Here’s the crucial thing to remember about financial reform: the status quo previous to the Dodd–Frank Wall Street Reform and Consumer Protection Act financial reform bill was entirely favorable to Wall Street and the largest banks.
The major, serial bailouts of 2008 were not the result of some unelected, socialist technocrats hidden away in a government basement somewhere exploiting a loophole. They were the results of GOP-appointed Hank Paulson, GOP-appointed Sheila Bair and GOP-appointed Ben Bernanke, all with the support of a Bush White House-sponsored EESA going to Congress and asking that an emergency bill be passed to allow for TARP. If this all happens all over again, and it could, there’s nothing to stop the government from going to Congress and demanding more money for the financial system. Congress can always pass new laws in an emergency, even if it means overturning old laws. The only way to stop this is through prudential regulation on the front end, separating out business lines that need a set of Federal insurance and those that don’t, and a resolution mechanism that is earlier and reduces uncertainty on the backend.
The GOP is opposed to all this. They have already signaled to Wall Street that, starting the morning of November 3rd, 2010, the GOP will be the party that fights sensible Wall Street reform and returns us to the world of 2009, the world most favorable to Wall Street.
The two top recipients of money from companies receiving TARP funds are the top two House Republicans, Minority Leader John A. Boehner (Ohio) with $200,000 and Republican Whip Eric Cantor (Va.) with $187,000. They are followed by the ranking members of two key House committees, Spencer Bachus (Ala.) on Financial Services and Dave Camp (Mich.) on the tax-writing committee…
Zach Carter wrote at length about Republicans who voted for TARP, against financial reform and have been rewarded by Wall Street handsomely. Boehner, Cantor, Bachus and Camp are all on the list.
But what are the actual goals for the repeal? Pat Garofalo writes about what will likely be the initial strategy:
House Republicans have already made it quite clear that they would repeal Dodd-Frank if they could, and at the very least they’d like to see the newly created Consumer Financial Protection Bureau defunded. But bogging down the regulatory agencies in an avalanche of paperwork and hearing appearances is an obvious avenue for preventing Dodd-Frank’s rules from coming online, should the repeal effort fall flat (which it likely will, as President Obama would almost surely veto any repeal, even if it got through both houses of Congress).
In a sign of potential things to come, Rep. Spencer Bachus (R-AL), who is slated to take over the House Financial Services Committee if the Republicans gain a majority, has already been begging the banks for donations, on the premise that the GOP believes financial reform was too tough.
What else will they focus on? From the Wall Street Journal marketwatch, Wall St. banking on GOP to ease new rules (what a title!):
Dan Crowley, a partner at K&L Gates LLP in Washington, says Wall Street is putting its money behind conservative candidates in the hopes that Republican control of the House will change the agenda on Capitol Hill and put a spotlight on implementation of the new banking rules, primarily through aggressive congressional oversight…
For example, one controversial measure in the bank reform law, dubbed the “Volcker Rule” after its author, former Federal Reserve Chairman Paul Volcker, is intended to limit big insured banks’ speculative proprietary derivatives and stock investments. The measure is strongly opposed by the financial sector, in part, because it also forces banks to sell majority interests in hedge funds….
“They [Republicans] can pressure the Fed, they can bring [Fed Chairman Ben] Bernanke and the Fed governors and harangue them on the Volcker rule and other issues,” Baker said.
We’ll talk in the future about the specific battles that will be fought over resolution authority, derivatives trading and consumer financial protection. But needless to say, these battles are coming, and the new outcomes that the Republicans will be fighting for are likely to be written directly from Wall Street.