Between the Financial Crisis Inquiry Commission’s launch, the FDIC risk-based fee and the Obama “bank tax,” now is really not a good time to be a bankster. Populism has finally reached Washington, and anything seen as harmful to the banks is suddenly good politics.
None of this means that anything will materially change; only that the opportunity for change now exists. For example, the Consumer Financial Protection Agency, feared dead in Senate negotiations, is now seemingly revived.
The fight in the Senate Banking Committee over the creation of a new agency dedicated to consumer financial protection has shifted from whether it should be created to what it will look like.
That’s a victory for consumer advocates, labor unions and the coalition of progressive groups fighting Wall Street over the shape of reform, but the banks still have several chances to ambush the proposed Consumer Financial Protection Agency as it moves through the Senate.
In a statement, Heather Booth, the executive director of the ad hoc group Americans for Financial Reform, said: “The Senate Banking Committee, with Chairman Dodd at the helm, will not be bowled over by the veiled threats of Wall Street lobbyists and will work for reform that will rein in the greedy, reckless behavior of the biggest banks. We look forward to working with them to achieve this goal.”
It’s possible that the banks are just shifting tactics, moving away from outright killing the CFPA and toward weakening it, in a form of regulatory capture. Nevertheless, it is striking how besieged the banks appear to be this week. Sheila Bair, one of the better regulators in this government, made a firm and succinct case for the FDIC asking for additional fees from member banks which overpay their CEOs to a degree that leads to excessive risk:
Ms. Bair: There are a number of MLRs (material loss reviews) for the smaller institutions that draw quite a clear contributing factor to bank failures on losses. We don’t have MLRs for the larger institutions because they got bailed out. That does not mean to say that we shouldn’t be looking at the huge compensation systems of the larger institutions as well, and how that fed into risk taking and the credit crisis which has obviously imposed massive losses for the deposit insurance fund. We must rely on academic research and other work done by our own staff to determine whether there is cause and effect here. We are asking the question right now but we are obliged to have risk adjusted premiums. And we are obliged to evaluate risk to the deposit insurance fund, and we are obliged to try to factor in those risk elements into our premium structure.
So I think there is nothing we are doing that conflicts with the Fed is doing. It complements that. There is nothing we are doing that conflicts with what the Congress is doing…
To suggest this agency shouldn’t do anything when there is such an overwhelming amount of evidence that this is clearly a contributor to the crisis and to the loses that we are suffering, I just cannot understand that.
Then there’s the Obama bank fee plan, set to be released as soon as tomorrow. This is designed, as per law, to recoup TARP losses. A senior Administration official said yesterday: “As the banking industry recovered the President and the economic team felt it was important to discuss ways to recoup every dime for the American people more quickly than the law required. The number would be no higher than 120 since that is the highest end of a conservative estimate of the cost of TARP, Treasury officials expect the number will be much lower and over the course of years the fee would pay back any cost to the taxpayer.”
And while this is a crowd-pleasing way to target voter anger about the bailouts, and is politically astute, The New York Times editorialized today that it should be combined with a windfall tax on bank bonuses.
This is an issue of fairness and sound public policy. The Treasury needs the money. A fee may also get banks and bankers to rethink the way they do business — something the much-promised, far-too-delayed and increasingly watered-down financial regulatory reform effort is unlikely to do. A permanent tax or fee imposed on the nation’s largest banks could reduce future risks by discouraging big banks from getting even bigger.
There just isn’t any shortage of juicy narratives that can be employed to support more regulation, more bank taxes, and more bonus clawbacks. Goldman Sachs just yesterday acknowledged front-running its clients.
Again, it’s not like banks are powerless. They have an entire Congress in their pocket, arguably. But it’s politically dicey to do anything but drive a stake through their heart right now. And that’s not likely to change in an election year.



24 Comments


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Correction, anything SPUN as harmful to banks is good politics. Any action taken will likely be all spin and no substance.
tax the Banksters heavily. We want our hard earned money back from these irresponsible Gambling Banksters! Time We let them fail!! Move your money to a community bank or a Credit Union… if enough of us do the banks will shrink!!
Ditto ratfood. I watched the hearings today until cspan ran into “tech difficulties” and the fcic folks, including Born, didn’t lay a finger on the banksters. Kabuki, well rehearsed.
The Rich taking care of the Rich!
Wouldn’t want to embarrass your moneyed friends now would chya??
Real populism died decades ago and never even received a decent burial.
Getting increasingly difficult to figure out how to fight it.
I don’t know much about populism in the past, but I sure don’t see much of it today.
Dayam Skippy… The Banksters… Not the Banks…! ;-)
Banksters = Gangster but probably have fewer scrupples.
Sure has been getting worse over my life time. The parties once cared about the average citizen, but that sure gone to hell. They are taking larger and larger percentages of the GDP(26% or so) leaving us with the crumbs..
at this point I want our money back with 25% interest just like they did to most of us on our credit cards… Hell move ya money to a local bank ta hell with the big pricks!!
Yep. Mine too. Sad to end one’s life with the U.S. in a shithole, but OTOH, better to die before it gets even worse. I’ve got 10-20 years left. Probably too many.
*heh* What money…? ;-)
make the best of them eCAHN. I know I will be, gotta hang around and watch the grand kids grow up!! I just hope it gets better for them, I am not sure anymore…
No, the parties once were required to adopt a class compromise in order to get what they wanted. Now they need do no such thing, because the working class is no longer pushing back.
I have one son, no grandkids. Don’t want any. Regret having a son. Was in the nuclear generation & swore I would never have a kid. Sorry I didn’t pay attention to my younger wiser self. This is no kind of world to bring a kid or a grandkid into.
too late they are already here… wouldn’t send them back ever..
Yep and that was when populism died. Pols realized all they needed to do was show voters a carrot because after the election it wouldn’t matter if all they got was the stick.
Makes me glad I was always too impoverished and unattractive to reproduce. :-)
Our elected officials still act entirely detached from the realities that the public is confronted with. Responses in support of the public have ranged from inadequate all the way down to mere lip service.
Judgement day approaches with a round of elections less than 12 months away. And the publics message to these men is the same now as it was during last summers townhalls:
There’s no hiding place down here.
http://www.youtube.com/watch?v=etYHWZyRSMU
Hey there, stop talking and get back to shoveling the coal. All this spinning takes a lot of energy and we’ve got to stoke the fires of populism.
LOL
All the hot air produced on Capitol Hill might push gov’t to do some good things.
I am going to say this one more time.
We should be really encouraging Labor that if the Dems in power don’t want to listen to the people and to Labor that we need to start a well funded (not like with the Greens) 3rd party.
Also don’t watch this political grand standing nothing worth talking about will come of it.
Moveyourmoney.info
Just move your money, your credit cards and your home/auto loans to your local Credit Union or Community Bank.
everything is seen as good politics except a bankruptcy cramdown or other meaningful mos in housing right? these guys are still in bed together
Hate to say it, but I’m glad I never had kids, either. This place sucks anymore & little chance of betterment. I was talking a young man of 20 (clerk at a store) the other day, and he spoke very clearly about how effed up the world is these days and how he and his generation feel nothing but despair and depression. I could only hang my head in shame. It does me no good to say that, as dfh, I kept pushing the boulder up the hill but it kept rolling back down.
I am so ashamed of my generation of baby boomers, most of whom are self-satisfied, smug jerks acting like dogs snarling over the crusts and bones.
I traveled a lot in third world countries in my younger days, and I shuddered to realize that their reality was most likely the future of the USA. When the CIA backed the coup against Salvador Allende in Chile in the 1970s, and then later the situation in in El Salvador, it was emminently clear that the top 5% here wanted nothing more than to own it all and more.
I, too, have a good 20 years left, but I will not be sorry to leave the planet. Time for good works so that my karma is reasonably ok this time around… shanti, shalom, peace.