Mendacious Commercials Against Financial Regulation
Annie Lowrey over at The Washington Independent has a nice post deconstructing the latest series of advertisments attacking the financial regulation bill now being debated in the Senate.
I admit I hadn’t seen this lovely bit of propaganda until she drew my attention to it, and it’s interesting to examine the claims it makes. The first rule of propaganda is to attribute to your enemy your own actions and intentions. Thus, the commercial rather cleverly accuses the Senate of setting up an apparatus for “unlimited bailout authority”, and, astoundingly, claims that “Goldman Sachs is in favor of the bill”.
Neither of these statements is true, of course, but the implications go deeper than that. As TPM revealed earlier this week, the sponsors of the ad, a front-organization calling themselves “Stop Too Big to Fail”, are funded entirely by corporate dollars, including, yes, Goldman Sachs. This attempt to dust up public anger against the financial reform bill indicates Wall Street’s fear of it, and their willingness to tell any lie in order to see that the reform bill doesn’t pass.
Not that they really have that much to worry about. As George Washington remarks, the reform bill currently being debated is “All Holes and No Cheese“, noting that:
- Won’t break up or reduce the size of too big to fail banks
- Won’t remove the massive government guarantees to the giant banks
- And won’t even increase liquidity requirements to prevent future meltdowns
What it will do, however, is set up new protections for consumers, specifically to protect them from predatory lending practices, overdraft fees, byzantine contracts that require a Ph.D to understand, etc. The bill will also (hopefully) enact some barriers to the trade of over-the-counter (unregulated) derivatives, those delightful instruments that got us into this crisis.
As with the health care bill, I feel really ambivalent about this.
On one hand, the Dodd bill does almost nothing to prevent too-big-to-fail, it proposes some watered-down reform on derivatives trading, it doesn’t reduce the size or power of our mega-conglomerate banks, it doesn’t reinstate Glass-Stegall, and it does nothing to rein in the frankly absurd amounts of cash the bank executives make, whether or not they happen to crash the economy
On the other hand, this bill does provide some new consumer protection services, it bans proprietary trading (whatever that is), and it does create a new regulatory body whose specific charge is to watch over our mega-banks (as opposed to the SEC, which has a universal mandate).
Is this good enough? Can we do better? With the flood of Wall Street money flowing into campaign coffers, and with the November election only 6 months away, I’m inclined to say no. Maybe we should take what we can get. And keeping in mind that, unlike the health-care bill which had full industry support, the Dodd bill is being opposed by nearly every major bank, maybe it isn’t so bad after all. If the banks are against it, there must be something good inside this bill.
Update: Also see Nomi Prins’ article in Alternet entitled “Ten Ways The Dodd Bill is Failing on Financial Reform“:
It won’t constrain the Fed’s future bailout operations. It appears to limit the Fed’s ability to lend money freely to firms in trouble by “allowing” its system-wide support only for healthy institutions or systemically important market utilities. But what’s to stop the Fed from designating any company a “systemically important market utility”? That was basically the rationale behind the AIG bailout.
Update II: It’s also important to keep in mind that Chris Dodd, the bill’s sponsor, is heavily funded by some of the most odious Wall Street titans, including Citigroup (who gave him $110,000 this cycle), AIG ($87,000), Merrill Lynch ($61,650), Morgan Stanley ($44,000), and JP Morgan ($37,000). Hooray for transparency!