There's a bit of a lost message in the financial-reform debate right now: American businesses will benefit from the Wall Street overhaul currently before Congress. Time's Barbara Kiviat looks at why the Consumer Financial Protection Agency will help firms:
Why would a business welcome new oversight? Well, partly because if consumers aren't protected from hazardous financial products, then they won't, in the long run, have as much money to spend at companies selling goods and services. Another reason: business owners themselves rely on financial products. As the CEO of the U.S. Women's Chamber of Commerce recently put it in an op-ed, "The creation of a strong, independent Consumer Financial Protection Agency will benefit businesses, especially small businesses, which create most of the nation's new jobs. It's too often forgotten that small-business owners frequently rely on personal credit – such as personal credit cards and home equity loans – to start, run and expand their businesses."
Kiviat has also looked at how businesses can benefit from derivatives reforms. There's also the fact that many ideas in the bill, designed to limit speculation, create incentives for businesses to grow their lending operations. While the Kaufman-Brown bill was defeated, weaker caps on a bank's liabilities already in the bill encourage asset growth and lending to businesses. It's not hard to see, intuitively, why a more stable financial system benefits the real economy (we learned the inverse lesson last year).
So why are these businesses -- through the Chamber of Commerce and like-minded groups -- fighting to kill the financial-reform bill and various provisions in it? Matt Yglesias has frequently noted the tremendous solidarity displayed by corporations and financiers even when their interests clash.
While Yglesias contends there is a larger framework of agreement on issues like low taxes and union busting -- a believable supposition -- there is also an element of mistrust and fear at play. In this political environment, even businesses that stand to benefit from better bank regulation have fallen under the sway of advisers who convinced them that liberal politicians aren't looking to solve the problems of the financial sector but instead are on an ideological crusade to destroy the private economy, starting with banks and ending with the seizure of the means of production.
As any objective observer will tell you, or indeed those on the left who would favor a more ideological crusade, the Obama administration is not on that path. Nor is the Democratic Party of the last several decades. Indeed, the starting point of the New Democrat movement in the late 1980s was explaining that Democrats do think that government, while it should be active in promoting the public good, should also stop certain economic interventions -- with a somewhat unfortunate emphasis on the latter. (A modern twist of this argument is Yglesias' emphasis on easing regulations locally where they are onerous and pushing them federally where they are lax.)
But still businesses worry. Some of them are, of course, right, that their interests may be negatively affected, but that's the problem of the public good, and many will benefit. Those that are advocating for reform deserve more attention, and I'll admit I've been lax in talking about groups like Business for Shared Prosperity and the American Sustainable Business Council, that are out there making the case to legislators (and their fellow entrepreneurs and managers) that financial reform is good policy and good for the economy.
-- Tim Fernholz
