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How would a lobbyist look at FinReg?

Mike Konczal examined Sen. Chris Dodd's FinReg bill from an interesting angle:

What would an investment bank hate about this bill, and lobby hard to change? I actually read this bill as if I was a Goldman Sachs lobbyist, looking for all the sections that I hated and made a list of what items I needed to lobby hard on to kill or modify.

My final verdict, by the time I got to the end? If I was a Goldman lobbyist, I’d probably shrug and go “eh, pass it.”[...]

If I was advising you, as a taxpayer, I’d point out that since we don’t want to shrink the biggest banks, we are going to be putting a lot of stress on unproven and uncertain powers and institutions, particularly the Federal Reserve’s ability to discipline the largest financial firms, and resolution authority’s ability to take on firms whose business model is, in part, to warehouse gigantic derivatives portfolios.

My sense is there's plenty in the bill Goldman Sachs will lobby to change, if for no other reason than Goldman's lobbyists need to show what they're doing to deserve their massive paychecks. But there's nothing in there that Wall Street can't live with. The bill is fundamentally about ensuring there's order and information in the event of a financial crisis. It is not about changing the way Goldman Sachs does business, which is what they really fear.

And maybe that's okay. Maybe you just want to give regulators a better chance to detect the next financial crisis and more powers to respond to the crisis if they miss it. But if you're interested in crisis prevention -- and I am -- the bill is disappointing on that front.

By Ezra Klein  |  March 17, 2010; 3:59 PM ET
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I haven't read the bill yet, but politically I think this may be the one area Dems could really be strong. If, that is, Dems were strong.

But they aren't. They'll pass a mostly do-nothing type bill because they are just as bought off as the Republicans. As a result we will probably be right back where we are today in a decade or two.

Posted by: nisleib | March 17, 2010 4:21 PM | Report abuse

the interesting this from this vantage point (well interesting to me at least) is banks would be absolutely FINE with the status quo with a caveat to ensure they get bailed out again when/if they screw it up again.

In contrast health insurers are absolutely not OK with the status quo and they've said so many, many times.

I wonder why Dems don't demonize banks like they do insurers especially when insurers (if people are paying attention) are asking for controls to the system and banks would be fine with the status quo or "slap on the wrist type" reforms.

Posted by: visionbrkr | March 17, 2010 4:25 PM | Report abuse

Wasn't there a cease and desist order issue about the use of the term "FinReg"??

Posted by: zeppelin003 | March 17, 2010 4:28 PM | Report abuse

But Ezra, is it disappointing enough to oppose? I really thought FinReg would be the "no compromise" issue for the Dems this year, even if it means the Republicans fight hard against it and the bill eventually doesn't pass. Granted, I see the "good government" side of the argument (take what you can pass, even if your base isn't super excited by it and it only moves the ball a few yards down the field), but I've also seen the argument that half-assed FinReg is worse than nothing at all.

And on top of it, I haven't had a year of constant articles to absorb as I have with healthcare, and this stuff is confusing to me to begin with, so I don't know how I should feel on this bill. It seems bad, but is it so bad that we should be pushing the Dems to junk it in favor of something stronger?

Posted by: MosBen | March 17, 2010 4:29 PM | Report abuse

Ezra - Thanks for all the useful insight into health care reform. You've made it all less painful. I hope you'll do the same for the financial regulation face-off, but I also hope you'll reconsider "FinReg". It sounds Newspeakish. Also, Yglesias agrees. That's one famous blogger and one semi-anonymous blog poster on the side of King's English.

Posted by: Chris48 | March 17, 2010 4:46 PM | Report abuse

But it's not altogether about the big investment banks like Goldman, is it? According to Tim Geithner last night on Maddow (okay, okay, I know), a lot of the problems are in the wider, wild-west of the financial industry: mortgage brokers, pay-day lenders, etc. I haven't read the proposal, and I probably wouldn't understand it if I did. So I'll have to depend on you and others to help see if this thing has any teeth.

In the meantime, I was informed that the Bank of America's "Shamrock Shuffle" will close my street and cause 36,000 runners to pass by my building Sunday morning. I'm thinking of standing out there with a sign that says "Hey, B of A, stop using my money to fight financial regulation." Can' t hurt.

Posted by: JJenkins2 | March 17, 2010 5:11 PM | Report abuse

Yglesias is calling you out on FinReg ( I'm with him. IngSoc double plus ungood.

Posted by: BenjaminTheAss | March 17, 2010 5:20 PM | Report abuse

...Which is to say, what Chris48 said.

Posted by: BenjaminTheAss | March 17, 2010 5:21 PM | Report abuse

What about derivatives trading, CDS, MBS, and other exotic instruments that brought the system to its knees? What is the regulatory structure to make these things more transparent? And where is my exotic instruments tax and financial transactions tax? I want those now!

Posted by: srw3 | March 17, 2010 6:03 PM | Report abuse


I know how you feel about this, which you laid out much better in a previous post. But I really hope you keep the pressure on about this. It's really depressing what's going on. You know, I remember a great article you wrote about the end of the West Wing and how it symbolized a bygone era among Democrats of process liberalism, shall we say. And perhaps during Bush that was true. But I have to say, process liberalism is alive and well in the Democratic party. It's the reason--I would say--that Dodd isn't scrapping his bill with Corker and returning to the stronger version he began with. He just blindly believes in the principle of bipartisanship. Another example would be your interview with Jay Rockefeller, who defended Senate Democratic leadership for not punishing wayward party members by stripping them of committee chairmanships the way Republicans do. Why didn't Harry Reid even consider doing this with Joe Lieberman when he threatened to filibuster with Repubs if his demands were met to stick it to liberals? There's a sickness with the filibuster, yes. But the greater sickness is the Democrats' process liberalism.

Posted by: dhs08 | March 17, 2010 6:27 PM | Report abuse

Business as usual is absolutely not okay. The strange new financial constructions, the repackaging of mortgages into securities, credit default swaps, all the machinations of the financial types that in my mind had no value beyond enriching the people that thought them up and crashed the economy, resulting in the largest transfer of wealth ever from the taxpayers to the rich, is going to surely happen again if there isn't some severe regulation of what the financial industry is allowed to do. All we need the financial industry for is to make loans to homeowners and to businesses. That is it. All the other roles they have thought up to enrich themselves have no benefit to the economy as a whole, and so they should be disallowed. For example, mortgages repackaged as securities, credit default swaps, all the rest of that stuff, if not made illegal, should be traded on an open market. Also, big firms shouldn't be trading on the one hand and advising people on what to trade on the other. Obvious conflict of interest. The whole financial sector is completely divorced from the real needs of the real economy, that is to say, companies that actually make products.
I think Volcker has the right idea. He's not a radical.
It is certainly all going to come crashing down again if we just put some weak-sauce regulation in there and call it good. The banks all have to be cut down to size, to where if one fails, then we have real capitalism: the good banks survive. As of now, they know they can take any risk they want because they have a government bailout waiting down the road, and that will all happen after they have already walked away with their huge bonuses. Goldman-Sachs has basically got away with a huge financial scam, and I have not seen any real repercussions as of yet.
Reselling mortgages is not a good idea. There has to be a real connection with the mortgage holder and the borrower. When they are resold, there are too many intermediaries and the loan becomes impossible to renegotiate. There are also too many incentives to load to bad risks.
I could go on and on. I kinda sorta know what I am talking about. Read Joseph Stiglitz's book, Freefall. He has the right ideas.
Nothing less than a complete restructuring of the financial industry, eliminating any of the financial creations that do not have a benefit for the economy as a whole, is necessary, for the continued prosperity of the country as a whole.

Posted by: christopherfarrell | March 17, 2010 8:16 PM | Report abuse

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