The Wall Street Reform and Consumer Protection Act of 2010 became law last July. Its first words promised “to promote… accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices.” But to get the bill passed, its well-meaning congressional sponsors had to compromise away toothy provisions like those requiring a strict separation between depository banking and financial trading.
The history behind that lame law is sadly relevant to understanding how some among corporate America’s super-wealthy now dominate Ameri-can politics and policymaking in ways that make yesteryear’s Gilded-Age capitalists and robber barons look like simon-pure civic do-gooders by comparison.
The Banking Act of 1933 strictly separated investment banking from commercial banking and imposed many other restrictions on what today we would call “financial services” firms. In every decade thereafter, assorted corporate interests pushed to repeal the law in whole or in part. In the early 1980s, as the number of members of Congress for whom the Great Depression was no mere chapter of a history book decreased, the lobbyists in Gucci loafers almost got their way. But in 1986 President Ronald Reagan’s unexpected support for a major bipartisan corporate-loophole-plugging tax reform law, the sudden October 1987 stock market plunge and the scandals surrounding the savings and loan industry temporarily broke big business’s political momentum.
In 1999, however, Congress passed and President Bill Clinton signed the Orwellian-named Financial Services Modernization Act. The law’s “modernization” provisions begat financial mega-businesses different in form but identical in consumer-exploiting function to those 19th-century corporate conglomerates that Teddy Roosevelt had broken up through vigorous use of the Sherman Antitrust Act of 1890.
The 2010 law did not come close to undoing the 1999 act. Worse, for almost a year now, President Barack Obama has left many key federal financial regulation jobs entirely vacant.
How did it come to this? I will leave the deeper explanations to theologians, philosophers and social critics. My answer centers on the fact that lobbying to influence public policy has become ever more supremely lopsided in ways that favor business interests.
For example, as the political scientists Kay Lehrman Schlozman, Lee Drutman and others have documented, between 1981 and 2006 the ratio of business lobbyists to union and public interest lobbyists working in Washing-ton, D.C., rose to 16:1 from 12:1, including nearly 2,800 lobbyists (up from about 1,500) representing just the Standard & Poor’s 500 corporations.
According to the Federal Election Commission, the U.S. Chamber of Commerce is the single biggest spender on lobbying, with no close second. Between 1998 and 2010 the chamber spent nearly $750 million. Its recent expenditures have shattered all records: $91 million in 2008, $144 million in 2009 and $132 million in 2010.
Many of the other biggest spenders on lobbying are business interests like big oil companies. By contrast, the union membership rate for private sector workers is now below 7 percent (it was nearly 12 percent in 1983) and falling. Public employee unions now claim about 7.6 million workers, but even the American Federation of Teachers’ Political Ac-tion Committee ranked only 26th on the F.E.C.’s 2009 list of the top 50 PAC contributors. And public employee unions are now under political assault in many state capitals.
In 2010, in Citizens United v. Federal Election Commission, the Supreme Court removed the last remaining legal barriers to corporate “electioneering communications” and related political “independent expenditures.”
By doctrine and tradition, the Catholic Church stands against all who selfishly exploit people for profits. But if Catholic bishops hope to be any real political counterweight to the worst elements in U.S. big business today, they need to pick up their game, speak out far more and pressure Catholics in Congress to fight for working families and to protect the needy from the greedy. Labor Day 2011 would not be too soon.
Dr. DiJulio would do well to skip a few lunches in the faculty club and go over to the Wharton School for a few lessons on the laws of unintended consequences.
Those causes, of course, are well-known: the federal guarantee of Fannie and Freddie mortgages took the risk out of the equation for the lenders, resulting in a emasculation of the essential risk factor in the free market. This ultimately replaced the free market with an I win you lose market. Then, early in the Clinton administration Longview Capital, a hedge fund, borrowed huge amounts of money from investment bankers such as Bear Stearns on a currency speculation, which bet turned against them. The failure and loss of these funds would have harmed the economy and perhaps lead to the default/firesale of those investment banks which had unwisely forwarded the monies to the fund, resulting in fired CEO's, etc. But the government intervened and worked out a bailout that violated free market principles. Thus the speculators knew that if they got into severe troubles that might affect the economy of the country, the government would bail them out. Again, heads I win, tails you lose. This was in effect a green light to speculators that the free market punishments of excessive risk would be mitigated for them by government officials. So the risk-taking expanded. Add to this Barney Frank demanding that banks make bad loans to those who could not afford them to enable them to become homeowners, all guaranteed by Fannie and Freddie, and you can see the dry wood being piled on the forest floor.
John rails against those who selfishly exploit others for profit, which certainly occurred in this mortgage crisis. Yet with the Liar loans and no down payment mortgages mandated by our government, the number of those doing the selfish exploitation is likely to include a far greater number of morgagees than bankers and mortgagors. Having lied about their incomes (57% of those in that type of loan by over 25%) to get the loan, often with no down payment, when the value of the home dropped, many simply walked away from their mortgages and left them in the hands of the banks and, ultimately, the taxpayer, with Fannie and Freddie on the hook for $150 billion and counting. The greatest number of greedy exploiters were our middle class citizenry, aided by Barney Frank as well as President' Clinton's unwise policies.
Other aspects of the article are contradicted by various sources. John bemoans the diminished power of union groups, yet according to the former president of the SEUI, that union alone raised $61 million for President Obama's presidential campaign. Those are some real fat cat numbers.
Charity begins AT HOME!
Bring the troops HOME!
WE need the money in AMERICA!
Factoid on today's news: 31 states are in debt for a total of 86.1 BILLION dollars.http://www.msnbc.msn.com/id/3032619/
Fact: Annual Cost of Iraq/Afghanistan wars: $80 BILLION dollars.
http://www.fas.org/sgp/crs/natsec/RL33110.pdf
DO THE MATH, CONGRESS!!
DO THE MATH, WHITE HOUSE!
$1.23 TRILLION AMERICAN DOLLARS spent overseas on FOREIGN WARS since 9/11. And for what? Shuttered public parks on the 4th of July weekend? Closed driver's license bureaus, suspended state lotteries, massive teacher layoffs and unpaid furloughs?
Memo to ALL politicians (and the church officials they USE):
NO MORE EXCUSES. There is PLENTY OF MONEY considering that 1% of the population control 38% of the total wealth in America! NO MORE USING ORGANIZED RELIGION TO HIDE BEHIND DIVISIVE HOT BUTTON ISSUES LIKE GAY MARRIAGE AND ABORTION AND MASK THE FACT THAT YOU ARE NOT DOING YOUR JOBS IN WASHINGTON AND JUST ABOUT EVERY STATE CAPITAL IN AMERICA!
“Protect the needy from the greedy” is a marvelous way of putting one aspect of our obligations as followers of Jesus to “bear one another’s burdens”). Sure wish this idea would become a guide to action amongst this country’s power brokers.. Currently it appears that the guide is more like “Feed the greedy from the table of the needy”.
For example, consider the budget impasse over proposals to increase taxes on the very wealthy. The same politicians who oppose raising taxes, even on those with a taxable income over a million dollars per year , support a budget that will further impoverish millions of already very poor people. These pols include a number of Catholics, e.g. Congressmen John Boehner and Tim Murphy, and Senator Pat Toomey.
Spending cuts are necessary to preserve some type of Social Security, Medicare and Medicaid system over the long term. However I consider it a crime to make these cuts in a way that further impoverishes poor people. Surely the super rich can be called on to make some “sacrifices” (if giving up an extra 10% of a taxable income over a million dollars can honestly be called a sacrifice as compared with reducing the food allowance for a family already experiencing hunger) .
Many pieces of financial legislation over the past twenty years, including deregulation and the tax cuts of 2001 and 2003, weren’t orchestrated by the needy, and certainly didn’t benefit the needy, but a disproportionate share of the benefit has gone to increasing the percentage of national wealth owned by the richest 5 or 10 percent. It appears that this legislation was orchestrated by the greedy, for the greedy. To insist that tax cuts for the super rich remain in place even as poor people are being more impoverished amounts to feeding the greedy from the table of the needy.
On behalf of poor people in this country I plead with all who in effect are advocating feeding the greedy from the table of the needy; please reconsider what you are doing.