Why Wall Street Won the First Round and How We Might Win the Next

[eridani]

http://www.nationofchange.org/news/2016/01/30/why-wall-street-won-the-first-round-and-how-we-might-win-the-next/

How did they succeed? The first line of defense for the banks was to get the government to rescue the banks from the financial mess they had created. The banks flatly refused Washington’s pressure on them to mount a collective defense with their own resources. Using the massive collapse of stock prices triggered by Lehman Brothers going under, finance capital’s representatives were able to blackmail both liberals and the far-right in Congress to approve the $700 billion Troubled Asset Relief Program (TARP). Nationalization of the banks was dismissed as being inconsistent with “American” values.

Then by engaging in the defensive anti-regulatory war that they had mastered in Congress over decades, the banks were able, in 2009 and 2010, to gut the Dodd–Frank Wall Street Reform and Consumer Protection Act of three key items that were seen as necessary for genuine reform: downsizing the banks; institutionally separating commercial from investment banking; and banning most derivatives and effectively regulating the so-called “shadow banking system” that had brought on the crisis.

They did this by using what Cornelia Woll termed finance capital’s “structural power.” One dimension of this power was the $344 million the industry spent lobbying the U.S. Congress in the first nine months of 2009, when legislators were taking up financial reform. Senator Chris Dodd, the chairman of the Senate Banking Committee, alone received $2.8 million in contributions from Wall Street in 2007–2008. But perhaps equally powerful as Wall Street’s entrenched congressional lobby were powerful voices in the new Obama Administration who were sympathetic to the bankers, notably Treasury Secretary Tim Geithner and Council of Economic Advisors’ head Larry Summers, both of whom had served as close associates of Robert Rubin, who had successive incarnations as co-chairman of Goldman Sachs, Bill Clinton’s Treasury chief, and chairman and senior counsellor of Citigroup.