[Corp. Watch] Big Greed's massive profits bought deregulation, then bail-out when that failed

[Corporation Watch]

It Is Damn Well Time to Shake Off the Bank Lobby

By Zach Carter

(Media Consortium, April 14) -- While the national economy struggles  
under the weight of a massive bank bail-out effort, the banking  
lobby's ability to influence public policy is more problematic than  
ever.

	The too-big-to-fail bankers may be dependent on U.S. taxpayers for  
their survival, but corporate lobbyists still have members of  
Congress, the Treasury Department, and the Federal Reserve asking the  
banks' permission to bring the Big Finance behemoths under control.

	The relationship between Wall Street and the government is so out of  
whack that it's difficult to distinguish the political players from  
the panhandlers.

	In Mother Jones magazine, Daniel Schulman and Jonathan Stein detailed  
the ease with which important congressional staff switch careers and  
move into the banking sector.

	In recent years, dozens of key staffers for powerful Senators have  
left the political arena to work for as lobbyists for the financial  
sector, and policy gurus from both sides of the aisle are jumping ship  
for lucrative careers as influence peddlers on Wall Street.

	"Financial firms seeking big bucks and favorable terms from Congress  
and the White House are deploying Capitol Hill aides-turned-lobbyists  
to win favorable treatment from the congressional lawmakers," Schulman  
and Stein write.

	Many lawmakers, including Senate Banking Committee Chairman Chris  
Dodd (D-Conn.), are refusing to disclose whether they've had contact  
with former staff who now work for Wall Street.

	Small surprise, then, that so many of the recent bail-out packages  
have allowed failed bank CEOs to stay in power and saved their  
shareholders from bad investments in inept, even predatory, companies.

	Sometimes these reinvented bank defenders are even former Senators.  
Susan Douglas of In These Times highlighted the career of former Sen.  
Phil Gramm (R-Texas), who is currently a lobbyist for Swiss banking  
giant UBS.

	The bank has been plagued by a seemingly endless stream of scandals  
over the past year, from diamond smuggling to tax fraud. And Gramm  
helped push for looser predatory lending laws -- including for the now- 
decimated mortgage sector -- while he was on the UBS payroll.

	This would be a shameful legacy for any former public servant, but  
for Gramm, Douglas notes, this behavior is particularly disgraceful:  
his two chief legislative "accomplishments" helped create and  
intensify the current financial crisis.

	Gramm co-authored the Gramm-Leach-Bliley Act of 1999, which  
compounded the financial world's too-big-to-fail problem by letting  
traditional commercial lenders like Bank of America and Citigroup buy  
up riskier, unregulated investment banks like Merrill Lynch.

	Gramm then pushed the Commodity Futures Modernization Act of 2000  
through in a midnight budget amendment, a tactic that ensured that  
"credit default swaps" were not subject to either securities  
regulations or gambling laws.

	Just eight years later, credit default swap gambling destroyed  
insurance giant AIG, to the dismay of taxpayers everywhere.

	When lawmakers stop cowing to the bank lobby and start answering to  
their constituents, the result is a big boost for the entire economy.  
Last week, committees in both the House and Senate dealt the credit  
card industry a rare defeat by approving bills that crack down on  
abusive credit card billing practices.

	Even though Sen. Dodd insists keeping his lobbying contacts a  
mystery, he is capable of crafting responsible legislation. The bills  
were introduced by Dodd and Rep. Carolyn Maloney (D-N.Y.), but still  
face major uphill battles clearing the full House and Senate.

	As Harry Hanbury detailed for the American News Project, conservative  
lawmakers and bank lobbyists are already hard at work watering down  
the legislative language to ensure that it will not actually curb any  
abuses if enacted.

	The bills would ban dozens of billing gimmicks that are as outrageous  
as they are common, including raising interest rates on credit card  
debt after it has been accumulated and hiking rates due to completely  
unrelated activity, like returning a library book late.

	The banking industry deploys a lot of clever words to mask the  
predation inherent in the tactics, and most common of all are the  
terms "price according to risk" and "risk-based pricing."

	These phrases make it sound as if all the poor little credit card  
companies want to do is set interest rates at levels appropriate for a  
borrower's credit profile.

	Of course, that's not what's actually happening: Lenders are  
radically changing the terms of loan agreements for no other purpose  
than to gouge borrowers, and give borrowers no say in what happens.

	It's crazy that banks are legally permitted to raise interest rates  
on cardholders after they have charged debt to their credit card. When  
you pay full price for anything else -- such as a shirt -- it would be  
laughable if the shop clerk demanded more money from you months later.

	Banker apologists insist that banning these practices will restrict  
the flow of credit. But more credit cards will not fix a problem  
caused by massively over-indebted consumers. We need higher wages, not  
a fresh flood of predatory, high-interest debt.

	But if taxpayers can win on credit cards, we can win on the bail-out,  
too.

	Sarah van Gelder, editor of Yes! magazine, posted an open letter to  
President Barack Obama this week, citing half a dozen economic experts  
and urging him to change his bail-out strategy before it's too late.

	"Watching your appointees' latest bank bail-out makes me wonder if  
all your administration's good work on healthcare, education, and jobs  
will be swept away by the extraordinary giveaway of trillions in  
taxpayer money to a group of powerful Wall Street operatives," she  
wrote.

	And indeed, in other arenas of economic policy, the president has  
made significant steps in the right direction. While Obama's proposed  
federal budget is less than perfect, it moves away from some of the  
worst trends of the past eight years.

	By implementing robust job creation plans and a massive increase in  
anti-hunger and nutrition programs, Obama has signaled that the plight  
of those hardest hit by the recession cannot simply be ignored.

	But these positive budget strides do not involve the banking lobby,  
which still maintains a stranglehold on any realm of U.S. public  
policy it can loot for a profit.

	Obama standing up to the financiers is not an improbable pipe dream,  
it's a prerequisite for economic recovery and a necessary step toward  
rebuilding the integrity of our democracy.