What does it take to make a Wall Street banker squirm with shame? Not content with having swindled tens of millions of Americans out of their homes and life savings, the very bankers who caused the biggest economic catastrophe since the Great Depression are now subverting government regulations designed to prevent comparable disasters in the future.
Top of the list of those responsible are the hustlers at Citigroup, once the world’s largest financial conglomerate, and a leading practitioner of the sordid behavior that caused the housing meltdown. Indeed, Citigroup was allowed to form as a merger of the investment banking of Travelers and the federal insured commercial banking of Citicorp only because lobbyists for those institutions successfully engineered the reversal of the Depression-era Glass-Steagall law that had banned such combinations.
Then when the new monster banks moved to exploit the subprime housing market with all sorts of financial gimmicks, their lobbyists succeeded in freeing all such trading in so called derivatives from any significant regulation.
The banks were so successful in marketing those often toxic assets that the federal government had to step in when the bubble burst and save Citigroup from bankruptcy, with a direct infusion of $45 billion in taxpayer funds and a guarantee of more than $300 billion of Citigroup’s bad paper.
You would think that the consequence of such destructive behavior would be a profound erosion of the ability of Citigroup and other banking lobbyists to write the nation’s laws governing financial activity. But just the opposite has occurred as the company’s influence has only grown in direct proportion to the harm it has bestowed. As The New York Times reported last week:
“Bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations. Instead, the lobbyists are helping to write it themselves.
“One bill that sailed through the House Financial Services Committee this month—over the objections of the Treasury Department—was essentially Citigroup’s, according to emails reviewed by the New York Times. ...
“In a sign of Wall Street’s resurgent influence in Washington, Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word.”
Of course they were faithfully copied by the staffs of Congress members from both political parties, who might as well be on the payroll of Citigroup and the other mega banks. The Republicans, with the exception of a few die-hard libertarians, always do the bidding of the banks that finance them, but the Democrats are just as eager to pig out at the bankers’ trough. Wall Street lobbyists were only too happy to hold a fundraising dinner last week for Democratic Rep. Sean Patrick Maloney of New York, who co-sponsored the Citigroup bill, one of several such events banking groups have organized for lawmakers who support their legislation.
What is at issue here is an attempt to gut the already tepid effort of the Dodd-Frank Act to control the runaway $700 trillion derivatives trading market. One source of alarm is the extensive in-house trading in these derivatives between affiliates of the too-big-to-fail banks. As an example of the profound corruption of our legislative process, congressional staffers turned to top corporate lawyers to draft the wording pretending to rein in their activity.
For example, as the emails reviewed by the Times revealed, House committee staffers consulted Michael Bopp, a partner at the elite law firm Gibson, Dunn who represents corporations involved in derivative trading, as to the verbiage he would prefer in the legislation. His language was well received, as the Times reported: “Ultimately, the committee inserted every word of Mr. Bopp’s suggestion into a 2012 version of the bill that passed the House, save for a slight change in phrasing.”
That last sentence, conveying the essence of America’s crony capitalist system, should stand as the defining epitaph for the death of representative democracy.
“I won’t dispute for one second the problems of a system that demands immense amount of fund-raisers by its legislators,” Jim Himes, a Democrat from Connecticut who supported the bankers’ recent bills and conveniently heads fundraising for House Democrats, conceded to the Times. Himes, who worked for Goldman Sachs before pretending to represent the people’s interest as an elected representative, is one of the top beneficiaries of Wall Street payoffs but claims to be distressed by the corruption that is his way of life. As he told the Times, “It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption. It’s unfortunately the world we live in.”
No, buddy, it’s the world you guys make and wallow in. Other folks just lose their jobs and homes while you manage to slither out of the slime richer and more powerful than ever.