A tale of two banksters
Tuesday, 02/23/2010 - 9:22 am by Jeff Sovern | 2 Comments
In the fictional conversation below, two fatcat bankers chat about the creation of a new agency to regulate consumer financial products like credit cards and mortgages. They express their dearest hope that whatever happens, they can look to the shelter of banker-friendly federal regulators rather than state regulators who would enforce new consumer rules.
Martin: How’d you do this year?
Powell: Low seven figures. You?
Martin: It’d just make you feel bad.
Powell: You got more? This new restraint is just killing me.
Martin: You guys should never have taken the bailout.
Powell: What else could we do? The bank would have gone down.
Martin: Yeah, well, I really need the money. Promised the kid a new Porsche.
Powell: Again? What for?
Martin: Nothing below a B on his report card.
Powell: Well, he deserved it then.
Martin: You know what they say. Money is the mother of all incentives.
Powell: Oh, I’ve been meaning to ask you: did you guys switch your regulator?
Martin: Yeah, of course. The state was demanding all sorts of stuff from us, so we changed. Goodbye state regulator, hello federal regulator.
Powell: I love the federal agencies. They give us a lot of freedom. Plus they kept those crazy state predatory lending laws from applying to us.
Martin: Well, the feds want the fees we pay, and they know if they fuss at us, we might as well stay with the states. And when things don’t work out so well, bailout city. But you think Congress will mess it up?
Powell: Can you believe the nerve? They want a new agency to protect borrowers? What, they think there’s an agency that protects banks?
Martin: You know, we’re lucky all these issues go over people’s heads. No soundbite for the Consumer Financial Protection Agency. It’s not like when Congress passed that credit card bill last summer. People got that one. The senators we give contributions to didn’t dare vote against it. But when the issues are complicated, the old scare tactics work.
Powell: Can you say it with me: “Pass this bill and people will get less credit and it’ll cost more.”
Martin: Hey, have you been paying attention to this proposal to change the disclosure forms? You know, the forms the borrowers get when they take out the loans to tell ‘em what they’re going to have to pay? The ones that said the subprime borrowers? Monthly payments would be lower than they really were?
Powell: I sure hope they’ll leave them alone. The old ones worked for twenty years. Why switch now?
Martin: Yeah, I mean, who even reads those things? Well, gotta go spend some money.
Powell: Go prop up the economy. But be discreet.
Jeff Sovern is Professor of Law at St. John’s University.
The point about the sound bite is sad but true. Democrats have been painfully incapable of framing an issue for some time now. Serious financial reform should be a slam dunk in this economy, but no one from the White House or the congressional leadership is out there making an effective sales pitch. Meanwhile, opponents of the bill will take every opportunity to disseminate their Luntz-approved talking points and leave the left playing catch-up — again.
Posted by Tim | February 23rd, 2010 at 11:03 am
Tim - you are absolutely correct. However, there’s a bit of good news. On March 3rd, the Roosevelt Institute is hosting a conference in which a number of experts on financial reform are coming together to propose a set of recommendations to fix the broken economy (George Soros, Rob Johnson, Joe Stiglitz, Elizabeth Warren, etc.). Simon Johnson, one of the headliners, has come up with a great description — very soundbyte-worthy– of what happens when the financial sector is left broken. It continues in something he calls the ‘Doom Cycle’ - a cycle in which risks and danger are compounded and each recession becomes more catastrophic. We need more language like this that captures the imagination and flows easily off the tongue….what I’m really looking for is a way to frame the deficit in a simple way - let me know if you’ve heard anything promising. Thanks for reading. Best, Lynn Parramore, Editor
Posted by FERI | February 24th, 2010 at 9:16 am