Say that again?
US Senator Scott Brown was talking about financial regulation on national television over the weekend. As you might expect, the Massachusetts Republican criticized financial overhaul bills headed for the Senate floor soon, and even suggested he might join a filibuster. But he wasn’t working from the standard Republican game plan, which depends almost exclusively on the fiction that Democratic proposals would perpetuate bailouts for America’s financial giants.
In particular, the Brown rebuttal outlined two eye-popping arguments against the current bill. He said it could threaten 25,000 to 35,000 financial service jobs in Massachusetts, and was bad for small businesses. Both left me scratching my head.
Those ideas probably came out of Brown’s recent visit to MassMutual, the big insurance company in Springfield. As the Globe’s Matt Viser has reported over the past two days, MassMutual executives initially said no jobs numbers had been discussed at the meeting, but later recalled a rather detailed conversation on the subject. Brown was told 33,000 financial service jobs had been lost in Massachusetts during the recession, and a loss of a “similar magnitude’’ was possible if the Senate bill became law, senior vice president Kenneth S. Cohen said yesterday.
For the moment, put aside any suspicion MassMutual was trying to give Brown some belated political cover for his numbers and take the story about 33,000 jobs at face value. The prospect of losing another 25,000 or 35,000 jobs in one of the state’s most important industries would be truly scary.
But the number itself is wrong, and the extrapolation into the future is crazy. Massachusetts hasn’t given up 33,000 financial service jobs, and it’s not going to lose any number like that in the foreseeable future.
The financial service industry surely has been hit hard during the recession but not nearly as bad as that. Between March 2007 and last month, a period that captures peak employment and the most recent information, the state lost about 19,000 financial service jobs, according to the Massachusetts Executive Office of Labor and Workforce Development.
That includes jobs in the insurance industry, and also at banks, securities firms, investment management companies, and real estate businesses. The biggest hits were suffered in the brokerage and real estate industries, which shouldn’t come as a surprise. Losses among insurance carriers and related businesses amounted to a total of 1,500 jobs during the period, according to the state numbers.
The idea that anything in the Senate bill could create additional job losses on a similar scale as the damage caused by the earthquake in the real estate and brokerage industries is simply nuts.
MassMutual has several beefs with the Senate version of financial regulation overhaul, and some of them may have prompted a forecast of more lost jobs.
MassMutual doesn’t like to be lumped in with other financial companies potentially responsible for repaying federal bailouts, a separate proposal the insurer says could cost it $200 million or more over a decade. The company also doesn’t like the way the Senate bill would restrict its routine financial activities using derivatives. Most of all, it chafes at the adoption of so-called Volcker rules that might limit its ability to conduct proprietary trading, operate private equity funds, and run hedge funds.
As far as I can tell, that last point was the genesis of Brown’s complaint in defense of small businesses. MassMutual proudly points to private equity investments it has made with other Massachusetts insurance companies over the past 30 years and suggests they generated a large number of jobs (on the other hand, the company doesn’t mention its ownership of Tremont Group Holdings, a fund of hedge funds that fed more than $3 billion of client money to Bernard Madoff).
Brown was vague on the details when he talked about small businesses on TV, and I couldn’t reach him yesterday. But the creation of small business jobs never depended on the private equity investments of insurance companies, and it never will.
The fight over financial regulation should reach the Senate floor this week, and Republicans could still wield a lot of influence. But they need to start talking more seriously about a serious problem. That includes the senator who would be the 41st vote.
Steven Syre is a Globe columnist. He can be reached at firstname.lastname@example.org.