After leading the dramatic three-day Showdown in Chicago at the American Bankers Association (ABA) Convention in Chicago, AFL-CIO President Richard Trumka will head to the House Financial Service Committee today to testify against proposed reform legislation and argue that the bill actually gives the banks more power.
As he testifies against the banksters, he will, in a twist of irony, be sitting at the same table with American Bankers Association President Ed Yingling.
After weakening current law on derivatives, the committee is proposing once again to weaken law in the banker's favor. The draft legislation concerning banks "too big to fail" would actually lead to more bailouts over the long run. In an advance copy of AFL-CIO President Richard Trumka's prepared testimony that I obtained, Trumka will tesify that:
The discussion draft appears to take the most problematic and unpopular aspects of the TARP and makes them the model for permanent legislation.
Essentially the legislation would weaken regulation and lead to the conditions in which the American people would be forced to bail out the banks again. As Trumka testifies:
The discussion draft would appear to give power to the Federal Reserve to preempt a wide range of rules regulating the capital markets - power which could be used to gut investor and consumer protections.
Trumka goes onto explain in vivid details how the Federal Reserve with its lack of accountability has traditionally acted in the interests of the banks:
The Federal Reserve currently is the regulator for bank holding companies. In that capacity, it was responsible throughout the period of the bubble for regulating the parent companies of the nation's largest banks. While regulatory authority rests in the Board of Governors of the Federal Reserve in Washington, routine responsibility for regulatory oversight has been delegated by the Board of Governors to the regional Federal Reserve Banks. The Federal Reserve System's regulatory expertise resides in these regional banks. The problem is that these regional Federal Reserve Banks are actually controlled by their member banks - the very banks whose holding companies the Fed regulates. The member banks control the selection of the majority of the regional bank boards, and the boards pick the regional bank president, who are effectively the CEO's of the regulatory staff... Giving the Federal Reserve with its current governance control over which financial institutions are bailed out in a crisis is effectively giving the banks the ability to raid the Treasury for their own benefit.
Trumka explains how the proposed legislation would give the big banks more of an incentive to take risky bets in order to drive out their competition:
We are also deeply troubled by provision in the discussion that would allow the Federal Reserve to use taxpayer funds to rescue failing banks, and then bill other non-failing banks for the costs.
Isn't that absolutely absurd? If a bank deemed "too big to fail" by the Fed takes out risky bets and its fails miserably, the other banks who were engaged in safe banking would have to bail them out. For the big banks that can afford to take huge bets, this would simply give them more incentive to do it. If they lose, the smaller banks not deemed "too big to fail" would merely go under bailing out the big banks. So why not gamble big on Wall Street since every situation would be a win-win. If you win, big profits. if you lose, you get a bailout and your competition goes out of business. Sounds like a good deal to me.
Furthermore, as Congressman Brad Sherman points out, the proposed legislation would allow the government to bail out banks into the trillions of dollars without having to seek Congressional approval. It would allow the Federal Reserve to bail these banks out secretly without the public knowing about it. This is just simply undemocratic. At least the last time we bailed them out, the bankers at least had to go to Congress and beg in shame. Now, as Sherman points out, the current legislation meant to reform Wall Street would actually be like "TARP on steroids".
The obvious question remains why has the House Financial Service Committee, under the leadership of Rep. Barney Frank, strayed so far from President Obama's plans to regulate Wall Street and dramatically weakened his proposals? Perhaps the $223 million that the banking lobbyists spent on lobbying Congress in the first six months of 2009 alone has something to do it. Or perhaps, as the Wall Street Journal reports, campaign contributions to committee members have increased dramatically as they consider financial reform.
However, as the Showdown in Chicago showed, anger over the bailout and greed on Wall Street has increased dramatically as well. The message is loud and clear: We will go to any venue to take on the banks. We will fight the banks wherever or whenever, whether it be the halls of Congress as Trumka is doing today, the thousands of protesters busting up the American Bankers Association's Convention earlier this week, or, like the members of United Electrical Workers (UE) who, as portrayed in Michael Moore's Capitalism, occupied their factory after Bank of America closed it down, at our workplaces.
We will not rest until real reform of Wall Street is passed. We will hold any politicians—Republicans and Democrats alike—accountable for passing fake reform that merely lines the pockets of Wall Street. We will not rest until justice is done.