Monday, October 21, 2019

Members of Congress Secretly Lobbied the Fed

As of late September 2012, more than one hundred members of Congress had lobbied the Federal Reserve and other regulatory agencies on the Volcker Rule, the part of the Dodd-Frank Financial Reform Act of 2010 that prohibits banks from operating like casinos (e.g., trading with proprietary funds, rather than those of customers).[1] The rule stems from the importance of banks in our financial system. In September 2008, the world nearly witnessed the collapse of that system when banks stopped trusting each other (e.g., via commercial paper market) because of the risks that some of the big ones had been taking with mortgage-backed derivative securities and the related insurance swap securities. Awash in healthy-seeming fees, the banks purchased risky subprime mortgages and bundled them into bond-like securities that could be sold to investors.
Congress passed the Dodd-Frank Act, so it makes sense, and indeed is positive from the standpoint of accountability, that lawmakers remain involve as the relevant regulators (who are not elected) translate the broad legislative language into specific rules for banks. However, the newspaper’s report points to a less-than-salubrious practice wherein members of Congress contact regulatory agencies in private and before even the period for public comment. This raises the possibility that Wall Street was using its connections in Congress to weaken the public safeguards in the bill—essentially putting a narrow private interest in front of the public interest that the bill was designed to protect.
The access purchased comes not only from having information that the regulatory agencies need; banks (and American corporations in general) could contribute unlimited amounts of money from the corporate treasury (rather than from contributions from executives and employees) to “social welfare” non-profit organizations that can spend money on political ads in support of friendly candidates (and against their opponents) without having to divulge the identities of the donors. So Wall Street banks can furtively promote U.S. Senate candidates who support the repeal of the Dodd-Frank Act without any of us knowing it. In fact, the “social welfare” (54c) groups can in turn contribute directly to a candidate’s campaign without divulging the names of the donors. Not even the IRS, which has been concerned about whether the donors pay the required gift tax, bothers the “social welfare” organizations for donor lists after complaints from several U.S. Senators. Nor has the SEC pushed corporations to divulge to their respective stockholders how the political donations have been spent. I suspect that senatorial influence lies behind this inaction too.
It is not as though there were some uncertainty regarding the need for disclosure in a democracy. Even though eight of the nine U.S. Supreme Court justices in Citizens United stress in their opinions the necessity of disclosure, corporations, no doubt well-connected in the halls of power in Washington from the donations already given, have a way to evade the transparency. Political and corporate democracy are both undercut as banks and business corporations can spend unlimited amounts (out of their respective profits) to help “pro-business” candidates for public office. Rather than being speech itself (and thus subject to free-speech constitutional protection), money is power that can be used to skew or otherwise limit the contours of public debate. After the election, the continued influence of the money is also stealth, such as when members of Congress lobby the Federal Reserve to weaken regulation meant to safeguard our financial system from a repeat of the near-collapse in 2008. For deregulation to be urged so soon after a near-depression gives us an indication of how dangerous “money as invisible speech” is to the public good, even if such influence is in the corporate interest.
As creatures of the state, corporations should not have a share in governance, for that function subverts the causal relationship between Creator and creature. That is to say, a corporate management (or board) presuming to influence members of Congress can be likened to the self-idolatry of a creature supposing itself to be God. Interestingly, as going concerns, corporations are immortal, legally speaking. As for us mere mortals, Rousseau reminds us that we are born free but live in chains—only we are under the delusion that we are still free because the confining elements are subterranean qua the furtive influence of great concentrations of private wealth. I suppose one question is whether finite bundles of subjectivity can somehow become aware of that which has been designed to be outside of our awareness, and, if so, whether a society can so move to protect its good in a viable republic.

1. Ben Protess, “Behind the Scenes, a Lawmaker Pushes to Curb the Volcker Rule,” The New York Times, September 21, 2012.

Tuesday, October 8, 2019

Is the U.S. Congress Too Beholden to the Financial Industry?

That financial deregulation had any traction at all following the financial crisis of 2008 in the U.S. is stunning, for the implication is that Wall Street money has tremendous influence in the U.S. Governent even after Wall Street banks have screwed up (even in triggering a financial crisis!). 

According to Gary Gensler, head of the Commodity Futures Trading Commission in 2012, Congress stood with the big banks in the struggle to shield Americans from the risks and excesses of Wall Street even after the financial crisis of 2008. He pointed in particular to a proposal from the U.S. House’s Appropriations Committee to cut his agency’s funding by 12 percent.[1] The CFTC had been given expanded powers by the Dodd-Frank Act in 2010. Doubtless the proposed budget-cut had something to do with that. It is astonishing that such a proposal would come in the wake of a financial crisis caused in large part by Wall Street bankers taking too many risks. That the agency was then tasked with regulating the problematic $700 trillion market on derivatives—a task that dwarfed the agency’s regulatory power over futures—suggests that the decision to cut the agency's budget after the financial crisis was especially agrevious, being based, I submit, in Wall Street's denial over its harmful role in triggering the financial crisis in which subprime-mortgage-based bond derivatives collapsed in value even as banks including Goldman Sachs were trying to unload the "crap" as good values. 

CFTC Chairman Gary Gensler staring down the big banks

That an industry with a vested interest in rolling back financial regulations could have any influence at all over elected representatives reflects the general ignorance or naivity concerning conflicts of interest. In a COI, a private interest predominates even if the good of the whole is being estolled. A bank-rolled member of Congress can used the espoused public-interest rationale advanced by the banking industry as cover to hide the cosy relationship. For example, a bank's public affairs department could put out the word that increased financial regulation, even after a financial crisis, is really socialism. The bank-rolled members of Congress could then use the socialism scare-tactic on their respective constituents while quietly accepting the large campaign-contributions from the banks. Meanwhile, the American people feel secure that such representatives are protecting them from a threat rather than enabling one.


1. Alexader Eichler, “CFTC Head Gary Gensler: Congress ‘Sides With Wall Street’,” The Huffington Post, June 8, 2012. 


For more on the conflicts of interest in the financial sector (and others), see: Skip Worden, Institutional Conflicts of Interest, available at Amazon.

On the Role of Socialism in American Political Polarization

In a stunning upset in the 2012 Republican U.S. Senate primary in Indiana, Indiana's Treasurer, Richard Mourdock, beat incumbant veteran Richard Lugar by 22 percent (61-39%). Even though Lugar's 36 years of experience in the Senate had seasoned him into a statesman in foreign policy, the Tea-Party-backed Mourdock was able to portray the aged senator as out of touch and too willing to compromise with Democrats. Mourdock had no intention of extending any hand across the aisle. Is such polarization worth the loss of experience in international relations? Moreover, what is the role of socialism in the political polarization? 
"While Lugar advised in his concession speech . . . that Mourdock would need to work together with lawmakers in the Senate, the new nominee stuck to the belligerent tone he [had] maintained in the campaign, warning that Democrats and socialists were destroying the nation."[1]  Even if Democrats were for government ownership of the means of production (i.e., companies), which is socialism, it does not follow that those Democrats were also attempting to sabatage the U.S. in its foreign relations. Especially given Lugar's expertise in that area, working across the iasle would only make sense. Nevertheless, Mourdock saw a link. 
"Today," he said, "we see the Obama White House and we see a Senate chaired by Harry Reid that's doing everything it can -- though perhaps not intentionally -- to turn our dreams, to turn our great national hope and our dream into the nightmare of ever-growing government, to make us that … western European-style nation,’ Mourdock said. ‘Just yesterday, France elected a socialist,’ he continued. ‘There are those I'm sure in the administration and in the left side of the Democratic Party that were cheering for that. But we're not going to stand for that in Indiana because the supporters of Barack Obama are not going to win!”[2] In other words, Mourdock expected the Democrats to cheer on and perhaps even aid "socialist" governments around the world, the spread of which could isolate the U.S. and the related interests of private property. In 2019, for example, the World Trade Court ruled against the E.U. for having unduly (i.e., unfairly, in terms of free trade) subsidized Airbus. The government ownership of a company goes beyond such subsidization of a corporation like Airbus, which, as of 2019, was owned by EADS, which in turn was owned by a mix of private companies and a few E.U. states. 
What about those supposed socialist countries? To be sure, Francois Hollande ran under the Socialist Party banner. However, the “socialist” policies that he had campaigned on were redistributionist. He did not advocate that the state own more of the means of production. Hollande was redistributionist in that he suggested that la dette (government debt) that Sarkozy had doubled should not be cut only by austerity (i.e., budget-cuts), which hurt the poor disproportionately; rather, the rich should be taxed what they had been taxed before the top tax rate was lowered. 
In fact, Hollande was in a position fresh from his victory to push for federal (i.e., E.U.) economic stimulus spending to complement the federal austerity programs in debt-ridden states, including Greece, Spain, Portugal and Ireland. Using tax increases and budget cuts to reduce government debt is hardly socialism. 
So, Mourdock's lack of knowledge on socialism as an economic system as well as on European governments, combined with his refusal to reach across the aisle, were misplaced, and thus not worth the loss of Lugar's expertise in foreign policy. 

1, Michael McAuliff, “Dick LugarLoses to Tea Party’s Richard Mourdock in Indiana Republican Senate Primary,” The Huffington Post, May 9, 2012. 
2. Ibid.

Tuesday, October 1, 2019

The European Commission as Political

The European Commission, the E.U.’s executive branch, has been known for being a technocratic institution. Yet in drafting regulations, imposing fines, and negotiating trade deals, the Commission is much like the U.S.’s executive branch. In fact, high-level appointments must secure the approval of the legislature through confirmation hearings. Yet the top of the U.S. executive branch, the White House, has been known for being ideological and definitely political. That that executive branch also promulgates and enforces regulations can be easily missed. That the E.U.’s executive branch is also political has definitely been missed or dismissed in the ideological illusion that the E.U. is merely a technocratic international organization rather than a federal system of governments. This illusion could finally be seen as such after the election of Ursula van der Leyen as President of the European Commission in 2019.


Her announcement of new titles for commissioners sparked ideological controversy because the titles themselves are inherently ideological. One commissioner would be “for Democracy and Demography,” while another would be “for Protecting our European Way of Life.”[1] Besides the inappropriateness of using office titles as ideological placards, the insertion of ideology at the top of the Commission must have surprised many Europeans who were under the ideological impression that the E.U. was merely an international technocratic organization rather than a federal system with a federal government.

The “once technocratic institution,” the Commission, was, according to van der Leyen a “geopolitical commission.”[2] Finally an explicit acknowledgement is made that the E.U. is geopolitical, and thus a federal government, rather than just a trading “bloc.” That The New York Times consistently applied this label to the E.U. in spite of the fact that it had not only an executive branch, but also a legislative one (The European Counsel and the European Parliament) and a judicial one (the European Court of Justice) boggles the mind. Unthinkingly swallowing the European illusion has effectively enabled it, and thus forestalled the day when Europeans would finally realize what they have created.

[1] Valentina Pop, “EU’s New Boss, Invoking ‘European Way of Life,” Sparks Partisan Brawl,” The Wall Street Journal, September 19, 2019.
[2] Ibid.