You are hereHome >
In Washington, you don't have to make this stuff up. Yesterday the U.S. House passed a bill that, if enacted, would stop all regulations designed to promote the economy, preserve the environment or protect health, safety or your pocketbook. The House rejected a plethora of public interest amendments -- including to protect nuclear safety and occupational health rules, protect clean drinking water and energy efficiency rules, to protect rules against oil speculation and to protect the ability of regulators to protect small investors. U.S. PIRG Public Health Advocate Nasima Hossain joined other leaders of the Coalition for Sensible Safeguards in a strong joint statement of opposition to HR 4078, the so-called Regulatory Freeze for Jobs Act.
Meanwhile, various House committees held "investigations" this week preparatory to their additional planned attacks on financial regulation. Rep. Barney Frank (MA), the last name in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, had words and video for people opposed to financial rules who were apparently born yesterday.
Excerpt "I just want to go back again to the fundamental point, the notion that the problem today in America today with financial institutions is too much regulation. You know once a week we get a demonstration that that’s not true -- the banks lying about LIBOR, a disgraceful pattern of behavior of simply lying. [...] But the notion that our problem is too much regulation -- I guess I am struck by the precocity of people who make that comment because it is a very articulate statement coming apparently from people who were born sometime in early 2009."
And over on cable TV, Citigroup's Sandy Weill, the man who first convinced the Fed (NY Times 1998 story on merger) to allow and then the Congress -- with passage of the sweeping 1999 Gramm-Leach-Bliley Financial Modernization Act repealing much of the 1932 Glass-Steagall Act -- to retroactively legalize a merger between Travelers Insurance and Citibank to create the first financial supermarket, has gone and changed his mind. Sandy Weill, this week, said it is time to break up the banks (CNN). Over at Naked Capitalism, Yves Smith doubts Weill's sincerity. We do also. But, to be clear, Weill's view is joined more thoughtfully by the new FDIC Vice-Chairman and former Kansas City Fed president Thomas Hoenig and by Professor Simon Johnson, among many others.
But although the banks were in a weakened state during the 2010 Wall Street reform negotiations, they still had enough power to stop all efforts to reinstate all or parts of Glass-Steagall's wall between commercial and riskier investment banking and/or limit the size of banks. Congress instead adopted a compromise proposed by former Federal Reserve Chairman Paul Volcker to severely restrict risky proprietary trading. Instead of a structural rule to restrict risk, the Volcker Rule is a conduct rule intended to restrict risky behavior. It was enacted in a weakened state not preferred by its sponsors; since then, it has been under withering Wall Street attacks. So, regulators have both further delayed it and proposed to weaken it more. The banks have relentlessly attacked it because it would limit the ways they can use other people's money for risky investments.
In an important public policy speech this week, Federal Reserve Governor Sarah Bloom Raskin both criticized proprietary trading and explained her vote against the proposed Volcker Rule regulating it (because the rule was too weak).
Excerpt: "I view proprietary trading as an activity of low or no real economic value that should not be part of any banking model that has an implicit government backstop.[...] I dissented in the vote for approval of the proposed implementation of the Volcker Rule. Let me say a bit about that dissent now. One reason for my vote was my sense that the proposed regulation's guard rails [against abuse] were insufficient. [...] I feel it is very important that the guard rails be strong and be set very close to the road because of the potentially severe dangers of, and costs associated with, proprietary trading by institutions that have access to the federal safety net."
The metaphor is easy. The banks are cars operating in a less-preferred "low-road" financial system that requires bigger guard rails or safety features than it has. You should read the entire speech. It's important.
And that's our week in Washington.
Tools & Resources
Protect your family and see what hidden hazards to watch out for.
A Consumer Guide to Shopping Around
Coalition of 75 religious denominations
Our Changing Relationship with Driving and the Implications for America’s FutureU.S. PIRG Education Fund
When Big Pharma pays off their competition to keep them from selling lower priced generic drugs, we all pay. Each year this costs Americans an added $3.5 billion.
Your donation supports U.S. PIRG’s work to stand up for consumers on the issues that matter, especially when powerful interests are blocking progress.
Join our network and stay up to date on our campaigns, get important consumer updates and take action on critical issues.