3 Fronts in the Battle to Break Up the Banks
This post originally appeared on Open Left.
One of the most disappointing outcomes in the Wall Street reform fight to date was the resounding defeat of the Brown-Kaufman amendment to strictly limit the size of large financial institutions. To put it bluntly, the amendment would have broken up the big banks, thus reducing their almost unprecedented concentration of power and wealth (and the control over our democracy that comes with that concentration of power and wealth).
However, even though this sweeping amendment failed, a series of piecemeal efforts to break up the big banks continues. Here are updates on three ongoing efforts that aim to reduce the size and power of our largest financial institutions:
- Move Your Money : The Move Your Money campaign is a grassroots driven effort to break up the big banks without waiting for Congress to act. The idea is simple: move your money out of the big banks that caused the financial crisis, and into community banks with a strong record of sound, local investment.In the same way that you buy locally to help build a sustainable, local economy, you can do the same thing to help end Too Big to Fail. Join with Open Left sponsor, Democracy for America, and pledge to move your money, too. It makes a big difference, is easier than it seems, and doesn't require the help of Congress in any way, shape or form.
- "Swap desk" spin-off gaining steam In an attempt to gain some populist credibility during her primary with Bill Halter, Arkansas Senate Blanche Lincoln inserted strong derivatives regulation language into the Wall Street bill. The language forces banks to spin-off their derivatives trading sections into separate entities, a requirement which would cost banks billions of dollars a year. Now, in the wake of Lincoln's victory in the primary, this legislation is actually gaining steam. From the Financial Times, via David Dayen:
Banks are likely to lose a key lobbying battle in the US over whether they will be forced to spin off their lucrative swaps desks, according to people familiar with financial reform negotiations in Congress.
Defeat, which would be a further blow to Wall Street, has been made more likely by Paul Volcker, the influential former Federal Reserve chairman, softening his opposition to the provision.
This battle is far from won, given that many in the Obama administration still oppose it. However, it was considered all but dead just a week ago,a nd is now gaining support at least partially as a result of Lincoln's primary victory. Bitterly disappointing as that victory was, it might yet have a surprisingly positive outcome in the battle to break up Wall Street.
- Retailers gaining ground in "swipe fee" battle . The banks are also reeling in a third front in the fight to reduce the power of the nation's largest financial institutions. Credit card companies and credit card-issuing banks are locked in a battle with retailer associations and consumer advocates to put limits on the size of credit card processing fees. This could cost banks up to $20 billion a year, further eroding their power and transferring that wealth to the wide range of businesses--small and large, god and and evil--that rely on consumer's making purchases with credit and debit cards.
Senator Dick Durbin is leading on the charge on this fight. Last month, he as assembled a bipartisan coalition of 47 Democrats and 17 Republicans in favorof the proposal, thus inserting it into the Senate Wall Street bill. The language is not in the House proposal, where Debbie Wasserman Schultz is leading the fight on behalf of the banks and credit card companies. The issue will be decided in the ongoing Wall Street reform conference committee, and Durbin has the advantage by a good margin.
Now, you may ask why you should care about a fight between Visa and Wal-Mart--don't consumers and working families lose no matter who wins? Admittedly, this is not a clear-cut fight, but on the side of the retailers are also small businesses and local businesses, not to mention your donations to charities and political candidates. Additionally, fitting in with the overall concept of this article, it is still a means of breaking up the largest financial institutions, and your local pizza shop poses a far lower risk to the overall economy than Citigroup, for example.
In the interests of full disclosure, I am currently or, in the case of #2, recently been employed in all of these efforts. However, I am not embarrassed to be involved in advocacy efforts that will, collectively, significantly reduce the overall concentration of wealth and power megabanks have on our economy and our democracy.
Despite the defeat of Brown-Kaufman, we can make real strides--to the tune of tens of billions of dollars annually--in breaking up the big banks this year. If Move your Money really takes off, we could even be talking about hundreds of billions annually. That will make a big, concrete, positive difference for our democracy and our economy,. Pledge to move your money, today.