Nov. 29, 2017—“Are there any rules for the banking industry that should be made stronger?”, Senator Elizabeth Warren (D-Mass) pressed Federal Reserve Chairman nominee Jerome Powell, during his confirmation hearing at the Senate Banking Committee on Nov. 28. “There are no places that we’re lacking,” he said. He supported rewriting the Volcker role against banks’ proprietary trading, which he chose to call “tailoring its application,” rather than what it would be–weakening the (already weak) rule. He left no doubt that other rules should be “tailored” as well.
Finally, after a lot of hemming and hawing, Powell answered Warren directly: The existing rules are “tough enough.”
In effect, Powell threw down the gauntlet to the Democrats. But will they fight?
Powell, an Obama appointee to the Federal Reserve, is the latest Trump Administration pick for a top position in a Federal agency charged with regulating the nation’s banks. Despite the sharp questioning by Warren, author of the 21st Century Glass-Steagall Act (S. 881), and Sen. Sherrod Brown (D-Ohio), Powell is likely to sail through the Senate and take over from Janet Yellen upon her imminent retirement. He will thus join the newly confirmed head of the Office of the Comptroller of the Currency (OCC) and the head of the Federal Deposit Insurance Corporation as one of the three top regulators of the nation’s banking system.
Both Powell and new OCC head Joseph Otting are now on record as advocating loosening of regulations for the major Wall Street banks. Otting himself comes from the banking industry, and presided over Treasury Secretary Steven Mnuchin’s old mortgage speculation mill bank OneWest. On the Trump OCC’s agenda are the proposals to ease punitive conditions for flagrant lawbreakers like Wells Fargo, and to expand the ability of bank holding companies to control nonbank corporations. Otting will clearly pursue this path.
Powell and Otting join with a host of other Wall Street sharks and promoters who already have been appointed to key positions in the Trump Administration. To review, they include: Steve Mnuchin at Treasury, who has declared his opposition to Glass-Steagall and defended his practices at OneWest; Gary Cohn in the White House, the Goldman Sachs exec who has come out definitively against Glass-Steagall; Jay Clayton at the SEC, who is publicly working to undermine the fiduciary rule which says brokers have to put their clients’ interests first; and Mike Mulvaney, now head of OMB and the Consumer Protection Board, who has succeeded in getting President Trump to break his pledge not to cut Social Security or Medicare, by putting in the President’s budget $64 billion in cuts to the Social Security Disability program. And that’s just for starters.
Given that Wall Street is already bloated with speculative paper (especially derivatives), creating bubbles that are widely projected to be headed for a fall, this push by the Trump Administration spells disaster. Yet the Democrats running the party continue to propitiate Wall Street money, run roughshod over the huge section of the party that voted for Sanders in 2016, and eschew the one major measure, Glass-Steagall, which could cut off the speculators, and prepare the way for a real economic recovery based on production-linked credit.
When Franklin Roosevelt was faced with such a Democratic Party leadership in 1932, he went to war against it, mobilizing on behalf of the “forgotten man” and ultimately winning support to save the nation. Should leading Democrats choose to follow such an FDR pathway, the situation is more than ripe for averting the horrors that otherwise are on the horizon.
This is not a party issue. It goes back as far as our First Treasury Secretary Alexander Hamilton himself, who famously took on Wall Street speculators as “unprincipled Gamblers,” and called for “Contempt and Neglect for those only interested in money.” Hamilton’s financial system was geared toward generating credit for building the nation, and he did his best to crush the speculators who threatened that system. His tradition was carried forward by Abraham Lincoln and FDR, both of whom did the most of any Presidents to turn our nation into an industrial superpower.
The nation desperately needs those Democrats who will seize this FDR moment, and rally the nation.
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Tags: banks, Elizabeth Warren, Federal Reserve, Franklin Roosevelt, Trump Administration, Wall Street