If anyone wants to inspect firsthand the intersection of campaign contributions and legislation, they could take a field trip to the U.S. House of Representatives Financial Services Committee. Votes this week may be instructive. For accuracy, the House of Representatives really should rename it the House Financial Services Services Committee.
In a recent profile, Slate savaged the panel for rubber stamping the will of Wall Street. As the nation continues to struggle to recover from the bank-caused crash of 2008, Slate quotes committee Chair Jeb Hensarling (D-Texas) as observing that "we have been accused" of trying to undermine the Wall Street Reform act. "I hope we are guilty of it."
Key observations from Slate:
• "Deep-pocketed lobbyists 'don't have to worry about having access to members, because all you have to do is wait for the phone to ring -- and you don't have to wait very long,' " observed a former member of Congress.
• The financial industry has already donated $149 million to congressional candidates in the current election cycle, more than from any other industry.
• Pressure from the committee on regulators has delayed and diluted reform rules, such as the important Volcker Rule prohibition on bank gambling.
To date, Wall Street-aligned members of the committee have tortured reality with an argument that reform laws have stifled banks from making needed loans--a misdirection at best, since most rules haven't yet taken effect. More recently, some members have bypassed this argument and simply complained (one might infer on behalf of their Wall Street donors) that rules harm bank profits.
With Washington frozen in partisan rancor, the committee's prodigious law-making efforts typically don't cross the Hill to the Democrat-controlled Senate. But the Republican-controlled Financial Services Committee's ability to put the brakes on the rulemaking process is obvious.
To return to the Volcker Rule: Chairman Hensarling's committee has repeatedly assailed the rule, a core feature of the Dodd-Frank Wall Street Reform Act that will bar banks from speculating with taxpayer-backed deposits. Following several hearings, the committee passed a bill to extend the period under which banks must sell a type of hedge fund called collateralized loan obligations. These actions spilled over to bank regulators who have since weakened the Volcker Rule to conform to the committee's wishes. One former regulator told Slate that the fear of a public "excoriation" by the committee takes its toll.
Next up at the Financial Services Services Committee will be a suite of bills apparently designed to alter the course of rule-making at the Securities and Exchange Commission that apply to companies, large and small, which attempt to raise funds in the capital markets. Three years ago, this committee originated what it called the JOBS Act, an acronym for "Jumpstart Our Business Startups" which really had far more to do with deregulating Wall Street. Though this bill unfortunately became law, many committee members are unhappy with what they see as a too slow pace on this deregulation effort.
One of the things that the original "JOBS Act" measure permitted is crowd funding -- an online fundraising tool typically used by charities or music festivals where donors don't expect a return other than good will. Now comes so-called JOBS 2.0, in which Rep. Patrick McHenry (R-N.C.) wants to quintuple what companies can raise through crowd funding, and double how much individuals can invest in any crown funding deal. This means more mom-and-pop investors may be prey to online appeals, all sanctioned by the government. The committee may vote on this and other measures later this week.
Ideally, the members of the committee should understand their primary service is to average Americans, not their donors. The members who do understand this responsibility must speak up, and act with responsibility to Main Street, that is the group to whom their financial services should be served.