Break The Banks

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By Clint Reilly

American banks love to affect a false pose of solidity and enduring strength. That’s why so much bank architecture mimics the classical columns of ancient Greece.

But the American financial system today is in ruins – much like the Parthenon.

So, how can it be that more than a year after the ignominious collapse of our financial system, banking reform still languishes in Congress?

A just-published book by former Treasury Secretary Henry Paulson – who wrote the trillion dollar checks – contends that taxpayers stand to make a profit on the bank bailouts.

Paulson’s conjecture is laughable in light of the more than $11 trillion of taxpayer infusions and guarantees committed to staunching our hemorrhaging financial system and stabilizing our economy. Even if it had a grain of truth, it still wouldn’t change history: the unprecedented intervention, the ruined personal wealth, the mass unemployment and our shattered economy.

President Obama has proposed a Consumer Financial Protection Agency to oversee credit cards and mortgages. Mega-money hedge funds would be required to register with the SEC. A Financial Services Oversight Council would target and regulate banks and financial firms too big to fail. A National Bank Supervisor would scrutinize problem banks. He even proposes a tax on banks to repay the government and the end of proprietary securities trading with depositors’ money.

Of course, the banking lobby is shamelessly resisting regulation the way car companies once smeared seat belts.

Elizabeth Warren, Chair of the TARP Oversight Protection Panel, recently wrote, “Now, a year later, President Obama’s proposals for reform are bottled up in the Senate. The same Wall Street CEOs who brought the economy to its knees have now spent more than a year and hundreds of millions of dollars furiously lobbying Washington to kill the President’s proposal.”

A high-paid Madison Avenue campaign, complete with focus groups and research conducted by Republican pollster cum television media guru Dr. Frank Luntz has been launched to fight off banking reform and demonize regulation. Incredibly, it could actually succeed in bamboozling the nation.

At the center of the Luntz disinformation strategy is the patented Republican attack on “Big Government.”

Luntz advises the bank lobby to use their own huge bailouts, which have infuriated taxpayers, to confuse and obfuscate by implying that added oversight might also bring unwanted bailouts for the next banking crisis.

In essence, Luntz jujitsus taxpayer anger by attacking the federal government for spending to bail out private enterprise and then proposing new bureaucracies to more tightly regulate these very same institutions.

Luntz writes, “Ordinarily, calling for a new government agency to protect consumers would be extraordinarily popular. But these are not ordinary times. The American people are not just saying no. They are saying ‘hell no’ to more government agencies, more bureaucrats and more legislation crafted by special interests.”

Franklin Roosevelt launched an aggressive campaign to regulate large banks and financial institutions after the collapse of Wall Street in the 1930s. His tough policies kept banks out of the securities business and successfully regulated lending for more than 50 years.

But these rules were gradually loosened for banks beginning with Ronald Reagan’s anti-regulatory policies in the 1980s and continued during the Republican administrations of both Presidents Bush.

Even President Bill Clinton – seduced by huge contributions from Wall Street firms and led by his Treasury Secretary Robert Rubin (a former Goldman Sachs chief) – eliminated many crucial New Deal regulations.

President Obama’s crusade to bring back oversight to banks, hedge funds and Wall Street is crucial to protecting consumers and taxpayers! By attacking the very federal government that rescued them from almost certain extinction, a shameless and greedy bank lobby now bites the hand that fed it.

How twisted and cowardly is that?

That’s proof enough that they need to be restrained.
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Clint Reilly was a leading political consultant for 26 years. His clients included current House Speaker Nancy Pelosi, Senators Dianne Feinstein and Barbara Boxer, and former California State Senate President Pro Tem Dave Roberti.  More recently, Reilly led a battle to preserve media competition in the Bay Area via two landmark anti-trust lawsuits (Reilly v. Hearst and Reilly v. MediaNews, et. al.). This article first appeared on www.clintreilly.com and is republished with his permission.