Inside a Banker's Mind

by Jeff Sovern

Isn’t it great that Occupy Wall Street is pretty much over? Though the truth is in some ways, they did us a favor. You know how a magician will gesture wildly with his left hand so you ignore what he’s doing with his right? Well, Occupy was like the magician’s left hand. We need people to ignore what’s happening in Washington—the magician’s right hand--and because people are more interested in demonstrations than the details of government, they’re overlooked what really counts. And, unlike the magician, we didn’t even have to do anything to make it happen. It’s as if the audience distracted itself. Plus, the occasional bad behavior of the Occupy folks and second-guessing the authorities shifted attention from us too.

What matters, of course, is that we pull the fangs of the Dodd-Frank Act. Take the Consumer Financial Protection Bureau. If it makes good on the goal of protecting consumers—from us--it may reduce our profits. So far, though, the strategy that we and Congressional Republicans are pursuing to cripple it is working beautifully, and most people haven’t even noticed.

I particularly like what we’re calling commonsense proposals to increase accountability. Congress originally arranged for the Bureau’s funding to be independent of the annual appropriations cycle, just other bank regulators. So we’re arguing for accountability by saying the Bureau ought to get funding from congressional appropriations. That way, we can lobby every year to have its budget cut unless it does what we want. It’s the same strategy Fannie Mae used to get power over its regulator. Sure, Fannie and Freddie Mac ended up being so poorly regulated they needed a bailout of $160 billion or so, but in the meantime, they made tons of money for the people running them.

We’re also saying we can increase accountability by changing the Bureau’s leadership from a single director to a five-member commission. Don’t you love the idea of increasing accountability by having decisions made by a three-member majority instead of one person? As if three people represent the public so much better than one. The bill the Republican-controlled House passed says no more than two commissioners can be from the same party, and one commissioner has to be from the Federal Reserve. That would be the same Fed that got the power to stop predatory lending in 1994, but didn’t use it until after the subprime crisis hit. I don’t think we have to worry about them stopping us from making profits. The House bill provides for accountability, all right; accountability to us. Definitely not to the 99%. It gives us a pretty good shot at either capturing the Bureau, or paralyzing it. Either way, the Bureau doesn’t hurt our profits.

The beauty part is that the Democrats will never agree to this. So we’ve disarmed the Bureau. The Bureau has only limited powers until a director is confirmed, and we’re using the Democrats’ refusal to agree to our “commonsense proposals to increase accountability” to justify blocking confirmation of a director. They didn’t have the votes to defeat a filibuster on the director the other day in the vote nobody noticed, and they can’t compromise without undermining the Bureau. Too bad, so sad. Life is full of pain.

And the long run is even brighter. Next time there’s a big consumer protection problem or bailout, we’ll be able to say we tried more regulation, and it didn’t work, so now let’s go for less regulation. Maybe we’ll be able to get rid of the Bureau.

We have only two things to worry about. One is that the president makes a recess appointment of Cordray and it sticks. The other is that the Occupy guys start paying attention to what’s going on in Washington and protest against that. It would be as if the magician’s left hand pointed to his right. But especially now that Occupy is just about done, that will never happen.