Bloomberg spotlights the Consumer Financial Protection Act and uses it as a jumping-off point for a smart story on the state of the finance-lobby’s might.
The theme is that the financial industry is still awfully powerful but—and this is a new thing—not all-powerful anymore, particularly when it comes to consumer-facing businesses.
That’s why the CFPA has been pretty much unstoppable, even if it’s been watered down by the community-banks lobby, which got all of its members out from under the proposed agency, which means 98 percent of all banks are exempted from its oversight.
Bloomberg opens with an anecdote on how the CFPA came to be so pushed by the Obama administration, which has hardly been hardcore with the banks (a key reason, little-discussed, why its political fortunes have fallen. I’m guessing if there had been a little more kick to the teeth and a lot less slap to the wrist, those polls would be a lot higher now)—it was pushed by the president himself:
During one of his first meetings about overhauling U.S. financial regulations in February, President Barack Obama had a question for his economic advisers, who included Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers.
“What about the families?” Obama asked, according to people familiar with the discussions. He then asked them whether they’d read the work of Elizabeth Warren, a Harvard Law School professor and longtime advocate of a national consumer financial protection agency. Michael Barr, a University of Michigan professor who was a Summers aide at the time, jumped in to say he knew Warren’s work.
“Well, what do you think about it?” asked the president, according to the accounts of the conversation.
“I think it’s a great idea,” Barr, 44, replied. The two debated the merits of such an agency during several meetings over the following three days. Then Obama offered Barr, whose own work included research on the borrowing patterns of low- income households, the job of assistant Treasury secretary for financial institutions.
Now take this anecdote with a grain of salt—it could be self-serving spin intended to attach the president more personally to what’s sure to be a popular issue. But it does make a certain amount of intuitive sense. I mean, do you think Larry Summers came up with this idea? If true, it’s interesting that Obama had read Elizabeth Warren, one-time scourge of right-thinking folks in the business press. And having read Warren, it’s no wonder he supports such a consumer agency.
Bloomberg puts all this in context:
Following the 1999 decision to overturn the Glass-Steagall Act that separated commercial banks from securities firms, bank lobbyists have been able to shoot down virtually any proposed rule they perceived as unfavorable to their industry, lobbyists and politicians say.
And it notes that while the banks lobby is still pretty much getting its way or likely to on non-consumer stuff like pay and derivatives, it has suffered some damage in the consumer area, which Bloomberg is excellent to point out is huge to the too-big-to-fail banks:
Harvard’s Warren says the consumer agency she proposes will affect the larger banks disproportionately: “It may cost the community banks some nickels, but the real impact will be on the big banks’ profit model.”
And Bloomberg is good to note the campaign contributions of the prominent politicians quoted in the story and the revolving door that still spins despite the Obama administration’s anti-lobbyist rhetoric:
JPMorgan also added two lobbyists to its Washington staff, which includes former Commerce Secretary William Daley. Jill Blickstein, who was previously chief of staff at the Office of Management and Budget in the Obama administration, was one of the new hires.
But some things really have changed:
The Treasury’s Barr has even appointed a former consumer advocate at the Center for Responsible Lending, Eric Stein, as his deputy in charge of consumer protection.
Lots of journalists will gloss over something that dents their thesis. Bloomberg doesn’t do that here, noting at length that the banks have still been able to get their way in some consumer areas, particularly in so-called cramdown legislation that many on the left thought was the only real way to speed the end of the housing crisis.
And it ends on what’s an appropriately skeptical note:
While banks’ lobbying efforts may have been weakened, their deep pockets still give them willing listeners on Capitol Hill and in the White House, says Joseph Stiglitz, winner of the 2001 Nobel Memorial Prize in Economics.
“It comes down to the influence of money on our political process,” the Columbia University economics professor says.
Even if Barr levels the playing field and the new agency is created, banks bearing cash still may win the game.
Good work.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.