I’ll probably alternate between snarky and serious financial reform blogging to keep myself sane. And right now I’m trying to think of a good metaphor for watching next week’s lobbying and amendment efforts during the markup of Dodd’s financial reform bill. There’s going to be a massive lobbying effort, and since there’s little that is really worrisome in the bill that has to go, the lobbyists can go after everything they want, and I’m sure whoever will be that 60th vote will give it to them.
So what’s a good metaphor?
I’m a huge fan of mob and gangster movies. Are you? Sopranos, Goodfellas, The Wire, Casino, etc. Love ‘em. And in many of these movies, there’s the cleaning house scene. The cops arrest the criminal boss, and in a back room the boss and his lieutenants make a list of everyone who is a threat to them and send the hitmen loose so they won’t be a liability.
It’s always a little bit shocking when they take out the people who are only a small, minor threat at best but could potentially still be a liability. Take this dialogue from the end of Casino, with the mob bosses talking in the back of the courthouse after they’ve been arrested about who needs to be whacked:
Mobster 1: He won’t talk. Stone is a good kid….
Mobster 2: I agree. He’s solid. He’s a fuckin’ Marine.
Mobster 3: He’s okay. He always was. Remo, what do you think?
Mobster 4: Look… why take a chance?
And then we get a montage of all the characters you’ve met that are getting massacred.
Next week’s markup will probably look like that. All the financial reform ideas you’ve met over the past year on this blog, all blowing up in car bombs attacks and from gunshots. And, in case you are thinking that the massacre will be so bad that the lobbyists will break down and feel remorse – that a Goldman (GS) lobbyist will be banging on a window screaming, “Where the fuck is Wallace String!?” – I highly doubt that will happen. I think they’ll enjoy it, in fact.
Goldman and the CFPA
Crowdsourcing request: What are all the little liabilities that Goldman wouldn’t want to take a chance on? I’ve got one.
So the CFPA is at the Fed. Goldman isn’t affected by the CFPA. However, the CFPA sits on the The Financial Stability Oversight Counsel, whose membership includes:
- the Treasury Secretary, who would serve as chair
– the Federal Reserve Chairman
– the Comptroller of the Currency
– the Director of the new Bureau of Consumer Financial Protection
– the Chairman of the SEC
– the Chairman of the FDIC
– the Chairman of the CFTC
– the Director of the Federal Housing Finance Agency
– and an independent member, who must have an insurance background, and would serve a 6-year term
Here’s the viewpoint of a Goldman lobbyist: The CFPA Director is not a sure vote for your interests on the FSOC, and it’s likely that they’ll be troublemakers when it comes to publicity and secrecy, leaking things to the press. If they are going to come from a community organizing background then they won’t know how things are done in banking. They might be, in the greatest phrasing ever, yappers. So they got to go.
You can imagine the dialogue at Goldman:
Goldman 1: The CFPA doesn’t affect us unless a close FSOC vote comes into play….
Goldman 2: I agree. It’s solid. Most of those lenders are scumbags anyway.
Goldman 3: Yeah my brother-in-law got ripped off on his mortgage. Remo, what do you think?
Goldman 4: Look…why take a chance?
So I’d look for a massive effort by lobbyists next week to get the CFPA kicked off the FSOC and replaced by someone more bank friendly during the markup. I’m actually curious about how far lobbyists will go in trying to make the already banking friendly group even more banking friendly.
If you think this is a stretch, if you mostly talk to people who are CFPA friendly, it isn’t. On the off chance that you haven’t gotten your daily dose of patronizing misogyny yet, here is Larry Kudlow at Townhall talking about the Dodd Bill. Kudlow is probably a good proxy for how a lot of finance people talk when no one is watching. He likes it, except for:
The biggest flaw in the Dodd bill is that it gives the Consumer Financial Protection Agency (CFPA) far too much free reign. The agency will be housed in the Federal Reserve. But it will be independent inside the Fed, with a director appointed by the president and financed by the Fed’s own profits.
The Fed itself, apparently, would have no say on CFPA rule-making, which is sort of like giving Elizabeth Warren her own wing at the central bank in order to make mischief. At a minimum, she’ll need grown-up supervision.
It’s tough to read the fact that FSOC can overrule the CFPA with a 2/3rd vote as anything other than the “grown-up supervision” Kudlow mentions.
The thing about the hit job is that once all the big names sigh, realize that we don’t often get a good chance at financial reform (and anyway the Federal Reserve is the least bad place to put this) and take the plunge to support the bill, it will be tough to pull back that support if the CFPA is knocked off the FSOC.
The Other Hit
This is problematic because FSOC can override the CFPA with a 2/3rd vote. That’s going to be hard to do when the CFPA sits on it and can presumably vote on issues, harder without it.
Now we’ve been talking about Goldman. JP Morgan (JPM) will also have to deal with the CFPA. What’s the smart way to lobby to kill this without it being obvious? I’d suggest a last minute amendment to change the bill so that FSOC can override the CFPA with a majority vote. Add another amendment that gives the CFPA something nice, like a giant budget or whatever, but add the majority vote too.
Which FSOC would be an “always no” vote against the CFPA? Are there five if the CFPA is knocked off FSOC and replaced by a stooge? The Comptroller of the Currency would be an “always no,” I think. That’s a crowdsourcing request: which members of the FSOC would be an “always no” vote against the CFPA? And which would be a “mostly no”?
Either way, if you are going to support the CFPA at the Fed, I’d highly recommend you have a poison pill trigger where the CFPA has to be on the FSOC and that it must be a 2/3rd vote for overrule.
Similar Posts:
- The FSOC’s Veto Over Consumer Finance
- The Military and the Consumer Financial Protection Agency
- Regulatory Reform Goes to the Full Senate
- Things Are Getting Weird in Financial Reform Efforts
- Systemic Risk Watchdog: Maybe It Takes a Village of Agencies
