How Wall Street Bought Barney Frank
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The staff is where it's at
Frank gladly inherited LaFalce's legacy. The Democratic wing of the financial services committee was still open for business. He indicated to the press that the Gramm-Leach-Bliley Act would not be re-considered, and he would keep key members of LaFalce’s team, including senior counsel Lawranne Stewart and chief of staff Jeanne Roslanowick.
By relying on Stewart and Roslanowick during the unfurling of the financial crisis, Frank has looked to the very enablers of the recent financial catastrophe to remedy the current situation. Both staffers played key roles in shaping the Clinton-era financial reforms that drove the U.S. economy to the brink last year. And as Frank negotiated bailouts and steered financial reform legislation through Congress, they’ve been two of his top lieutenants.
Roslanowick’s various biographies give her credit for playing an important role in crafting GLB, and LaFalce described her as “tough as nails and absolutely unyielding” in negotiations on consumer protections and community reinvestment. But it is unclear which policy questions she held her ground on as the bill’s sole achievements for consumers were toothless privacy reforms and ATM fee notifications, and its most significant community reinvestment provisions were attempts -- authored by GOP Sen. Phil Gramm -- to embarrass community groups.
Granted, it could have been much worse -- Gramm wanted to end the Community Reinvestment Act (CRA) altogether -- but this was certainly not a consumer-oriented legislative achievement to hang one’s hat on. Consumer advocates called the GLB a massive giveaway to Wall Street, and Public Citizen would spend the next decade pointing to the negative effects of banking consolidation brought about by the bill.
In financial reform’s most recent iteration, Roslanowick and company appear to have forfeited on CRA once again. The bill gives the Consumer Financial Protection Agency no oversight of financial institutions on CRA issues.
Roslanowick’s fellow LaFalce/Frank staffer, Lawranne Stewart, has an embarrassing history with the financial products known as derivatives that the bill was supposed to address.
Stewart, now senior counsel at Financial Services, helped author the Clinton-era legislation that cleared the way for the great derivatives explosion of the Bush years, which eventually brought AIG to its knees in September 2008. From 1999 to 2001, she was Undersecretary of the Treasury Gary Gensler’s top lieutenant, and helped craft the legislation known as the Commodity Futures Modernization Act. In March, Senator Bernie Sanders put a hold on Gensler’s nomination as chair of the Commodity Futures Trading Commission, over concern for his role in shaping that legislation. Gensler was eventually confirmed, and has established himself as a tougher critic of Wall Street than was expected.
Stewart’s authorship of that legislation is evident in this celebratory email between Enron lobbyists sent on December 12, 2000.
Stewart passes the document containing “an amendment to the definition of ‘trading facility’ to exempt single dealer markets” along to her boss Gensler, who then forwards it to the lobbyist George Baker with the subject line “as discussed.” Baker then forwards it to derivatives lobbyist Ken Raisler, who then forwards it to Enron lobbyist Chris Long, who then passes it along to the rest of Enron’s lobbying team with a brief analysis, closing with: “They may cut a deal as early as this afternoon!”
Elements of this bill would later become known as the “Enron loophole,” which exempted energy trades from proper oversight and were believed to be behind historic spikes in fuel prices during the spring and summer of 2008. Though Democrats have blamed Senator Phil Gramm for the loopholes, Enron lobbyists were actually worried that Gramm would hold out for something too radically deregulatory, thereby putting their sought-after language in jeopardy. In any case, a compromise was reached, and Stewart played a key role in crafting the Enron-approved language.