Republicans in Congress who, in the face of overwhelming evidence of the need for financial reform, strenuously oppose even the most modest restrictions on financial institutions.
What is striking is not that finance capital let its dogs out and that they are doing its dirty work. We expect that from the captains of finance.
Nor is it that Wall Street is resistant to reforms that might bring some stability and rationality to the financial system.
Nor is it that the Republican Party has turned into a cesspool of right-wing extremism, which in its outlook and policies does the bidding of finance capital and other reactionary sections of the capitalist class.
What is striking is that in the present era of capitalist development even small victories on the progressive side of the ledger are never secure. And the only thing that will change this is people’s politicians and popular legislative majorities fighting “the good fight” within the halls of Congress in concert with an aroused, sustained and united struggle of millions outside the halls of Congress.
Photo: The Wall Street bull sees red when it comes to any restrictions whatsoever. Doug LeMoine CC 2.0