As the Occupy Wall Street movement has laid claim to Zuccotti Park, Wall Street’s original occupants have staged their own protest in the halls of Congress. And unlike the protesters, the banks know what they are fighting for.
In the last year, droves of lobbyists hired by Wall Street have swarmed to Capitol Hill and are trying to chip away at last summer’s financial overhaul bill, the Dodd-Frank Act. Lobbyists have been successful in delaying some portions of the bill and diluting others because of a highly partisan Congress. In the process, they are thwarting the democratic process.
The current congress ranks as one of the most divided and ideological congresses. An organized but obstinate Tea Party has wielded the filibuster to cut back regulations.
To win the 60 votes necessary to pass a filibuster, proposed legislation is gutted, specific plans and actions are replaced with vague malleable promises, and rules are whittled away with exceptions and exceptions to garner enough votes.
These compromises get bills passed. But the convoluted laws that result from this process riddled with exceptions are a headache to interpret. Fortunately for Congress, the responsibility to interpret and implement laws lies with judges and administrative agencies. Wall Street lobbyists have had their most success stealing the handoff from lawmakers to law interpreters, when money and non-elected officials change the law.
Wall Street’s current nemesis, the Volker Rule, exemplifies how lobbyists slip into these crevices and disrupt the democratic process. Originally passed as part of the financial overhaul bill, the Volker Rule prohibits commercial banks from proprietary trading, or trading money from commercial funds.
Banks such as Goldman Sachs and JP Morgan rely on proprietary trading to achieve profits. The Wall Street Journal reports that some commercial banks have become reliant on the gains from propriety trading. The Journal opined that Goldman would likely have to cut back on executive salary to continue making profit should the Volker Rule be implemented.
In the aftermath of the financial crisis where banks had made errors with other people’s money, many thought it fitting that restrictions be placed on how banks used money from commercial accounts. Thus, the Volker Rule.
The Volker Rule “generally” prohibits banks from proprietary trading. But exceptions are allowed for trading on behalf of customers, hedging activities by the banks, and underwriting and “market-making” activities. But even these exceptions have exceptions. SEC Chairwoman Mary Shapiro notes that when exercising an exception involves conflicts of interest, high risk assets, or constitutes a threat to the safety and soundness of banking institutions, then it is not permitted. This is exactly the kind of confused law that lobbyists use to disrupt the democratic process.
It has been a long, hard battle to pass the Volker Rule. Chris Dodd paid for the it and the financial bill democratically with his political career. Wall Street instead pays cash to lobby for change outside the political process.
The Occupy Wall Street movement has been criticized for many things including its amorphous political stance. Unlike the Tea Party which rose up against Obamacare, OWS has united around populism. But it is populism that will cure the damage done by hyper-partisanship. Partisanship drives gaps and contradictions into laws, cutting back at the democratic process when law is placed into the hands of unelected regulators. Populism repairs those holes by focusing on the democratic process over narrow policy goals.
Though OWS may not spawn a congressional caucus with a political platform, its populism is a step in the right direction towards repairing the damage to the political process from excessive partisanship.
Photo Credit: Will Palmer