Wall Street Not the Biggest Fan of Financial Reform

by Matt Zeitlin

There’s a meme going around the populist, anti-corporatist right as incarnated by Timothy Carney that the financial reform bill that passed the senate, like the health care bill, is just entrenching incumbent interests and isn’t real reform. His evidence for this claim — aside from particular policy points — is partially that banking lobbyists and prominent bankers have had meetings with policy makers and, in general, have had some amount of input on the policy making process and apparently have been successful in killing a specific leverage requirement amendment. And, some bankers have been making noise about supporting reform in general, like when some Goldman guy told Politico that “We’re not against regulation. We’re for regulation. We partner with regulators.” Of course, conservatives jumped all over this as yet another piece of evidence that financial reform was just another big government scheme to protect the perfidious big banks.

Well, it turns out that the banks are playing a similar role to much of the health insurance industry during the health care fight: recognizing that reform is inevitable, publicly trying to get the best possible deal, but also ultimately supporting the other side. This is from Politico:

And even if the derivatives language finally goes away, some on Wall Street who supported Obama and other Democrats say they may not to do so again, frustrated by months of what they view as relentless bashing and punitive policy-making.

“It’s not just derivatives. That’s just a symptom of the larger issue,” said one Wall Street lobbyist who declined to be named out of concern for angering the administration. “It’s general frustration with lack of rationality, principles and the unending uncertainty. [The financial industry] feels re-traded between Obama’s vision during campaign and the execution of the policies.” The phrase “re-traded” is a Wall Street term for bad faith renegotiation of a previously agreed-upon deal.

“This will have an impact on fundraising,” the executive said, “not out of retribution, but out of deep disappointment in the irrationality of policies/rhetoric and a determination not to fall into ‘Stockholm syndrome.’ ”

Congressional Democrats and the party committees that support their campaigns are already suffering from Wall Street’s sense of betrayal. According to a center study done for RealClearPolitics, Republicans collected about three-quarters of the political contributions from New York financial services companies in March. About two-thirds went to Republicans in February.

So, once again, Republicans turn out to be totally on the side of business interests and Democrats are trying to pass an imperfect, yet meaningful reform. It shouldn’t really surprise anyone that things have shaken out this way.