This isn’t dysfunction so much as a demonstration of the Republican leadership’s lack of interest in doing anything about a reckless and out-of-control financial system that gave the country such a terrible global crisis. More broadly, Kaiser’s account once again shows how unserious the modern Republican Party is about policy, how beholden to special interests it is and how determined to not give any victories to the Democrats and a president it views as illegitimate.
With its focus on Congress, Kaiser’s account underplays the work of financial industry lobbyists and the White House. Kaiser does point out that the financial industry employed 2,700 lobbyists (including 1,447 former government employees) to work against reform in 2009 and 2010, spending more than $750 million. By contrast, groups advocating reform to the system spent a paltry $5 million. But the author doesn’t show us much actual lobbying. And given the modesty of the eventual law and the myriad delays in implementation, Frank’s crowing that the banks got nothing for all of this dough rings false.
Obama White House officials, especially then-Treasury Secretary Timothy Geithner, play only bit parts in Kaiser’s book. The White House created the template for the House version of the bill, which was “generally cautious,” he writes. But then throughout the many months of negotiations, White House officials made only rare appearances. When the law was finally enacted, Dodd was angry that the Obama administration took so much credit. But since Kaiser hasn’t focused much attention on the White House’s contribution, it’s hard to evaluate who has the better claim. According to other reports, Geithner and his staff played a large role, often working to blunt more radical reforms. In one case, the Treasury secretary personally lobbied against the Brown-Kaufman amendment, a truly transformative and dramatic proposal that would have set high capital requirements on banks and put limits on their size.
Frank is the star of this book. The congressman lives up to his reputation as brilliant and witty. But he is also a flawed boss who leaves to his staff the difficult job of bringing less brilliant colleagues around to his way of thinking. Dodd isn’t nearly as interesting a character. If Dodd has a core ideology or set of principles, Kaiser didn’t find them. Instead, Dodd wants to get something, anything, done — and it’s important for that something to be bipartisan.
Kaiser enjoys pointing out the intellectual limitations of our nation’s politicians, and we enjoy reading about them. At one point, Rep. Jeb Hensarling, a Republican from Texas, attacks what he thinks is a taxpayer-funded bank bailout fund. He likens it to his college fund, which he and his wife have “because we intend to send our children to college.” The author writes slyly, “This bit of rhetorical wizardry seemed to please Hensarling.” Like many Republican charges about Dodd-Frank, Hensarling’s comparison was erroneous. The banks, not taxpayers, were going to pay for the fund. But his objection also made no sense. The fund was more like insurance. Buying fire insurance doesn’t mean you are counting on your house to burn down.
By contrast, Frank understood the complexities of financial regulation. But perhaps being smart in this context wasn’t such a good thing. Smart legislative and regulatory solutions may embrace flexibility and exemptions that banks can later exploit. Regulations that create clear, bright lines may seem simplistic and dumb. But such rules tie regulators’ hands, freeing them from banking influence.
Dodd-Frank may have been too smart for its own good.
is a senior reporter at ProPublica and a columnist for the Dealbook section of the New York Times.