A thousand cuts
In bits and pieces, conservatives attack Wall Street reforms
SOME CAUSES are more easily sloganized than others. “Let’s Re-deregulate Derivatives’’ has a certain rhythm, but it doesn’t sell well politically. So the conservative ideologues who want to roll back the Wall Street Reform and Consumer Protection Act, and return to a time when there were fewer regulations to restrain the reckless behavior of the financial-services industry, avoid saying so directly. Instead, they engage in indirect assaults which, if successful, will recreate the conditions that led to the crisis and caused millions of Americans to lose their jobs or homes.
Conservative opponents of the law, with a majority of Americans against them - every poll shows that financial reform is broadly supported - hope that the public is too distracted by the showdown over the debt limit, a slow economic recovery, and two wars that it won’t notice the stealth attack on that law.
These opponents rely on collateral, but damaging, attacks to disguise their effort to undo the reform.
■ Catch 22.
House Republicans have drastically reduced the funding needed by the Securities and Exchange Commission and the Commodity Futures Trading Commission to adopt rules to regulate derivatives - the financial instruments that made AIG a symbol of financial destruction and allow speculators to drive food and energy prices higher. They then say that because the rules have not been adopted it is impossible to create any rules at all.
■ Defying the laws of physics. Opponents of financial reform argue that they must roll back regulation of American firms to put them on “a level playing field’’ with their foreign competitors. But European financial institutions also argue that they are the victims of a playing field which tilts in favor of American firms. These unlevel playing fields - if they exist - defy the laws of physics because everyone claims to be on the bottom.
■ “I’m only doing this for your own good.’’ Those wishing to free large financial institutions of regulation argue that requiring banks to have sufficient capital will cause small businesses to suffer. Conservatives pretend to defend the little guy while they carry water for the big guys. They claim that an independent agency to protect consumers against predatory practices will actually hurt consumers by depriving them of products which - although they may appear harmful - will prove ultimately to be in their best interest.
■ Throwing a temper tantrum. Senate Republicans, lacking the votes to roll back Wall Street reform, have blocked it by hijacking the constitutional provision that requires the Senate to advise and consent regarding nominations. They refuse to confirm anyone to run the Consumer Financial Protection Bureau unless the law is rewritten to substantially weaken it. Having lost the legislative battle over financial reform, they are throwing a temper tantrum in defiance of the Constitution. This is especially ironic for a political movement that claims that it is the most faithful defender of the constitutional spirit.
Those seeking to undermine the Wall Street Reform and Consumer Protection Act are in the difficult position of having to persuade the American people that our problem is not the reckless financial practices that led to the worst economic disaster in 80 years, but rather new rules designed to reduce the chance that it will happen again.
But they understand one important principle of debate - try to refrain from saying something that almost no one will believe. So they do not come right out and state that derivatives should be re-deregulated or that consumers need no protection. Instead, they are trying to induce mass amnesia while they try to recreate the conditions that led to the economic mess we are in today. But those of us who fought to adopt the law are determined to keep them from succeeding.
US Representative Barney Frank of Massachusetts is coauthor of the Wall Street Reform and Consumer Protection Act.