The upside of outrage
Noam Scheiber has the fascinating behind-the-scenes story of how the derivatives-regulation sausage is being made — and how Wall Street, amazingly, seems to be losing the lobbying war, at least for the time being. In a nutshell, the banks sought to get around proposed new derivatives regulations by creating an “end-user exemption” loophole which they could then drive their trucks full o’money straight through. But the CFTC’s Gary Gensler saw through the ruse and persuaded Barney Frank to tighten up the language and minimize the size of the loophole. And since the banking lobby was pretending to care only about its end-user clients, it had few if any grounds on which to object to the new bill.
Gensler’s own role can’t be overstated. A former Goldman Sachs partner who served as Treasury under secretary in the late 1990s, Gensler’s nomination to the CFTC aroused suspicion among congressional liberals when the Obama transition team announced it last December. But Gensler spent several months persuading regulatory hawks that he was one of them, and his actions as chairman underscore it. “The reason I think the left and these consumer groups are in good position is that they have Gensler at the CFTC,” says the bank lobbyist. “He’s turned a rinky dink commission into the most powerful agency in the federal government when it comes to derivatives.”
This is not the first time that the head of the CFTC has tried to rein in the power of the banks. But it is the first time that Congress has listened — and that’s worrying the likes of Andrew Ross Sorkin, whose column today is headlined “Beware the Result of Outrage”.
I’ll have more to say on Sorkin’s column in general, and the Miller-Moore amendment in particular, later today. But suffice to say that Scheiber I think shows quite compellingly that there’s significant upside to outrage too.