Post-Election Risk: Less Limits and Oversight of Banks

regards,
-Lance

http://www.ritholtz.com/blog/2010/11/post-election-risk-less-limits-and-oversight-of-banks/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

Post-Election Risk: Less Limits and Oversight of Banks
By Barry Ritholtz - November 2nd, 2010, 7:12AM
Our story so far:

Banks and investment houses spent the last 30 years pouring money into
congressional elections, influencing regulations and oversight of their
industry. They managed to exempt derivatives from any and all oversight,
increase leverage from 12-to-1 to unlimited, repeal Glass-Steagall limits
that kept Wall Street and Main Street Banks separated, create a new
“Lend-to-securitize unregulated banks.

The most recent decade saw the rise on the Shadow banking system — it
existed outside of any supervision or government regulations.

The end result of this: A Financial collapse, frozen credit, and the worst
recession since the Great Depression.

Fast forward to the mid-term elections:

While most of the electorate is focused on Tax Cuts, deficit spending, the
Tea Party, and who might have practiced witchcraft, my biggest concern is
none of the above. The threat to long term economic health will be the
attempted roll back of the re-regulation of the financial markets.

Milquetoast as Financial reform was, I fully expect a run at overturning
the recent FIn Reg reforms. As hard as it is to believe, 1980s era
deregulation-speak is already coming out of the not-yet elected, bank
backed candidates and their deep pocketed corporate sponsors.

Consider this most recent bit of governmental genuflecting:

“The most powerful executives in the banking industry didn’t go to the
government. The government came to them.

Ben S. Bernanke, the chairman of the Federal Reserve; Timothy F. Geithner,
the Treasury secretary; and regulators like Mary L. Schapiro of the
Securities and Exchange Commission and Gary Gensler of the Commodity
Futures Trading Commission made their way last month to a room called the
Nest at the Willard InterContinental Hotel in Washington. There, the
members of a group called the Financial Services Forum awaited them.

The event with the forum, which is composed of chief executives,
underscored how influential banks, brokerage firms and insurance companies
remain in Washington, despite all the critical campaign rhetoric from the
White House, Capitol Hill and other quarters. And Tuesday’s midterm
elections are likely to leave them in an even stronger position, blunting
the most serious overhaul of financial regulations since the Great
Depression.

The widely expected prospect of a Republican takeover of the House of
Representatives and possibly the Senate would be warmly welcomed by the
banks, who want a break from the regulatory push of the last two years.
Divided government makes it harder to pass new legislation and brings with
it other benefits for the banks, like reducing the chances of an increase
in corporate taxes.”

This is no accident — great gobs of money has been funneled to candidates
willing to act as the bitches for the banks in DC:

“The example of Wall Street’s attempts to resist financial regulation—and
the help provided by the Chamber—is an illustrative one. The Chamber
pounced early on Congress to dissuade it from passing the Consumer
Financial Protection Agency Act. Donohue’s troops mounted grassroots and
media onslaughts around the country, dispatching local chamber officials
and business members to lobby local lawmakers, and running local
advertisements directly targeting them. In Montana, the Chamber aired an
ad targeting Senator Jon Tester that showed a man lying awake in bed in
the middle of the night, staring at the alarm clock, while a voiceover
intoned, “Call Senator Tester. Tell him to stop the CFPA, because small
businesses can’t afford more economic pain.” The Chamber put millions into
this sort of advertising.”

As much as the Chamber of Commerce claims to represent business, it is
actually “beholden to a cadre of multinationals whose interests are often
inimical to those of small business. In 2008, a third of its revenues came
from just nineteen companies.”

Thus, regardless of the outcome of this election, sunlight and pressure
must be maintained on those who would once again, allow the biggest banks
to have their way with us . . .



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