By Dana Milbank
Wednesday, November 25, 2009
The nation's bankers have much to be thankful for as they sit down to their turkey dinners on Thursday.
At this time last year, the American financial system was near collapse, rescued only by hundreds of billions of taxpayer dollars. Now the system has stabilized, and the industry is on the verge of a coup that many would have thought impossible a year ago: an escape from any major reform of financial regulations.
On Tuesday, the American Financial Services Association even held a conference call with reporters to update them on its efforts -- successful so far -- to torpedo plans for a new Consumer Financial Protection Agency, which would protect people from the sort of lending abuses that led to last year's implosion.
The ASFA, a trade group of credit card issuers, auto-finance companies, mortgage lenders and others leading the fight against the CFPA, took the unusual approach on Tuesday of publicly celebrating the reform's fading prospects.
"This was supposed to be a slam-dunk," crowed Bill Hempler, the group's top lobbyist. But instead, he said, "Democratic members are increasingly having heartburn over CFPA and maybe second thoughts."
House Financial Services Chairman Barney Frank's CFPA proposal? "He may have problems either bringing this whole package to the floor or even individual pieces."
Senate banking Chairman Chris Dodd's CFPA proposal? "A number of [Senate] colleagues are hinting that there was overreaching going on. . . . Folks attribute this to a political ploy for reelection."
Richard Shelby, the Senate banking committee's ranking Republican? "His leadership is keeping the pressure on him not to cut too sweet a deal."
Hempler detailed how various other lawmakers -- Sens. Michael Bennet (D-Colo.), Evan Bayh (D-Ind.), Tim Johnson (D-S.D.) and Bob Corker (R-Tenn.), and, in the House, Rep. Ron Paul (R-Tex.) and the Congressional Black Caucus -- were causing various problems for the bill. "It looks more and more like Senate banking won't take it up until January or February, and with next year being an election year, that does raise the concern level," Hempler reported with satisfaction. "This could delay the overall effort." Or, with a bit of luck, kill it outright.
The trade group's analysis was astute. But the presentation took a considerable amount of nerve. The AFSA's membership, according to its Web site, includes some of the best-known names of the financial crisis: CIT, CitiFinancial, Countrywide, EquiFirst, HSBC, Morgan Stanley, Wells Fargo Financial and GMAC. The trade group points out that its members did not directly receive bailouts from the Troubled Asset Relief Program (those went to banks, including some of the AFSA members' parent companies), but it's a safe bet that many of those firms would have failed if the government hadn't intervened to prop up the financial markets.
Now these same companies, suffering from some combination of amnesia and ingratitude, are determined to fight off regulatory efforts to prevent a repeat of the same cycle of bubble, collapse and bailout. Big firms such as J.P. Morgan Chase, Goldman Sachs, Citigroup and Bank of America -- direct or indirect beneficiaries of federal bailouts -- are all battling efforts to rein in derivatives. And credit card issuers, facing new regulations scheduled to take effect in February, have responded by increasing their rates and fees.
In Tuesday's conference call, AFSA's executives offered the many familiar reasons why government regulations are bad: The states are doing a good enough job regulating financial services; new fees would be passed on to consumers; it would increase bureaucracy. Hempler even raised the threat of lawsuits as the group's members try to see just how unfair and deceptive they can be without running afoul of the new rules: "It adds a whole new layer of untested language to the unfair-and- deceptive-practice standard that will have to be newly regulated, and ultimately there will probably be litigation that comes out of that."
But the argument most likely to prevail for the financial firms on Capitol Hill was offered by Chris Stinebert, the trade group's chief. "Especially now, when we're in a very, very sensitive time, when the capital markets are just starting to recover," he said, "introducing a high level of uncertainty in the marketplace could be very detrimental."
Or, to put it another way: Don't regulate us now because the economy is still suffering from the mess we made because we weren't regulated the last time. Chutzpah, it appears, is recession-proof.