It’s a good thing Sen. Elizabeth Warren owns a fighter’s spirit, as supporters heard again Sunday in Northampton – straight talk from one of the nation’s economic populists.
She needs to brawl, because her signature achievement, the Consumer Financial Protection Bureau, is under attack, and the stakes are changing. Donald J. Trump, the expected Republican presidential candidate, says Dodd-Frank, the 2010 legislation that restored regulation on Wall Street, should be repealed.
Trump hasn’t provided details, but U.S. Rep. Jeb Hensarling, Republican chairman of the House Financial Services Committee, is swooping in with a game plan.
This Texas lawmaker doesn’t have a national reputation, though the financial services industry knows where to find him. In the 2014 election cycle, he received more campaign contributions from the rapacious payday lending industry, a regular target of the consumer bureau, than any other member of Congress – $68,000. And since being elected in 2002, he has received $5.5 million from the financial industry, according to the Center for Responsive Politics. Hensarling has managed to secure regulatory relief for his patrons in bills that passed in the House but didn’t get through the Senate.
Perhaps sensing his moment with the Trump candidacy, Hensarling last week outlined what he’s calling the Financial Choice Act in a speech to the Economic Club of New York. He said Dodd-Frank has failed and called for “a new legislative paradigm in banking and capital markets.”
This paradigm isn’t chump change. It would wave a magic wand over investor losses due to the 2008 market crash and Great Recession and would likely set a new generation up for a financial fall due to speculative excesses.
In the Obama White House, and likely in a Clinton one, this legislation would face a veto. But Hensarling is betting he’d get an invitation to a bill-signing ceremony in a Trump White House.
At a hearing of the Senate Banking Committee last week, Sen. Warren said Hensarling’s bill, not yet detailed, shows Republicans “eager to return to the good old days before the 2008 crisis, when these banks could run wild.” Warren called the proposal “Congressman Hensarling’s wet kiss for the Wall Street banks.”
The bill would repeal the Volker Rule, which restricts speculative trading by banks. It would allow banks that hold 10 percent of their capital as a buffer against bad times to free themselves from certain rules.
And the measure would essentially neuter the consumer bureau Warren created. Since its launch, the bureau has secured over $11 billion in relief for more than 25 million people harmed by unprincipled financial practices. Yes, that’s millions and billions.
Rather than get its money from the Fed, the bureau would be subject to appropriations from Congress that could be turned off. The bureau would be renamed the Consumer Financial Opportunity Commission and be guided by a five-member bipartisan board.
They might as well ship the whole thing off to that storage cavern in “Raiders of the Lost Ark.”
As Los Angeles Times columnist David Lazarus said of Hensarling’s bill, “If there’s one thing the financial services industry hates, it’s adult supervision.”
But adults have a role to play. As Warren noted in her talk here last weekend, it is government’s duty to set policy that shepherds opportunity for all Americans, not just the wealthy.
“We went from a country that strengthened the middle class to one that bet on its wealthiest citizens and hoped that the benefits would eventually trickle down,” she told her Northampton audience.
A lot of candidates have spoken this year about the travails of the middle class. Warren did too Sunday, but her message – and mission – seem to resonate. “For a lot of families, no matter how hard they work, no matter how many coupons they cut, no matter how hard they try to save, there is never enough to make ends meet,” she said.
Her voice may be what stands between Dodd-Frank and a return to a free-wheeling Wall Street.