March 10, 2010 02:05 AM UTC

Wake up people. The banks are winning and consumers are losing

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• by: Danny the Red (hair)

You would think that a year and half after the US taxpayer saved the world by propping up the banking system, the financial sector would have humbly submitted to regulations to prevent another disaster.  Nope.

As Congress this week inches toward a new set of rules to avert another global financial collapse, it is focused on two conflicting goals: reforming the banking system to protect consumers while still giving lenders the freedom to take risks.

So far the score looks like: Bankers 1, Consumers 0.

More than a year after a wave of risky mortgage bets brought Wall Street to its knees, banks and other financial institutions are still playing by the same rules that got them into the mess.

https://www.msnbc.msn.com/id/35…

While President Obama has spent his first year in office battling on the hard front of health care reform, the multi national financial firms have marshaled their forces and incomprehensibly out maneuvered reform despite overwhelming consumer anger on the right and the left.

How has this come to pass?  Anger with the banks is so pervasive amongst the people of the United States that maintaining status quo is incomprehensible.  The problem of “too big to fail” has become the problem of “too big to be subject to regulation.”  We are losing the battle to regulate banks, because they are too politically powerful as well as too important to the economy.

The banks have the power to preserve this arrangement. While the U.S. financial system has a long tradition of functioning well with a relatively large number of banks and other intermediaries, in recent years, it has been transformed into a highly concentrated system for key products. The big four have half of the market for mortgages and two-thirds of the market for credit cards. Five banks have over 95 percent of the market for over-the-counter derivatives. Three U.S. banks have over 40 percent of the global market for stock underwriting. This degree of market power brings with it not just antitrust concerns, which this administration has declined to act on, and a huge amount of economic risk–but great political influence as well.

The banks are going to use that power to block legislation containing any meaningful financial reform. And they are likely to succeed. Their current political donations surpass those given by most other interest groups, and the limit on their future donations has just been lifted by the Supreme Court. These banks and their allies are already targeting at least one member of Congress who supported the 2009 credit card bill. Chris Dodd, chairman of the Senate Banking Committee and long-standing champion of the financial sector, recently railed against the big banks for not cooperating with financial reform; but he is freer to speak out now that he is no longer seeking reelection. Senator Richard Shelby, the committee’s ranking minority member, is steadfastly opposed to reform; he and other top Republicans eagerly await the arrival of largesse from big banks. Hill staffers remark that the financial Godfathers’ message is quite clear: If you cross us, we will bury you at the polls. Nothing in the Volcker Rules would change this relationship between Wall Street and Washington.

https://www.tnr.com/article/pol…

What is particularly galling about this is they are using our money, the bailout money, to lobby against reregulation.  Bonuses are up 17% on Wall Street while folks across America struggle to put their lives back together after those same bankers took the world to the brink of collapse.

This is not the first time this has happened.  Teddy Roosevelt’s was the first to use the Sherman anti trust law against a corporation and it wasn’t by accident that it was J.P. Morgan’s Northern Securities Corporation (Before this Sherman anti trust was used to bust unions).  The critical problem 100 years ago that TR was trying to address was that big banks were more powerful than the government and this threatened the sovereignty of the United States.

In his autobiography, Roosevelt told the story of how the great J. P. Morgan had come to him after news of the suit broke and in avuncular fashion suggested that the whole scandal could have been avoided if the president’s man (the attorney general) had met with Morgan’s man to arrange matters. It had become habit for the country’s business elite to view the federal government as merely a rival power, even as a lesser power that should consult with its betters before acting. T. R. implied that he had put Morgan in his proper place.

https://www.presidentprofiles.c…

In all fairness, JP Morgan was a great man who saved this country before we had a Fed by organizing a bailout in the Panic of 1907.  However, the issue is not whether mega banks are good or bad, or run by moral people, the issue is sovereignty: is a single corporation, (or a collection of 6) more important than our elected government.  Does a cabal of a few powerful players neither elected, appointed by elected officials, nor hired by elected officials, get to determine the shape of our future?

This most recent deregulation problem only culminated under Bush as pure jungle capitalism, you can go back 30 years to Garn-St, Germain (which I wrote about, somewhat presciently in the spring of  ’08 https://coloradopols.com/showDi…  months before the Lehman-AIG collapse) and every President since has had some hand in the deregulation.

So what is my point?  We cannot afford to lose this battle.  I am not looking for compromise; I am not looking for bipartisanship; I am looking to lay it on a line.  Are you for the American people or the multinational banks (Citizens United not withstanding–I do not accept that banks are people).

Thanks for listening to my tirade.