Wall Street’s lobbyists and special interest groups have corrupted members of Congress and frustrated needed financial regulation and reform. Notwithstanding the endless series of financial abuses perpetrated by Wall Street in recent years, abuses that have literally undermined the economic fabric of the country, Congress refuses to pass meaningful reforms and has significantly reduced the budgets of financial industry regulators thus effectively compromising securities regulation and enforcement. In essence, the SEC and CFTC are fighting a war with ‘peashooters’ while Wall Street employs ‘weapons of mass destruction.’
When Franklin D. Roosevelt took office in 1932, the cruelest year of the Great Depression, he was able to get enacted some sweeping but fairly straightforward laws that forced Wall Street’s banksters out of the shadows of unregulated markets and into the light of day: (i) the Securities Act of 1933 with its registration and prospectus requirements; (ii) the Securities Exchange Act of 1934 that required public disclosure filings; (iii) the Commodity Exchange Act of 1936, which required all commodities and futures to be traded on regulated exchanges; and (iv) the Glass-Steagall Act, which prevented banks from using depositor’s money for speculative trading by separating commercial banks, investment banks and insurance companies.
What made the 2008 financial crisis possible, according to Rolling Stone’s Matt Taibbi, was that Wall Street created new “weapons of mass destruction” like credit default swaps and collateralized debt obligations, and moved its speculative trading in them away from the transparency of regulated exchanges into “darker, less regulated markets” (“How Wall Street Killed Financial Reform”).
If the President and Congress really wanted to rescue the economy and protect consumers, Taibbi argues, they first needed to turn those darker, less regulated markets into open exchanges. The initial draft of the Dodd-Frank financial reform laws did that and more. But it never stood a chance against Wall Street and its money, armies of lobbyists and lawsuits.
Taibbi’s article is recommended reading. It sets out in infuriating detail how Wall Street has just taken over the Executive and Congressional branches of government, and used the Judicial branch as well to slowly but surely beat the life out of the Dodd-Frank reforms it does not like.
Big Wall Street money buys more than access. It allows Wall Street to co-opt the government for its own ends. It buys politician’s acquiescence and cooperation ? every last one of them, according to at least one person in a position to know.
Former SEC Chairman Arthur Leavitt, currently a board member of Bloomberg LLP, when asked why politicians lack the courage to stand up to Wall Street greed, was quoted as saying: “There is no political courage. I don’t know of a single member of Congress who is willing to resist the seductions of money and campaign contributions and the kind of flattery that comes from those who have special interests.” (Tom Keen’s EconoChat, Bloomberg Businessweek).
Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.