Tomorrow, the House Financial Services committee is expected to pass the final facets of its regulatory reform effort, which would move a final package to the House floor for a vote as soon as mid-December. Not ready to go quietly into the night, the Financial Services Roundtable (FSR) — one of the main lobbying arms for the country’s biggest banks, including Citigroup, JP Morgan, and Bank of America — fired off a letter to committee members, pressing them to vote no on the bill.
In the letter, the FSR claims to be “a strong, and consistent, advocate for financial regulatory reform,” and emphasizes that reform “must happen sooner rather than later.” However, it then spends the bulk of the letter criticizing nearly every meaningful portion of the House legislation, claiming that it will destroy jobs and negatively impact the economy:
Several amendments designed to ensure financial stability will have negative consequences for the economy. The heightened capital standards for large financial institutions, combined with the cost of pre-funding a systemic risk reserve, will reduce lending and other activities by large financial companies. The provisions designed to prevent financial institutions from becoming “too-big-to-fail” will, at a minimum, increase the cost of funding for such companies, and may accelerate the failure of a troubled institution. The new powers for regulators to break up large firms create a disincentive for positive growth and job creation.
The only committee actions which the FSR voiced support for are a weakening of risk reduction provisions and a change to accounting standards so obviously advantageous to only big banks that even the Chamber of Commerce couldn’t support it. Remember, this is the same organization whose Senior Vice President for Government Affairs announced on C-Span that “we’re not for any regulation.”
Like other sectors, the financial services industry is counting on the jobs argument to resonate in an era of double digit unemployment. But the proposed measures are meant to safeguard the financial system against another crash, the last of which caused massive job loss to which we’re still struggling to respond. With its letter, the FSR is paying lip service to the obvious need for reform, while advocating permanently enshrining “too big to fail” and the sort of lax capital standards that led to some investment banks leveraging themselves at 40-1.
In terms of potential for job loss, it seems to me that the status quo is far more problematic, but you can bet that these same arguments will migrate with the bill over to the Senate.