The Billion-Dollar Bank Heist
Rivlin, Gary, Newsweek
Byline: Gary Rivlin; Research support was provided by the Investigative Fund at The Nation Institute.
How the financial industry is buying off Washington--and killing reform.
There are the bills a president signs sitting in the Oval Office and the bills that merit a Rose Garden ceremony. And then there are bills so momentous--or at least so critical to a president's reelection prospects--that those around the commander in chief orchestrate a more elaborate ceremony. Such was the case with Dodd-Frank, the financial-reform package that President Obama signed into law last July against a backdrop of velvet curtains in a resplendent venue a few blocks from the White House.
"Passing this bill was no easy task," Obama told the 400 dignitaries who witnessed the most ambitious overhaul of the financial system since the Great Depression. "We had to overcome the furious lobbying of an array of powerful interest groups and a partisan minority determined to block change."
The pomp and ceremony may have been premature. Ever since the law's passage, those same "powerful interest groups" who opposed Dodd-Frank have been trying to prevent it from taking effect. As written, the law delayed implementation of most of its new rules for at least 12 months so regulators would have time to hammer out the finer points of the 2,319-page bill. But that delay has also provided an opening to banks and other financial institutions seeking to defang the law. "Just because we lost that round," says Cam Fine, president of the Independent Community Bankers of America, which spent $1 million in the first three months of this year to lobby against implementation, "doesn't mean we just give up. Congress changes its mind all the time."
Take what's been happening with the Consumer Financial Protection Bureau, which is the law's most significant and controversial provision. The agency is set to go live next week, except that Republicans in the Senate have made it clear they won't confirm anyone to serve as its head unless the agency is radically scaled back. All told, Dodd-Frank has some 300 provisions, and the bulk of them are under attack by a number of foes, from bankers to check-cashing companies to free-market Republicans.
And so it is, says a discouraged Rep. Barney Frank, that his eponymous bill is "facing a death through a thousand cuts."
The story of this evisceration is largely one of money--the tens of billions of dollars in profits that banks and other financial institutions stand to lose if Dodd-Frank is implemented, and the astonishing sums they're spending to squash it. The industry paid lobbyists $1.3 billion in 2009 and through the first three months of 2010, according to the Center for Public Integrity, which added up the spending by the 850 businesses and trade groups fighting financial reform. Many of these same businesses are now spending as much money, if not more, to lobby for curbs on the new law.
The Financial Services Roundtable, for instance, is on pace to spend $10 million on lobbying in 2011, based on its spending the first few months of this year. That's well above the $7.5 million that the trade association, which represents most of the country's largest financial firms, spent in 2010. The American Bankers Association is expected to beat its $7.5 million spent last year, based on first-quarter-2011 numbers. JPMorgan Chase and Citigroup are on track to match last year's lobbying spending: $7 million and $5 million, respectively. Wells Fargo, which spent $5 million last year, spent $1.9 million in just the first quarter of this year.
None of that includes the millions in campaign contributions the banks and trade associations are pouring into the coffers of those members of Congress who sit on the relevant committees responsible for financial reform--especially those willing to take on Dodd-Frank.
It's simple to see why banks oppose Dodd-Frank. …