Even as Congress debates legislation to tame it, Wall Street is conducting a bidding war between the parties for its continued beneficence. More than 60 per cent of the $34m given by the financial industry to fund the 2010 elections has so far gone to Democrats, but since January the Street has switched its allegiance to the Republican camp. In the first quarter of this year, Citigroup, Goldman, JPMorgan Chase and Morgan Stanley donated twice as much to Republicans as to Democrats.My answer is that Wall Street has already completed the deal and that the policians are now working for Wall Street.
It is hard to bite the hands that feed you, especially when you are competing for food. The finance reform bill emerging from Senate Democrats takes a hard line in many respects – requiring that most derivatives be traded on open exchanges where buyers can see what they are getting and sellers have adequate capital, establishing an agency to protect unwary consumers from predatory lending, and giving the government authority to wind down the activities of banks that get themselves into trouble. Democrats point to these and other features as evidence of their willingness to be strict with the Street, despite their dependence on its generosity.
But the American public has no independent means of judging how tough the bill really is. Most people do not understand the intricacies of finance, and still do not know exactly what Wall Street did to bring the economy to the brink. The dependence of both parties on the financial industry for political support inevitably feeds suspicions that the bill is not nearly tough enough. Why, for example, are so-called “customised” derivatives exempted from the exchanges? Does this not create a big loophole? Why does the bill not limit the size of banks so none can again become “too big to fail”? Why is the Glass-Steagall Act – which once separated commercial from investment banking – not being fully restored? Why does the bill not separate investment banking from the private banking and wealth management activities that got Goldman into trouble?
Reich is more optimistic than I am. He still sees hope. He wants things done:
If Washington knew what was good for it and the nation, it would sever its financial connections with the Street. Better yet, it would enact legislation seeking to limit the impact of private and corporate money in politics. That goal is made more difficult to achieve by the grotesque recent Supreme Court decision (Citizens United vs. Federal Election Commission) holding that corporations, including financial firms, have the right to spend unlimited amounts on political campaigns. But there are ways around this, such as more generous public funding for candidates that choose not to take private contributions. Hopefully as well, the president will nominate Supreme Court justices who understand the importance of public trust in democratic institutions, and the difference between companies and people.I hope he is right and things can be done. But I'm pretty pessimistic. The only thing that will get ordinary citizens to pay attention will be a full scale collapse like the Great Depression. It is pretty clear that the Great Recession was a minor interruption to "business as usual" for Wall Street and Washington. Sure, unemployement is astronomical and housing foreclosures are changing the face of America, but apparantly this isn't enough to get people to actually take off the blinders and realize what a charade has been pulled. They voted for "Change You Can Believe In" and got "business as usual".