Bucking the Banks

Bucking the Banks

How can we expect the experts to reform the financial system when it’s experts who got us into this mess to begin with?


When I went to the White House on June 17 for the unveiling of the president’s new proposal for financial reform, I wasn’t expecting to see anyone I knew. But upon entering the regal parlor of the East Wing, reporters were greeted with an odd scene, something like a staged cocktail party with a Marine Band pianist and people in suits milling and kibitzing. I started to pick familiar faces out of the crowd: Robert Kuttner from The American Prospect, Elizabeth Warren of the Congressional Oversight Panel, George Goehl of National People’s Action and now-legendary Brooksley Born, ex-chair of the Commodity Futures Trading Commission who presciently warned of the dangers of unregulated credit default swaps.

Joining the small community of progressive finance reform advocates were about two dozen legislators from both parties, the chief members of Obama’s economic brain trust and a passel of anonymous white men in suits who I later realized were the titans of finance. It was a weird scene. “I was standing next to Larry Summers when he had no one to talk to,” one lefty in attendance confided to me, “but I couldn’t bring myself to talk to him.”

I also spotted Heather Booth. Booth has short-cropped silver hair, an organizer’s edgy intensity and a résumé in progressive politics nearly as long as the White House’s eighty-eight-page plan for financial reform. She started with the Student Nonviolent Coordinating Committee forty-six years ago; went on to found the Midwest Academy, which has trained more than 25,000 organizers; and has run campaigns in the labor movement, the feminist movement and the Democratic Party. Her latest project is Americans for Financial Reform, a coalition of nearly 200 groups–ranging from the AFL-CIO to ACORN, Public Citizen, Taxpayers for Common Sense and AARP–that has set itself the Herculean (but desperately needed) task of countering the voices of the Men in Suits during the coming battle over financial regulation. The fact that Booth was in attendance gave me a pinprick of optimism.

The crowd was shuttled into the East Room, where Obama touted his advisers’ deliberative process. “These proposals reflect intensive consultation with leaders in Congress,” he said, as well as “conversations with regulators…consumer advocates and business leaders, academic experts and the broader public.”

That afternoon, the White House sent reporters a complete list of the attendees, and it was an impressively diverse set of stakeholders. The list struck me as an embodiment of everything that is noble and frustrating about Obamaism. In crafting the plan, and staging the event, the White House really does seem to have brought everyone to the table. If you closed the doors of that room and asked those present to hammer out a financial reform policy, the result wouldn’t be ideal, but it would be pretty decent.

But no matter how much the White House would will it otherwise, policy isn’t created in this fashion. Rather than an ersatz constitutional democracy where every stakeholder gets one vote, it’s a lot more like shareholder democracy: the more shares you own, the more votes you get. And the banks have all the shares.

A recent paper by IMF economists showed that between 1998 and 2006 the average FIRE (finance, insurance, real estate) firm increased its lobbying costs by 25 percent, while other industries averaged only a 10 percent increase. Public Citizen recently released a study of public finance records that calculated that Wall Street had spent $5 billion-with-a-b in campaign contributions and lobbying over the past decade.

This may seem like par for the course in Washington, but it’s far, far worse in financial matters than in almost any other area of domestic policy. On the other major legislative battles–healthcare, climate change, the Employee Free Choice Act–there is an organized, mobilized permanent infrastructure to push lawmakers in a progressive direction. They may be underdogs, but at least it’s a fight. Every time the HMOs try to scare people about “socialized medicine,” Health Care for America Now and others are there to push back.

This simply isn’t the case with financial reform, as has been depressingly clear since the chaotic week in October when TARP was authorized. On one side you have the entire networked overclass of twenty-first-century financial capitalism; on the other… the Center for Responsible Lending. That’s only a touch hyperbolic. The CRL does great work, and there are others–the Consumer Federation of America, Public Citizen–who have been toiling alongside it. But this doesn’t even rise to the level of being an unfair fight. It’s not a fight at all. “Dude, there’s just no comparison,” one Democratic staffer on the House Financial Services Committee told me. “Just completely outgunned.”

Says a staffer for a senator who’s been an outspoken critic of the financial industry, “If there’s anything that’s organized to counteract [Wall Street] influence, I certainly haven’t seen it.”

Which is where, I hope, Americans for Financial Reform comes in. The idea, Booth says, is to coordinate existing efforts and then amplify them so that it’s “not just up to the banks to make a deal in private.”

The group just launched in mid-June and so far has only three staffers, including Booth. But they’re raising money and project a $5 million budget. Booth says she’s been overwhelmed by the enthusiasm and energy people have shown for the project. In a month they’ve relied on progressive economists and wonks to pull together a policy task force, which has issued a series of white papers sketching out a vision of progressive regulatory reform. They’re now developing a communications and grassroots field strategy.

They have their work cut out for them: part of what facilitates Wall Street’s power is the sheer complexity of the issues involved. “On the one hand its affects everyone’s life; on the other hand it’s been the province of elite inside circles, and you think, Well, the experts will take care of it,” she says. And yet, “the experts are the ones that got us into this.”

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