It was hard to get away from Wall Street in Washington this week.
In Congress, the Senate Banking committee held its first hearings since November on Wall Street reform, starting with an appearance by former Federal Reserve Chairman and current chair of the President's Economic Recovery Advisory Board, Paul Volcker. Volcker testified in support of an administration proposal (dubbed the “Volcker Rule”) to prohibit banks from using our savings to speculate on Wall Street, warning the committee: "I tell you sure as I am sitting here, that if banking institutions are protected by the taxpayer and they are given free rein to speculate, I may not live long enough to see the crisis, but my soul is going to come back and haunt you [when it happens]."
That same day the news broke that Bank of America, the nation’s largest bank, will end its efforts to block creation of an independent Consumer Financial Protection Agency that will crack down on abusive and deceptive financial products. And former Citibank Chairman John Reed, free to speak his mind in retirement, endorsed an independent consumer agency in testimony before the Senate Banking panel on Thursday.
Nevertheless, financial firms haven’t stopped their all-out push
against reform. We saw preliminary reports that financial executives
poured money into the campaign of new Massachusetts Senator Scott Brown
in the days before his election. As reported by the Boston Globe:
“A sign the industry is prepared to spend heavily in the upcoming
midterm elections to beat back new controls and taxes President Obama
wants to impose."
One piece of good consumer news was also an example of why a consumer financial protection agency must be independent of the existing banking regulators. Citibank has agreed to postpone new fees the bank planned to charge new “free checking” customers. The change was made after quick action on the part of the New York Attorney General, no thanks to Citibank’s prudential regulator.
On a final related note, we saw yet another example of why the Senate should dump the filibuster rule that obstructionist members from both sides of the aisle are using to stymie reform. Senator Richard Shelby (R-AL, and Ranking Member on the Sen. Banking committee) has placed an extraordinary hold on all pending Obama administration nominees. 60 votes will be necessary to break a filibuster and move the nominees unless Shelby lifts the hold. All over whether Northrop gets a defense contract to build planes in Mobile Alabama. Whatever the merits of the issue, it shouldn’t stand in the way of unrelated nominations.
That's the power Shelby holds thanks to the 60-vote rule, just as he has been able to hold up Wall Street reform in the Senate Banking Committee with a similar threat to withhold GOP support unless Chairman Dodd caves on strong consumer protection. Dodd announced today that he and Shelby have come to an impasse in negotiations and that he is moving forward with a financial reform draft. Kudos to the chairman for moving ahead on reform that is long overdue. But Dodd has still not publicly renewed his commitment to a strong, independent Consumer Financial Protection Agency. That's the step we'll be looking to see as Washington digs out of the snowstorm next week.