James Pethokoukis

Politics and policy from inside Washington

Wall Street’s lobbyists deserve their bonuses

Mar 2, 2010 22:30 UTC

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.

Other lobbying successes abound. The Independent Community Bankers of America, which advocates for smaller lenders, helped force mega-banks to pre-fund any future possible bailouts. The Securities Industry and Financial Markets Association, along with the insurance industry, derailed strict Senate regulation of retail investment brokers.

Though the bankers’ advocates in Washington have done well, their work has been caught out in one regard. The International Monetary Fund recently found that banks that invested more to influence policy over the past decade were more likely to take more securitization risks, have larger loan defaults and sharper stock falls during key points of the crisis. The lobbyists may find much of their upcoming lobbying is focused on next year’s bonus.

Romney’s “No Apology”

Mar 2, 2010 21:25 UTC

Just started reading Mitt Romney’s book “No Apology.” Actually quite a lot of meat in the economics chapters. The former Massachusetts governor and possible Republican presidential contender wants to cut investment and corporate taxes. Doesn’t like the Fair Tax or value-added taxes. Seems willing to consider a carbon tax/payroll tax swap. Wants to spend a lot more on basic research. No apologies for supporting TARP or RomneyCare.

Obama’s union error

Mar 2, 2010 16:27 UTC

The great Ed Yardeni thinks the POTUS is repeating FDR’s mistakes:

In 2016, I expect that Mr. Geithner will make the following speech: “We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job … We have never made good on our promises … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot.”

Those words were actually spoken by FDR’s Treasury Secretary Henry Morgenthau before his fellow Democrats on the House Ways and Means Committee. Revisionist conservative-leaning historians are increasingly blaming FDR’s policies for prolonging and deepening the Great Depression. A recent addition to this perspective is “The Forgotten Man: A New History of the Great Depression” (2007) by Amity Shlaes. She followed it up with an interesting article in the WSJ on Feb. 1 this year, “How to Make a Weak Economy Worse.” She observed that FDR’s anti-business policies were bad for business. She notes, “The 1935 Wagner Act was a tiger that makes today’s union law look like a pussycat. It favored unions over companies in nearly every way, including institutionalizing the closed shop. And after Roosevelt’s landslide victory in 1936, the closed shop and the sit-down strike stole thousands of productive workdays from companies, punishing earnings and limiting ability to hire.”

In yesterday’s WSJ, we learned that the Obama administration is considering union-backed proposals to make it easier for government agencies to bypass low bidders and award contracts to higher bidders that pay more wages and benefits. The AFL-CIO labor federation is pushing for a jobs program called “Jobs Now Make Wall Street Pay.” They want a transaction tax on securities trading to pay for yet another infrastructure spending program.


Revisionist economic historians are anti-labor, just as Holocaust revisionists are anti-you-know-what. Cite them with caution.

Oh, and if you don’t like labor guilds, unions and what they stand for, Jim, namely equal rights, safe workplace environments and decent conditions for working people, which is the antithesis of what we have now, don’t beat about the Bush – just come right out and say so.

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Zuckerman for Senate?

Mar 2, 2010 15:59 UTC

Heavens, a Mort Zuckerman bid for US Senate in New York would be great fun. Not a guy who loves to press the flesh, but supersmart and interested in getting things done. I just wonder if these CEOs who want to go to Washington fully realize how incredibly boring being a senator is.

Of course, he won’t have to spend loads of time raising money. So that helps. (One of the interesting nuggets from Game Change, the 2008 presidential campaign book, is just how much Hillary hated raising money.)  Disclaimer: I worked for Mr. Z  for a dozen years at U.S.News & World Report.