Obama's US Top Cop for Banks Wants Less Regulation, Echoes Republican Wall St. Pals
If you had any doubt about the bank lobby's vice-grip on public policy, look no further than the meeting of the American Bankers Association currently taking place in Washington. In a shameless effort to curry favor with the deep-pocketed financial industry, House Minority Leader John Boenher, R-Ohio, urged lobbyists to fight hard against financial reform. And astonishingly, the nation's top bank cop, Comptroller of the Currency John Dugan, actually agreed with him.
The ABA is the top lobby group for the nation's financiers, and has been fighting hard to prevent meaningful regulation of the industry that drove the global economy off a cliff in 2008. Their current conference is focused on "government relations," known to the rest of the world as "shameless vote-buying."
At Thursday's meeting, Rep. Boehner made an impassioned plea for the bank lobby to keep up the fight, according to a report by Dow Jones NewsWires:
"Don't let those little punk staffers take advantage of you and stand up for yourselves," Boehner said. "All of us are hearing from our friends and constituents on lack of credit, you can't get a loan, the more your government takes and taxes, the more regulations you have to comply with the more cost you have there and less amount you are going to have available to loan to customers."
Right now, the only demographic in the U.S. that is less popular than Wall Street bankers are the lobbyists who work for Wall Street bankers. What's shocking about Boehner's statement isn't the sentiment -- anybody paying close attention to the financial reform debate knows that every Republican has been in the bank lobby's camp since well before the crisis broke. Boehner has to know that siding with the same banks that screwed the public on their houses, their credit cards and their retirement is not a good idea. But Boehner believes the bank lobby is so powerful he's willing to publicly encourage the group to work with Republicans to fight against popular reforms.
Tragically, Boehner appears to be right. The bank lobby spent over $463 million lobbying Congress in 2009 according to the Center for Responsive Politics. Yet even after the worst financial crisis in history, the Senate didn't even start considering a reform bill until this week. Along the way, President Obama and Democrats in both the House and the Senate made a string of pointless concessions to the bank lobby, effectively gutting several key reforms. Republicans, meanwhile, have won electoral contests in Virginia, New Jersey and Massachusetts.
But the comments from Comptroller of the Currency John Dugan, the nation's top bank regulator, were just as outrageous as Boehner's public oath of fealty to the ABA. Dugan, whose agency completely failed to protect consumers from predatory lending both before and after he took over as its head, actually argued that we have too much consumer protection in the U.S. regulatory system.
"In every case consumer protection has the edge and will trump safety and soundness, and I think that is backwards," Dugan said, according to a Business Week report.
"Safety and soundness" roughly translates to bank profitability. Dugan couldn't have the relationship between profits and consumer protection any more wrong. In 2009, credit card companies had jacked interest rates through the roof, banks scored almost $40 billion in overdraft fees, and a whopping 2.8 million homes were in foreclosure at year-end. That overdraft fee number is about triple the banking industry's combined profit for the year. The main line of business in American banking is consumer predation. The nation's largest banks, by contrast, scored epic bailouts and paid out epic bonuses.
Dugan doesn't even see a pressing need for action on overdrafts. He told reporters yesterday that he thinks "the jury is still out" on whether banks should be held accountable for overdraft fees.
These are the views of the top bank regulator in the United States today. But given Dugan's background, we shouldn't be surprised he is so sympathetic to the ABA. Before President George W. Bush nominated him as Comptroller, Dugan worked as a lobbyist for the group, helping secure passage of major deregulatory legislation, including the repeal of Glass-Steagall in 1999.
Salon's Andrew Leonard highlights Dugan's comments and makes a thoughtful suggestion: "Dugan's term ends in August. Why not ignore him now, and replace him with Elizabeth Warren?"
For a long time, most observers have seen Warren as the ideal person to serve as the first head of a new Consumer Financial Protection Agency. And the idea makes sense -- Warren was the first person to propose creating a regulator that answers only to citizens, not bank balance sheets.
But the OCC -- Dugan's agency -- currently has very broad consumer protection powers. The agency did not lack the power to avert bank abuses, it simply chose to look the other way. Putting Warren in charge of the OCC would dramatically change the debate over financial reform. The mere threat of a Warren-headed OCC would force the bank lobby to back down from some of its most outrageous demands, like torpedoing the CFPA. If Obama actually named Warren Comptroller of the Currency, bankers would immediately start feeling the heat.
Whatever Obama and Congressional Democrats do, they'll pay a monstrous political price if they don't push hard for real reform. The loopholes Dodd has left open in his current proposal are so broad that Republicans can vote against the bill and tell the public they simply wanted a better piece of legislation, while pocketing checks from the bank lobby all along. Republicans are taking a very unpopular stand with Wall Street right now. Democrats need to muster the political will to show that they stand with the rest of us.