“If it were done,” says Macbeth as he contemplates killing Duncan — his kinsman, his houseguest, his king — “ . . . ’twere well it were done quickly.” A similar judgment seems to inform the newly empowered congressional Republicans’ rush to roll back the modest regulations that the Dodd-Frank Act imposed on Wall Street banks. Deregulating Wall Street is distasteful stuff that can claim no real public support or economic merit, but for reasons both political and financial, the Republicans have decided it’s best done quickly.
Scarcely had the Republicans taken their oaths last week when they sought to enact, under an urgency provision that required a two-thirds vote for passage, a delay of one Dodd-Frank provision — the Volcker Rule — that prohibits publicly insured banks from making bets with their own (that is, taxpayer-insured) funds on risky collateralized loan obligations. Dodd-Frank was enacted in 2010; the Securities and Exchange Commission has given the banks till 2017 to divest themselves of these positions; the Republicans, apparently believing that seven years didn’t give the banks enough time to dispose of this profitable paper, wanted to extend that to 2019. Since the bill required a two-thirds super-majority, Democrats were able to defeat it, but on Wednesday, Republicans again brought it to a vote, this time requiring just a simple majority for passage — and it passed.
But why the urgency? Why the rush to let the banks run amok, even before Republicans turn their attention to authorizing the Keystone XL pipeline, repealing Obamacare and reversing the president’s executive orders on immigration? Those are all causes, however, that Republicans want to highlight, for which their base is clamoring. Deregulating Wall Street, by contrast, isn’t high on the tea party’s to-do list, if it’s on it at all. By scurrying to give the banks what they want, Republicans can get it out of the way and hope that any public memory of this unseemly spectacle is eclipsed by the epic, more popular battles to come.
By pushing mega-bank welfare to the head of the line, Republicans also sent a clear signal to Wall Street that they’ll do whatever it takes to further feather the bankers’ nests. In return, they doubtless anticipate that the financial sector’s support for the GOP will continue to soar, even as its support for Democrats has slumped. In the early ’90s, Wall Street split its donations to the two parties’ candidates almost evenly, but in recent years it has favored the GOP. According to the Center for Responsive Politics, in 2012, 68 percent of the contributions from the financial, insurance and real estate industries went to Republicans; in 2014, it was 62 percent. And since the financial sector is the largest donor to federal campaigns — it has invested a tidy $3.8 billion in candidates since 1990, $1.4 billion more than any other industry — the GOP’s scramble to court Wall Street is rooted in cold financial logic.
For their part, the Democrats are beginning to move — did someone say “at last”? — in a distinctly anti-Wall Street direction. Arguing that the nation’s financial policymaking should no longer be entrusted to Wall Street’s leaders, Senate Democrats, led by Massachusetts’s Elizabeth Warren, compelled one such banker to withdraw his name for consideration as the No. 3 official at Treasury this week. With the backing of Democratic House leader Nancy Pelosi, Rep. Chris Van Hollen (Md.), the ranking Democrat on the House Budget Committee, introduced legislation that would significantly cut taxes on the middle class, to be offset by a tax on financial transactions. Van Hollen’s proposal would take a bite out of the profits of flash traders, who have substituted an electronic version of slapjack for what used to be the process of considered investment in productive enterprises. (This is what passes for innovation on Wall Street.)
With legislation like Van Hollen’s, the Democrats — at least, the party’s growing Warren wing — are calculating that their proposals to help the struggling middle class will eclipse Republicans’ efforts precisely because the resources to bolster Americans’ incomes aren’t there unless the mega-rich are compelled to give back what they’ve taken from their countrymen. To that end, the Warren Democrats are proposing tax policies that help the 99 percent at the expense of the 1 percent and that favor corporations that reward their workers, not just their chief executives, with productivity bonuses — while penalizing those that don’t.
Republicans clearly wish their gifts to Wall Street were done quickly, at the witching hour. The Warren Democrats, in making Wall Street’s assault on Americans’ livelihoods central to their politics, aren’t likely to let the Republicans quietly steal away.