The New York Times reported Monday, May 10, that the big banks have employed an army of lobbyists to persuade legislators to get rid of a provision in the Senate's financial reform bill that would effectively bar the banks from trading in derivatives.
Those lobbyists would doubtless say that their activities are a sign of a healthy democracy, but why couldn't it be as easily argued that they subvert democracy by interfering with the will of the people, as manifested in this bill written by their elected representatives? The provision to stop banks trading derivatives is a direct result of the mortgage meltdown and $700 billion bank bailout, which resulted from irresponsible trading in these instruments, which, incidentally, never seem to get explained in the media. (I know what a share in a company is, and I know what a bond is, but when I read something like "Derivatives are contracts whose value is determined by something else," (from the same article in The Times, May 10) I don't get it.
It goes without saying that the lobbyists in this case and their employers, the banks, have no shame. You might think that having failed in their responsibilities so catastrophically that they nearly destroyed the entire economy, that they themselves would be asking the government for more regulation, so that such a thing could never happen again. But no.
I wonder what some other lobbying activities contrary to the public interest might look like.
What if criminals could put aside their differences and their rivalries and get together and form a group to lobby Congress to go easy on them? The Association of Federal Felons, perhaps? Outrageous!
But trading in these derivatives presumably would be a crime, albeit a white-collar crime, if the law is passed as it currently stands, with the provisions suggested by Sen. Blanche Lincoln still intact. And even if it would not be a crime, then surely it ought to be, for one of the astounding things about the bank crash and rescue is how few criminal inquiries and indictments resulted. How can those things not be crimes, when they threaten so much harm to the economy and to the public's confidence in the web of laws and customs and business practices that keep it running?
Why are those bank lobbyists even allowed to talk to legislators in an attempt to influence the content of the law? And why are those conversations allowed to remain private? There should be a publicly available transcript of every conversation between a lobbyist and a legislator or aide, so the public can see who makes changes to the language of a bill, and at whose behest: who will gain, and who will lose.
Going by the FDIC Web site, the crisis is not over. The site lists 265 banks failed since October 2000. Of that number, 212 have closed their doors since the beginning of 2009.
Double the number of banks had failed this year by May 14 than failed in the first five months of last year.
The Times reported Thursday, May 13, that the Senate defeated, by 20 votes, an amendment that would have weakened the regulations put forward by Lincoln. But, apparently, Democratic support for her provisions may be wavering. The Obama administration isn't too keen on strict regulation of derivatives either, The Times reports. Obama, who campaigned on a platform of change, doesn't appear to be quite as intent on change as Franklin D. Roosevelt was in 1933, after the last crash. But I daresay that Congress in his day was not crawling with lobbyists.