Wall Street sign outside the New York Stock Exchange. (Press Association via AP Images)
When Senator Elizabeth Warren addressed members of the Financial Services Roundtable in Washington on Thursday, she began by recounting the first time she spoke to the trade group, representing the country’s largest banking and financial interests, in 2010.
At the time, the Dodd-Frank bill had just been passed after bruising battles with the industry, and she was in the process of setting up the Consumer Financial Protection Bureau, which the financial sector and its allies in Congress loathed and would repeatedly try to defang. “When [Chairman] Richard Davis introduced me, he said that in the interest of safety, all knives had been removed from the tables,” Warren recalled. “It was a joke—or at least I hope it was.”
Indeed, Warren is very familiar with Wall Street’s awesome power to influence the policy process in Washington. Which is why she came to them with a plea: please do more to avert a debt-ceiling breach and the potential calamity that would result.
You protect your interests every day in Washington. Ending this destructive notion of politics by hostage-taking is in your interests. And preventing an actual default—a self-inflicted wound that could cause a spike in interest rates and a freeze in our credit markets—is clearly in your interests.
I know that many of you have already spoken out, and I’m grateful for that. But please keep at it. For those of you who haven’t, please start now. Speak up publicly and write op-eds and give interviews. One conversation won’t get this done. Think of it this way: it took years of effort—press conferences and op-eds and town halls and hearings—for the debt-ceiling hardliners to raise this issue in the public consciousness, and now almost half of the country thinks that Congress should not raise the debt ceiling. It will take that kind of effort to reverse the tide.
What’s odd is that she had to say anything. One would think the financial sector would be applying a full-court press to stop a devastating fiscal meltdown that would wreak havoc on the Street (and most everywhere else). But implicit in Warren’s plea was that bankers haven’t been doing nearly enough.
Sure, some have spoken out, as she noted—like Goldman Sachs CEO Lloyd Blankfein at the Clinton Global Initiative yesterday. But the pleas have been soft, and virtually no pressure is actually being exerted in Washington. There’s nothing like the coordinated campaign that almost stopped the CFPB from actually having a director.
Why? The most obvious explanation is that Wall Street as a whole simply doesn’t believe the country will default. As always, the financial sector lets its money do the loudest talking, and the markets clearly are not anticipating a default. Goldman just released a report that found no discernible reaction in the S&P 500 to a potential debt-ceiling breach. “Complacency is even more pronounced on stocks with high government exposure,” wrote Goldman analysts. “Fear priced into options on these stocks dropped over the past few months to new lows.”