If Jim DeMint gets his way, the Senate will vote any day now on repealing the historic Dodd-Frank financial-reform law. While Senator DeMint is receiving a big assist from conservative lobbying groups, his amendment is sure to fail given the Democratic majority. Still, the tireless war against Dodd-Frank - a law that marks its first anniversary next month - will go on.
Like the assault on the health-care law, the campaign to roll back financial reform is a sophisticated operation bolstered by big money and animated by ideological fervor. What's different is that cracking down on Wall Street is popular with the American public, and so - DeMint's frontal assault aside - much of the push to destroy Dodd-Frank has been carried on over power lunches and in the back offices of congressional committees.
Opponents of financial reform have mounted a three-pronged attack.
First, Republican lawmakers hope to block the funds that executive-branch agencies need to implement Dodd-Frank. The legislation that President Barack Obama signed last July is more akin to an outline than a detailed regulatory mandate. It will only have teeth when numerous rules are written and oversight mechanisms are put into place. Getting the money for this work wouldn't have been a problem if Democrats still controlled the House--but they don't anymore.
Last week, the House Appropriations Committee rejected the Obama administration's request for increased funding for the Securities and Exchange Commission and voted instead to freeze the agency's budget. The vote came despite the fact that its chair, Mary Shapiro, told Congress earlier this year that the SEC needed to write 100 new rules, open five new offices, and publish 20 studies to comply with Dodd-Frank mandates. Among other things, the SEC has new authority over credit-rating agencies, derivatives, and hedge funds: the institutions and financial products that led us into the crisis. If Shapiro can't hire the extra staff she needs, the SEC won't be able to exercise its expanded oversight - which is exactly the goal of the budget cuts.
Republicans are also using the power of the purse to strangle the Consumer Financial Protection Bureau, an entirely new agency and one of Dodd-Frank's most ambitious elements. The same bill that freezes SEC spending includes sharp limits on funding for the CFPB, which was expecting $550 million in fiscal year 2012 and needs a minimum of $329 million to get going. Republicans would give it $200 million. Trying to snuff out the CFPB has almost become a sport on Capitol Hill, where no fewer than five bills aimed at weakening or killing the bureau have been introduced.
A second strategy for undermining Dodd-Frank is to ensure that the new rules implementing the law are weak. For example, Dodd-Frank mandated the creation of a strong whistle-blower program to help expose financial crimes. Wall Street lobbyists worked hard to stop the SEC from setting up the program. The SEC narrowly approved the new rules in May, but this fight is not over: Legislation introduced in the House would force whistle-blowers to first report wrongdoing to company counsels before tipping off the government, a requirement that subverts the whole point of the program.
Wall Street has mobilized an extraordinary lobbying push to influence the rule-writing for Dodd-Frank. In fact, this campaign is larger than the financial industry's effort to shape the original bill. According to the Center for Responsive Politics, the agencies working to implement reform were subjected to more lobbying in the first quarter of 2011 and last quarter of 2010 than in any other period since President Obama took office.
The final strategy for neutering Dodd-Frank is to stop the administration from appointing strong regulators - or even any regulators. Republicans have not only refused to confirm Elizabeth Warren as the head of CFPB; they have said that they will not allow anyone to run the bureau unless the administration agrees to curb its powers. Other top positions crucial to implementing Dodd-Frank are also vacant or soon will be, and confirming pro-regulatory leaders won't be easy. Obama hasn't even tried to nominate a new comptroller of the currency, a crucial position now held by an acting head, John Walsh -- a Bush holdover who is openly skeptical of regulation.
Nearly a year of attacks on Dodd-Frank has yet to deal a deathblow to financial reform. Many features of the law - such as new oversight of hedge funds - have moved forward as planned. But the attacks have slowed implementation, especially in establishing the CFPB. Meanwhile, the Obama administration's ambivalence about cracking down on Wall Street has aided regulation foes. Treasury Secretary Tim Geithner is considering an exemption for markets that trade foreign currency from the Dodd-Frank rules that govern derivatives - a step favored by the banks and opposed by reform advocates. And Wednesday, the Federal Reserve sided with the financial industry on debit-card fees, issuing new rules that take a more lax approach than what Dodd-Frank envisioned.
Efforts to obstruct both the letter and the spirit of Dodd-Frank will only get worse as the 2012 election approaches. After lawyers, nobody contributes more to elections than the financial-services industry, and Democrats and Republicans alike are fiercely courting this money. That includes President Barack Obama, who just last week dined with top financial leaders at a Manhattan fundraiser.
You need to be logged in to comment.
(If there's one thing we know about comment trolls, it's that they're lazy)