FRESH AIR
On July 21, 2010, President Obama signed into law the Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank bill. Reporter Gary Rivlin says "the passage of Dodd-Frank was something of a miracle. Despite 3,000 lobbyists, that's six, nearly six lobbyists for every miracle of Congress, the bill passed, and it was actually a pretty strong bill." But to the chief lobbyist for the Financial Services Roundtable, a lobbying group that represents 100 of the country's largest financial institutions, it was just "halftime."
Rivlin is an investigative reporting fellow at The Nation Institute. In his article "How Wall Street Defanged Dodd-Frank," he tells the story of what he calls the fight that has taken place "in the back rooms of the bureaucracy.
....Goldman Sachs had 31 meetings in the first five months. Morgan Stanley had 20 meetings within the first five months. But then you look at the consumer advocacy groups, you know, you add them all up, they didn't have 10 meetings. And so again there's just this imbalance of power....there's an inequity in the process given the inequity in people on either side of the fight. He tells Fresh Air's Dave Davies,
"You've got regulatory lawyers and lobbyists doing hand-to-hand combat over every comma, every clause in the rule-making process. And then finally if a rule makes it, if in fact it's put into law, then you've got the legal challenge." Rivlin reports that the financial industry has spent more than $1 billion on hundreds of lobbyists who have been working to chip away at Dodd-Frank in the three years since its passage.
"....anyone's invited to write a comments letter. And, you know, it makes sense. OK, the federal bureaucracy is about to create a rule. Let's hear from people just in case they didn't consider some unintended consequences.
But ...it provides another opportunity for industry to really gum up the works. So [there are]one million pages of comments letters, just about derivatives reform, just about this one piece of Dodd-Frank....39,000 comments letters. Some of them run 300 pages.
And, you know, I asked, you know, well how many of these have you read? And he said, well, I've read a lot of them. And I said, well, are they making serious points? And he goes: Every once in a while. But for the most part, he feels like they are being written and published just to slow things down because there's federal laws that say that you can't just treat one of these letters like a comments box, let's empty it out every once in a while and throw it in the trash. You need to document every issue brought up and analyze who's saying what.
It's a long and arduous process that just adds months and months," Rivlin says, "and so even though we're nearly three years out from Dodd-Frank, of those 398 rules requiring action by a regulator, only about 148 of them ... have been finalized, in large part because we've created a process in Washington that has openness and fairness. But if you have mighty forces that have these battalions, they're able to really choke the process and slow it down."
...[But] there's plenty of progress. I mean, [the] agency has implemented 40 of the 60 rules that they were told to create. So there's been huge steps. As you say, the big banks are registering to sell derivatives. They're starting to share the pricing. But until they finish writing the rules, there's no market. There's no equivalent of a stock market to trade them on.
And so there's something of an all-or-nothing element to this, and they're well on their way, but the big worry that consumer advocates have, those who believe in derivatives reform have, is that there's the potential still for these huge loopholes to be written into Dodd-Frank. Just to choose one huge one, cross-border regulation. You know, what do you do with the foreign subsidiaries of a U.S.-based bank.
....And you know, it's too early to render a verdict, but you know, over two years into its existence, consumer advocates in Washington are very pleased with the Consumer Financial Protection Bureau. They've made some rulings that have made folks happy around credit cards and mortgages. They are starting to take actions, or at least they're indicating that they're going to take action on some other abusive products. So, so far so good.
[But], as Davies asks Rivlin, "Is the financial system any less vulnerable to a crash than it was in 2008?"
Rivlin's answer is "No."