The Great Debate UK
America's big banks aren't being broken up. Nor does it appear there will be strict new limits on their activities. And while lenders may have to cope with a new consumer regulator, its power and scope is evanescing daily. If there is any group from Wall Street deserving of fat bonuses this year, it's the industry's lobbyists in Washington.
The banks smartly recognized regulatory reform was inevitable after the greatest financial meltdown since the Great Depression. So rather than try to stop it, the industry helped mold and massage any changes into a shape it could tolerate. And early indications from Congress suggest they've been successful.
Wall Street's crew on K Street, lobbyists' answer to advertising's Madison Avenue, has been formidable. It includes the American Bankers Association, the Financial Services Roundtable, the Financial Services Forum and the U.S. Chamber of Commerce. They set their sights early on a White House proposal to create a powerful and independent Consumer Financial Protection Agency.
The lobbyists have successfully scaled back various iterations of the plan. One would make the regulator part of the Treasury Department, and force it to consult with existing watchdogs before imposing restrictions. Republican alternatives are even weaker, alternately housing a consumer unit either in the Federal Deposit Insurance Corp or the Federal Reserve. Expect a diluted compromise between diluted compromises -- just as seems the case for the "Volcker Rule" to limit proprietary trading by banks.