In July, Congress passed the “Restoring American Financial Stability Act of 2010,” promising to restore trust to the nation’s battered financial system. As President Obama put it, the bill will “protect consumers and lay the foundation for a stronger and safer financial system, one that is innovative, creative, competitive, and far less prone to panic and collapse.”
Having declared “Mission Accomplished,” Obama and his congressional allies turned the massive, 2,319-page legislation over to the bureaucracy to interpret. The financial industry promptly shifted from conventional warfare over the shape of the law to a drawn-out insurgency to influence the regulations that spell out how it will be implemented. As the Los Angeles Times reports, “Having failed to block financial reform, Wall Street is now focused on the next best thing: ensuring that the law is loosely interpreted and weakly enforced.”
Citigroup lobbyists, for instance, met with Federal Reserve officials to argue that new rules restricting trading by hedge funds might affect the competitiveness of U.S. firms. Attorneys for the BlackRock investment management firm met with commodities regulators to seek an exemption from restrictions on the trading of derivatives.
Where have we seen this before? Oh, Obamacare. Responding to the special pleaders, the Obama administration has handed out (by one recent report) 111 waivers to corporations and unions to various mandates contained in the legislation.
The only thing that amazes me is that anyone else is amazed by this. This is how Washington functions! When Congress passes sweeping legislation and special interests stand to gain or lose hundreds of billions of dollars of economic value, what the heck else would we expect? When the camera crews leave the room, journalists move on to the next big story, and the public turns its ADD attention span to the latest antics of Paris Hilton or Lindsay Lohan, that’s when the lobbyists really get to work.
There is a direct correlation between the growing scope of Congress’ control over the economy and the growing size of the political class that seeks to tap the subsidies, wheedle the tax breaks and write the regulations to favor themselves and cripple their competitors. Likewise, there is a direct connection between the concentration of economic power in Washington, D.C., and the ability of the dominant players in any industry to write the rules of the game in their favor. As a consequence, we are witnessing the transformation of American capitalism from an economic system in which corporations compete in the marketplace on the basis of price, quality and innovation to one in which they compete increasingly on the basis of how many lobbyists they hire, how much PAC money they raise and how they effectively then can create an un-level playing field.
We can get a peek at the activity in the aftermath of financial “reform” because the Fed, the Commodities Futures Trading Commission, and two other federal agencies have begun publicly disclosing their contacts with lobbyists on the financial “reform” law. Writes Nathaniel Popper for the Times: “That glimpse [behind the curtain] frequently shows companies arguing that their operations shouldn’t be covered by the new regulations, or that the regulations should be narrowly written.”
All told, regulators have reported at least 510 meetings with lobbyists representing 325 organizations. The most active corporations: JPMorgan Chase had 23 meetings with regulators, and Goldman Sachs had 21. More than 90% of the encounters were initiated by banks, hedge funds and other financial companies; only a handful occurred at the request of unions (hardly disinterested parties themselves) or public interest groups.
I think it’s safe to say that zero meetings were initiated at the request of individual citizens.
If we want to clean up this Augean muck, we have one of two choices: Increasingly restrict the ability of corporations and other organized interest groups to participate in the political process, or roll back Congress’ control over every aspect of the economy. One path leads to tyranny, the other to freedom. The choice is ours.
