One year after the biggest economic collapse since the Great Depression, Congress is still debating new financial regulations to protect consumers and prevent risk-taking in the financial sector. The House Committee on Financial Services is currently undertaking the important first step of writing, amending and voting on some of the pieces of the long-proposed financial regulatory reform. While debating these issues top committee members have been the recipients of disproportionate campaign contributions from the very industry that they are tasked with regulating.



Twenty-seven committee members have so far received over one-quarter of their contributions from the finance, insurance and real estate (FIRE) sector. This includes Chair Barney Frank, Ranking Member Spencer Bachus, four subcommittee chairs and four subcommittee ranking members. Of the twenty-seven, twelve committee members received over 35% of their contributions in 2009 from the FIRE sector.



Ranking Member Bachus, a crucial decision maker on the committee, received 71% of his campaign contributions from the finance, insurance and real estate (FIRE) sector so far this year. (These numbers run from January 1-June 30.) For his career, the Alabama congressman receives 45% of his contributions from the FIRE sector. Bachus leads the committee in his reliance on FIRE sector campaign contributions. Bachus has taking a position in opposition to most of the regulatory reforms. Bachus recently stated in a hearing, “this is absolutely the wrong time to be creating a new government agency empowered not only to ration credit, but to design the financial products offered to consumers.”



The industry has already had successes this year. Committee consideration of a bill to create a proposed Consumer Financial Protection Agency was delayed after industry trade groups sent a letter to the committee demanding they delay consideration. The bill was later changed to be narrower in focus than the original language.



A Bloomberg report also notes that the derivatives lobby, headed by large banks JPMorganChase, Goldman Sachs and Credit Suisse, worked the New Democrats, including Rep. Melissa Bean, to get changes made to a bill aimed at filling holes in derivative regulation. Officials in the Obama administration stated that the resulting bill, released as a discussion draft, “created too many loopholes and had the potential to exclude all hedge funds and corporate end-users from oversight.” Bean received 42% of her $634,535 in campaign contributions in 2009 from the FIRE sector.

"They can’t pay what they owe!” he began angrily. Then he paused, collected his thoughts and started over: “Tim Geithner saved them on terms extremely favorable to the banks. They should support all of his proposed reforms.”



Mr. Johnson continued, “What gets me is that the banks have continued to oppose consumer protection. How can they be opposed to consumer protection as defined by a man who is the most favorable Treasury secretary they have had in a generation? If he has decided that this is what they need, what moral right do they have to oppose it? It is unconscionable.”



...Starting on Wednesday, the House Financial Services Committee will take up a number of reforms proposed by the Obama administration, hoping to push them through the committee so they can be voted on the House floor as part of a larger financial reform package. Among the proposals the committee will tackle is, yes, the establishment of a new consumer financial protection agency.



The administration’s outline for this new agency-- which would regulate mortgages, credit cards, debit cards, installment loans and any other product issued by a financial institution-- was sent up to Capitol Hill in July. Since then, Barney Frank, the committee chairman, has made a number of substantial changes, none of which, I have to say, have strengthened the proposed legislation. He stripped the bill of the much-promoted “plain vanilla” provision, which would have forced, say, mortgage brokers to offer customers a 30-year fixed mortgage alongside any exotic option A.R.M. mortgage they wanted to push.



He has changed the nature of an oversight panel, so that it would consist of the top bank regulators-- the very same regulators who did such a miserable job looking out for consumers during the housing bubble. He has tinkered with the way the agency will be financed, making it less onerous for the banking industry and more onerous for nonbank financial institutions that will come under the agency’s purview.



Saddest of all-- at least from where I’m sitting-- he abandoned the so-called reasonableness standard, which would have forced bankers to make sure their customers both understood the products they were buying and could afford them. Mr. Frank has said that such a provision would put bankers in an “untenable position.” Yet that is precisely what brokers are required to do when they sell a stock or a bond to their customers. Why shouldn’t the same standard apply to a banker making a mortgage loan?



Part of the reason Mr. Frank made those changes is that he needs the support of conservative Democrats if he hopes to turn this bill into law. But it is also because he felt a need to mollify, at least to some extent, the bank lobby, especially the community bankers who populate every Congressional district in the country. Indeed, in a recent missive to its members, the American Bankers Association trumpeted its success in helping make the bill more palatable to the banking industry... Not long ago, the A.B.A. sent an “action alert” to its member banks, pleading with them to call their congressman in a last-ditch effort to stop the bill. (“Passing more laws that will overly complicate and restrict the products our customers need is detrimental to our banks,” the note read in part.) And even if the bill does pass, the industry is hoping to pervert its purpose, so that it will become a means to stifle competition from nonbank financial institutions.

As Congress debates the measure, 400,000 people ran out of benefits in September and another 208,000 are set to lose them this month, according to the National Employment Law Project. Some 1.4 million people will stop receiving checks by year's end if Congress doesn't act, according to the employment law project.

In most polls, the majority of Americans favor a non-profit alternative-- like Medicare-- that would give the private health industry some competition. So if so many of us, including President Obama himself, want that public option, how come we're not getting one?



Because the medicine that could cure our health care nightmare has been poisoned from Day One - fatally adulterated, thanks to the infamous, Washington revolving door. Movers and shakers rotate between government and the private sector at a speed so dizzying they forget for whom they're supposed to be working.



If you've been watching the Senate Finance Committee's markup sessions, maybe you've noticed a woman sitting behind Committee Chairman Max Baucus. Her name is Liz Fowler.



Fowler used to work for Wellpoint, the largest health insurer in the country. She was its vice president of public policy. Baucus' office failed to mention this in the press release announcing her appointment as senior counsel in February 2008, even though it went on at length about her expertise in "health care policy."



Now she's working for the very committee with the most power to give her old company and the entire industry exactly what they want-- higher profits-- and no competition from alternative non-profit coverage that could lower costs and premiums.



A veteran of the revolving door, Fowler had a previous stint working for Senator Baucus-- before her time at Wellpoint. But wait, there's more. The person who was Baucus top health advisor before he brought back Liz Fowler? Her name is Michelle Easton. And why did she leave the staff of the committee? To go to work-- surprise-- at a firm representing the same company for which Liz Fowler worked-- Wellpoint. As a lobbyist.



You can't tell the players without a scorecard in the old Washington shell game. Lobbyist out, lobbyist in. It's why they always win. They've been plowing this ground for years, but with the broad legislative agenda of the Obama White House - health care, energy, financial reform, the Employee Free Choice Act and more-- the soil has never been so fertile.



The health care industry alone has six lobbyists for every member of Congress and more than 500 of them are former Congressional staff members, according to the Public Accountability Initiative's LittleSis database.



They want a public option about as much as you want the swine flu, and just to be certain Congress sticks with the program, the industry has been showering megabucks all over Capitol Hill. From the beginning, they wanted to make sure that whatever bill comes out of the Finance Committee puts for-profit insurance companies first-- by forcing the uninsured to buy medical policies from them. Money not only talks, it writes the prescriptions.



In just the last few months, the health care industry has spent $380 million on lobbying, advertising and campaign contributions. And-- don't bother holding onto your socks-- a million and a half of it went to Finance Committee Chairman Baucus, the man who said he saw "a lot to like" in the two public option amendments proposed by Senators Rockefeller and Schumer, but voted no anyway.



...One reporter in particular was out to break their grip. His name was David Graham Phillips. One day in 1906, readers of Cosmopolitan Magazine opened its March issue to discover the first of nine articles by Phillips titled, "The Treason of the Senate."



He wrote, "Treason is a strong word, but not too strong, rather too weak, to characterize the situation which the Senate is the eager, resourceful, indefatigable agent of interests as hostile to the American people as any invading army could be, and vastly more dangerous: interests that manipulate the prosperity produced by all, so that it heaps up riches for the few: interests whose growth and power can only mean the degradation of the people, of the educated into sycophants, of the masses toward serfdom."



The public outrage provoked by Phillips and other muckrakers contributed to the ratification of the 17th amendment to the Constitution, providing for the direct popular election of senators, who until then were elected by easily bought-off state legislators.

[A] faction of Wall Street-funded "New Democrats" [read: Melissa Bean] are trying to gut a White House proposal to change that paradigm and establish minimum floors of bank regulation that states can go beyond. According to the Wall Street Journal this Democratic congressional faction is trying to flip the proposal on its head by making the final product establish a federal ceiling whereby states cannot regulate banks any further.

In his brief career as a U.S. Senator and a presidential candidate, it appears that Barack Obama was given more money from the FIRE Sector (Finance, Insurance, Real Estate) than anyone else in the history of the legislative branch. The three all-time winners were all senators who ran for president:Barack Obama- $42,268,166John McCain- $33,339,458Hillary Clinton- $29,800,366Close behind them were three more Senators who are also former presidential candidates, John Kerry, Joe Lieberman and Chris Dodd. Wall Street isn't taking any chances. I was 100% onboard with Glenn Greewald's feeling's of shock and awe yesterday morning when he reminisced about Dick Durbin's stunning April admission about the banksters: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created-- are still the most powerful lobby on Capitol Hill. And they frankly own the place." His suggestion that there has been a financial coup d'etat goes right to the basic problems of this nation. The sector as a whole has doled out $2.28 billion in campaign contributions since 1990 and spent another $3.69 billion in lobbying since 1998. And what did they get for their nearly six billion dollars in thinly-disguised bribes to Congress? A license to steal (from us), in the form of some good old fashioned bipartisan deregulation-- a religion for Republicans and a nifty business proposition for mostly conservative Democrats Blue Dogs and for non-believing Republicans.Last week Paul Blumenthal of the Sunlight Foundation shined a very bright spotlight on the comfy monetary relationship between members of the House Financial Services Committee and the legalistic, vaguely disguised bribes from that same FIRE sector. Of the 73 members of the committee, only 10 appear to be innocent of accepting bribes, or at least of not being in severe conflict of interest-- Maxine Waters (D-CA- the only member with the ethics to not acceptmoney from the sector the committee oversees), Ron Paul (R-TX), Steve Driehaus (D-OH), Keith Ellison (D-MN), Mary Jo Kilroy (D-OH), Frank Lucas (R-OK), Carolyn McCarthy (D-NY), Alan Grayson (D-FL), Adam Putnam (R-FL) and Al Green (D-TX).In the light of President Obama's apparent determination to revisit the failed banking regulatory initiatives Congress started working on when the economy started disintegrating under the conservative orthodoxy (i.e.- Greed is Good) of the Bush Regime, yesterday'sasked a very pertinent question: Have Banks No Shame? . Hopefully Joe Nocera, the savvy author of A Piece of the Action , was thinking rhetorically.Last night my broker went on a tirade, demanding to know why he had to have his taxes raised to pay for a bunch of lazy poor people who couldn't afford insurance. I didn't ask him to go and dig ditches for minimum wage and I didn't remind him that without zero percent interest rates, an overly active , tax-payer supported FDIC and the TARP bailout for Wall Street-- thattaxes were used for-- he wouldn't have any insurance (or a job) himself now. Nocera put an aspect of the question, more tactfully-- what do the banks owe the country after all the bailouts?-- to former IMF economist Simon Johnson.You may have caught Obama's speech Friday (there's a video of it below) in which he calls for Congress to get on the stick in terms of protecting Americans from predatory banksters-- the same banksters who financed his-- and their-- political careers and the same banksters he-- and they-- are counting on to cough up the money for future campaigns. Why do I feel a whole lot of nothing is about to happen? Oh, they'll make some nice noises and, sure, they'll make some pathetic incremental steps-- which the Republicans and Blue Dogs will fight as though they were establishing a Soviet Republic-- but Obama live up to his promise. Is Change in the air? Hope?Yesterday Digby pointed out that they haven't even been able to get the simplest of emergency regulations implemented-- a widely supported extension of unemployment benefits-- because of an inability to deal effectively with die-hard reactionaries and obstructionists, in this case Arizona extremist Jon Kyl.If Kyl were worried that he might get strung up by the enraged citizens of Arizona, he might stop playing his games. But he isn't-- not worried and not ready to stop the obstructionism and rotten attitude towards the American families who have given him such a nice-- albeit totally undeserved-- life. If they can't deal with something this simple, how are they going to be able to go up against not just a two-bit twerp like Jon Kyl, but against the entire banking industry?Our Nobel laureate did single out the worst players on the block Friday for special attention-- the U.S. Chamber of Commerce, an arm of the worst faction of the Republican Party... though some think the worst faction of the Republican Party is just an arm of the Chamber at this point. The president says the Consumer Financial Protection Agency the Chamber (and GOP) are so dead set against would have "just one mission: to look out for the financial interests of ordinary Americans. It will be charged with setting clear rules of the road for consumers and banks, and it will be able to enforce those rules across the board... The U.S. Chamber of Commerce is spending millions on an ad campaign to kill it. You might have seen some of these ads-- the ones that claim local butchers and other small businesses will somehow be harmed by this agency. This is, of course, completely false-- and we’ve made clear that only businesses that offer financial services would be affected by this agency. I don't know how many of your butchers are offering financial services."In an OpEd fortoday, Bill Moyers and Michael Winship discuss the poisonous-- even deadly-- role DC's infamous revolving door between government and Corporate America has played in the destruction of meaningful universal health care. If anything, their arguments are even more true for Wall Street.That helped-- for a few years. But, as Durbin said last April, "they frankly own the place."David Sirota's OpenLeft column today makes the point that conservatives are undermining "progressive federalism" (in short, the good parts of states' rights) on behalf of the banksters who have underwritten their political careers.

Labels: banksters, bribery, Dick Durbin, financial-services industry, House Financial Services Committee, Jon Kyl