One of the best things I have ever read on Huff Po –  The Cash Committee: How Wall Street Wins On The Hill — explains how Wall Street manages to win in Congress, no matter who is the controlling party.

The Banking committee has become the place where reform goes to die.

“In the fall of 2008, Democrats took the White House and expanded their Congressional majorities as America struggled through a financial collapse wrought by years of deregulation. The public was furious. It seemed as if the banks and institutions that dragged the economy to the brink of disaster — and were subsequently rescued by taxpayer funds — would finally be forced to change their ways.

But it’s not happening. Financial regulation’s long slog through Congress has left it riddled with loopholes, carved out at the request of the same industries that caused the mess in the first place. An outraged American public is proving no match for the mix of corporate money and influence that has been marshaled on behalf of the financial sector.”

Yes another tactical error by the Dems:

In short, by setting up the committee as a place for shaky Democrats from red districts to pad their campaign coffers, leadership made a choice to prioritize fundraising over the passage of strong legislation. “It makes it difficult to corral consensus,” says Rep. Stephen Lynch (D-Mass.), a subcommittee chairman, of the unwieldy panel.

And just as the lure of money leads inexperienced new members to join the committee, it prompts experienced staffers to bolt for larger paydays in the private sector. “You have this phenomenon where if you have a staffer who’s very experienced on a certain issue and is dealing with the financial sector for any number of months or years, all of a sudden they become a real acquisition target for Wall Street,” says Lynch.

The key takeaway: Both parties are beholden to corporate interests.

>

Previously:
Tactical Error: Health Care vs Finance Regulatory Reform (September 9th, 2009)

http://www.ritholtz.com/blog/2009/09/finance-reform-vs-health-care-reform/

Source:
The Cash Committee: How Wall Street Wins On The Hill
Laura Bassett, Jeff Muskus and Elyse Siegel
Huff Po, December 29 , 2009

http://www.huffingtonpost.com/2009/12/29/the-cash-committee-how-wa_n_402373.html

Category: Bailouts, Politics, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

32 Responses to “The Place Where Reform Goes to Die”

  1. franklin411 says:

    Or, that you can’t really have dramatic change without dramatic pain and suffering to make people take change seriously.

    I read newspaper articles and editorials from the 1920s and 1930s for a living, and I can tell you that average people were very, very afraid that the United States was on the verge of a violent revolution driven by hunger in 1932. Capitalism had failed, and many wondered if communism or fascism was on the horizon unless something was done.

    By the time Roosevelt took office in 1933, the crisis had reached a crescendo. The entire banking system had ground to a halt. Millions were out of work, thrown out of their homes, and literally starving. In Germany, Adolf Hitler rose to power by promising to protect the little guy. Japan turned towards war against China as an economic stimulus program. There were even fears that France and Britain could go fascist.

    Thus, when FDR took power, Americans had devolved into a frightened mass desperate for leadership and willing to accept changes to their basic ideas about how the world worked. Example: Until 1929, most Americans would have said that the poor are poor because they’re stupid, lazy, or deviant. But in the Depression, people who had played by all the rules lost their life savings through no fault of their own. Maybe it wasn’t true that, as the conservatives (D and R) had always claimed, programs to feed starving people only encouraged them to be lazy. Maybe the government did actually exist to provide for the general welfare.

    When, oh Barry, did we ever have such a moment in this recent crisis?

  2. leftback says:

    f411: I know you are numerate, so let’s do the math. BTW, I am not a republican, but a liberal fiscal conservative.

    The analogy goes like this: 1929 = 2008, 1930 = 2009, 1931-1932 = 2010-2011.

    I’m not saying that we see a Great Depression II, because my favorite analogy is to Japan’s Lost Decade.
    But clearly 1930 was a very strange year, and so was 2009. We just don’t know what happens from here.

    The state budget problems are what would be keeping me up at night if I was in the WH, as a trigger for further employment problems. This is only a statistical economic recovery, and if you step outside privileged areas of the US, if you go to Ohio, Michigan, it’s clear that it’s a regional depression.

    Don’t assume that “they” are in control, just because Geithner seems to think that they are.

  3. call me ahab says:

    “1930 was a very strange year, and so was 2009. We just don’t know what happens from here.”

    exactly- for example

    The worst is over without a doubt.”
    James J. Davis, Secretary of Labor.
    - June 1930

    SCHWAB FORESEES RECORD PROSPERITY;
    -October 25, 1930

    “The depression has ended.”
    Dr. Julius Klein, Assistant Secretary of Commerce.
    - June 9, 1931 (Stock market did bottom one year and 50% later)

    WORLD COOPERATION: A NEW STEP AHEAD; The Hoover Plan Has Focused Attention on the Problem of Economic Unity THE NEW WORLD COOPERATION
    -July 12, 1931

    wow- all sounded so promising- especially like the New World Cooperation- we’ll aee if we can at least be less wrong

  4. montyhigh says:

    Ok, the government is completely corrupted by special interests, especially the banksters.

    I’m convinced, but I must say I don’t see any way out.

    I admit I’m historically from the right (where I don’t see anyone taking the problem seriously, except for Ron Paul). Ron Paul has no solution… His solution is: We’ll put good people in and obey the constitution. If the constitution couldn’t defend itself against the corruption how is Ron Paul’s good guys (even if they got in) going to stop the corruption (or keep it from reemerging).

    What other solutions are being proposed (probably from the left, because I don’t see anything other than Ron Paul on the right)?

    I’m seriously trying to learn.

    MontyHigh, http://www.worldofwallstreet.us

  5. number2son says:

    And that is why, after being a lifelong Democrat, I will never vote for a Democrat for major office again.

  6. number2son says:

    montyhigh, this may cause you a cognitive dislocation, but Ralph Nader has been front and center on this issue for a long, long time. I’m no fan of Mr. Nader, but credit where credit is due.

  7. FrancoisT says:

    “In short, by setting up the committee as a place for shaky Democrats from red districts to pad their campaign coffers, leadership made a choice to prioritize fundraising over the passage of strong legislation.”

    And they shall pay a very heavy price at the polls for that. Maybe not in 2012, (who can have any pretense of successfully uproot Obama?) but should the recession get a 2nd dip before November 2010, it could be very ugly.

    When you stop and ponder the recent past, you realize that the “leadership” did exactly what people didn’t want them to do…politics as usual. On the House Financial Services Committee, that meant having such Wall Street prostitutes as Melissa Bean and Mel Watts, just to name those two.

    Do they really think campaign money will be an effective shield against people’s rage?

    The ONLY saving grace the Democrats have now is a Republican party in such disarray and so out of touch with the preoccupations of ordinary Americans that it is hard to see them regaining that many seats.

  8. DaveInDenver says:

    A regular reader’s appeal to Obama:

    I must tell you, not only can we not hold our heads up in any sort of dignified manner globally, your elegant bow to China’s leader, Wen Jiabao, will be a prolonged measure which our country will now be forced to endure. We can no longer look China in the eye, as they are methodically taking ownership of us.

    http://truthingold.blogspot.com/2009/12/readers-appeal-to-obama.html

  9. Pat G. says:

    “explains how Wall Street manages to win in Congress, no matter who is the controlling party.” That relationship is a two way street, traveled often… And they say two wrongs don’t make a right.

    http://blogs.barrons.com/stockstowatchtoday/2009/12/28/fed-offers-banks-a-cod-which-way-to-the-exit/

    Okay, how much over .25% is the Fed going to pay banks on a “term deposit facility“? Can the average American get that rate too? And just how does the Fed propose to pay for this?

  10. philipat says:

    @Bloomberg

    “A lot of this is about trying to find somebody to blame,” said Gramm, now a vice chairman of investment banking at UBS Securities LLC.”

    No further comment required really.

  11. diegonomics says:

    I’m intrigued by the level of intellectual discussion on the question of our economy’s health, but I must politely disagree with assessments that conclude we’re headed for a depression. In my opinion, late 2008 was when the analogies could be drawn to 1929, but we’ve bounced back in Southern California, and come out of the steep dive in the rest of the country.

    Certainly many places in the country are hurting bad, and that’s why I believe we have to focus strongly on job growth. But noone is going hungry. During the great depression the national economy contracted by 50%, i. e. half of the entire economy disappeared between 1929 and 1934. Unemployment peaked at 35%. THATS a depression.

    I see our biggest potential problem as being one of stagnation, where we are not forward thinking, fluid and dynamic enough to meet the challenges before in a creative, confident manner. I’m a political progressive, and a newly minted Obama democrat. But I’m a Chicago School, old school thinker on economics. For me, its a wonderful combination, because I have strong views on the environment and green living, but am quite competant in macro-economics and political economy. Economics provides tools for creating enlightened policys. I don’t think I’m alone. Most of us have mixed views.

    Look at BR- he’s a genius technician on economics, finance and political economy, yet the subject of this thread shows a clear, what I would call ‘progressive’ description- Wall Street keeps getting its way in Congress and its a problem. So I guess you could call my concept of what a progressive is is an optimistic, forward thinking liberal. Now I’ll share my secret- I’m manic depressive, and get my cynicism out in fits and spasms! ; )

  12. mthomas says:

    anyone see Eric Sprott’s comments on the market today?

    I thought they were pretty interesting, and I also came across some really interesting articles on gold and the gold price posted on Sprott Asset Management’s site, particularly the top one from Dec. 24th: http://www.sprott.com/PreciousMetals.aspx?id=53

  13. call me ahab says:

    “During the great depression the national economy contracted by 50%, i. e. half of the entire economy disappeared between 1929 and 1934. Unemployment peaked at 35%. THATS a depression.”

    so . . .uh . . .we have a few years to go? . . .or . . .you are of the camp-

    “The worst is over” . . .and . . .”the Depression has ended” . . .long before the depression had started its grinding inescapable grasp on the economy-

    glad you have it all figured out

  14. Free Market Extreemist says:

    Black & White is where it Begins and Ends.
    Its not about absolutes – but DEGREE.

    Who is MORE Beholden to Corportate Interests (no one is pure) and who is LEAST beholden to them?

  15. Bob the unemployed says:

    > The key takeaway: Both parties are beholden to corporate interests.

    That is quite old news. To be honest, I am quite surprised this august blog consider such old news as newsworthy.

    The item we should be talking about, after seeing Congress owned by corporate interests for well over a decade, is: how do we the People get Congress back to looking after our interests.

  16. How do we break the two-party duopoly?

  17. wunsacon says:

    >> Who is MORE Beholden to Corportate Interests (no one is pure) and who is LEAST beholden to them?

    That’s a tough one!

    It’s the establishmentarians versus the disestablishmentarians. (Twenty-five years ago, didn’t anticipate that that word would be relevant. But, boy, is it ever…) The cathedral vs the bazaar. The mainstream versus the two extremes (socialists and libertarians — who’d both prefer to see failed market participants reap their just rewards but differ over whether the state or private charity should care directly for the poor).

    What we have is bureaucracy, not socialism. Kleptocracy, not capitalism. It’s looking like the worst of both worlds. It’s El Duce’s fascism.

    …But, I’m not saying anything “new” here…in contrast to F411′s more interesting post.

  18. wunsacon says:

    diegonomics, you’re right. Prices HAVE bounced in Cali and elsewhere. (Though, based on comments I see from lawyerliz on CR, Miami hasn’t by much at all.) But, the prices are “nuts” again. For how long this time? How many new high DTI suckers can the banks find to buy all that inventory at high prices?

    We’ll see.

    One thing is for sure: The establishmentarians have really bent me over and robbed me of my potential purchasing power.

  19. bman says:

    Well the antidisestablishmentarians generally always have power, it’s only at times of transitions that they lose it. We’re mostly disappointed in the lack of transition. Some say it is yet to come, I’ll vote for that too, but this time around we should all be a little more picky about what constitutes change.

  20. flipspiceland says:

    @DamienHoffman

    What Two party duopoly?

    We have only one party: The incumBENT party.

    And therein, lies the answer to your own question.

  21. jc says:

    GMAC gets a few billion more this week, ho hum, DITECH is too important to fail LOL

  22. torrie-amos says:

    the only thing obvious to me, is all of these politicians are following obama’s money machine, get some prime time, spit out your website, tell a story of your fight for right, send a few emails on how it’s going, then ask for money to get the job done, rinse wash and repeat

  23. philipat says:

    Torrie.

    For all thes years. Sad but true.

    Can there evr be a better world? America was supposed to show the way.

    Sorry to dream for minute. The skies here in Bali tonight are clear and full of stars. That is, I’m out of it. And never was a Bnaker!!

  24. philipat says:

    I do so wish there was a spellchecker or edit function in WordPress?

  25. Its Me says:

    I never thought of the way business is done in Washington. So the party bosses disperse committee positions not on background or interest, but on the money that is generated from the lobbist in that industry.

    Have a seat that is a little shacking – Banking or Finance for you. In a solid seat and it’s veteran’s afiars or worse ~~~~Ethics~~~. :o

    What an ugle part of our society.

  26. xynz says:

    Damian Hoffman asks the right question:

    “How do we break the two-party duopoly?”

    The answer is a more parliamentary system of government. You can’t do it to the Senate, without amending the Constitution, but you can do it to the House. That’s a good start.

    It would work the same way as this initiative to effectively end the Electoral College, without amending the Constitution:

    http://en.wikipedia.org/wiki/National_Popular_Vote_Interstate_Compact

    There’s nothing in the Constitution that says you have to use a Congressional District. Voting Representatives into the House is controlled at the State level. If a State were to amend the State Constitution, so that all Representatives were elected “At Large”, then that would be Constitutional. With Reps elected “At Large”, you can get rid of winner take all and have proportional representation.

    Obviously, this would work best in the larger states, with at least 10 or more Representatives. The people no longer vote for individual candidates, they vote for parties that submit party lists. If the state has 10 Representatives, then the party lists have 10 candidates. The seats in the House are won, based on what percentage of the vote they’ve received. For example

    Democrats win 41 (44) % of the vote, they get 4 seats (first 4 members on their list win seats)

    Republicans win 27 (30)% of the vote, they get 3 seats

    Green Party win 14 (19)% of the vote, they get 2 seats

    Christian Theocracy Party win 4% (7%) of the vote, they get 1 seats

    Cannabis Legalization Party win 4% of the vote, they get 0 seat

    Extreme Looney Party win 3% of the vote, they get 0 seats

    Bunch of minor parties get the remaining 7% and 0 seats

    While you’re making this change, you also want to switch to STV (Single Transferable Vote). For example, people who voted for the Cannabis Legalization Party marked their ballot with the CLP #1 , the Greens #2 and the Democrats #3. The CLP didn’t get enough votes for seats, but the people who voted for CLP didn’t waste their votes, those votes then transferred to the Green Party (the revised percentage for the Greens is in parenthesis).

    Extremely Looney Party made the ELP their first choice, the CTP their second choice.

    The votes for the other parties that didn’t get seats were also transferred, based on their voters ranked preferences. More details about how STV works here:

    http://en.wikipedia.org/wiki/Single_transferable_vote

  27. hr says:

    Become a member of the NRA – Never Re-Elect Anybody

  28. What is needed is a Gypsy Seniors Party of economically independent seniors that can move into the districts of senior members of congress that control committees. Once the seniors are eligible to vote they can fire the members in some of the safer districts and then break up the incumbency/seniority hammer lock that is held on the congress. I call them Gypsies because once they deal with one ‘safe’ seated senior member of congress they can flood into the next district and do the same thing all over again :)

  29. [...] The House Banking committee is too big to succeed.  (Big Picture) [...]

  30. LeeX says:

    Barry, both parties are not specifically beholden to “corporate” interests, but there’s a strong correlation ;-o

    The political system is beholden to greedy and rent-seeking corporate entities, and the system works very well for them. Now we have a “reform” bill that formalizes TBTF with $4 trillion dollars of free insurance for the big banks. Of course, the bill does not mention the words TBTF, but I think the banksters are very happy with the plan. When in the world are we going to see the perps from Countrywide and IndyMac wearing orange jumpsuits? Is everyone going to skate away with their fortune intact?

  31. dsawy says:

    I have to laugh at people proposing European-style parliaments as a solution to our problems.

    Everyone knows that the French government is utterly without any corporate corruption, right? Right?

    (insert sound of crickets chirping here).

    And we know that the English system of government is uncontaminated by banking interests, right?

    (more crickets).

    The first solution to the problem is to get campaign finance “reform” repealed. It was nothing more or less than “incumbent protection.”

    For all the people proposing “European” solutions to our problems: Please go live in Europe. It will be a much faster way of achieving what you want, ie, to live in a European nation.