Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Detroit News, the Guardian, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndrewKroll.

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Chamber PR Helping its Foes?

| Thu Mar. 11, 2010 3:08 PM PST

The US Chamber of Commerce, a huge, controversial player in the battle to reform Wall Street and beef up consumer protection, launched its latest attack on financial reform efforts today, criticizing a proposed small tax on financial transactions. The tax would take something like 0.1 percent or 0.25 percent of financial transactions such as stock trades, and could use those funds to offset the cost of, say, health care reform or to lower the federal deficit. One liberal policy center said the tax could raise $100 to $150 billion a year.

Today, as part of its PR push, the Chamber released a study (PDF) claiming the tax would damage US markets and hurt Main Street by reducing investments and retirement savings. "This proposal would starve cash-strapped companies and cripple our efficient, transparent, and liquid markets," said David Hirschmann, president and CEO of the Chamber’s Center for Capital Markets Competitiveness. "The good news is that a majority of Americans agree that it’s a bad idea." (Mind you, that "majority of Americans" claim is based on poll of 800 people; everyone can agree that 0.000002 percent of Americans speak for all of us, right?)

Asked about the Chamber's latest PR move, Dean Baker, an economist at the left-leaning Center for Economic and Policy Research who favors the tax, actually thanked the Chamber for releasing the study and making the conclusions it did. For instance, one of the report's biggest conclusions is that the new tax would raise trading costs to what they were in the 1980s—something that Baker says is far from a bad thing. He also said the poll accompanying the report (PDF) actually shows there's a fair amount of public support for the tax. 31 percent of respondents said they thought the tax was necessary because of the damage big financial institutions did to the economy—and that's with polling language clearly intended to sway people against the tax. Tweak the questions a bit, and you might've seen majority support for the tax. "I'm kind of happy," Baker says. "They're doing our work for us. And we didn't have to pay anything."

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6 Things to Look For in Dodd's Wall St. Bill

| Thu Mar. 11, 2010 8:48 AM PST

There's light at the end of the tunnel for Chris Dodd's long slog toward a new Wall Street crackdown. In a statement today, Dodd announced he's going to release a draft of his financial reform legislation on Monday. "Over the last few months, Banking Committee members have worked together to try and produce a consensus package," Dodd said. "Together we have made significant progress and resolved a many [sic] of the items, but a few outstanding issues remain."

The announcement from Dodd signals that the Connecticut senator's efforts at writing a bipartisan bill have failed. In a news conference soon after Dodd's announcement, his GOP negotiating partner, Sen. Bob Corker (R-Tenn.), said Dodd's announcement was "very disappointing" and blamed a number of factors for derailing the bipartisan talks. "There's no question the White House, politics and health care have kept us from getting to the goal line," Corker said.

Since Dodd released an early draft of financial reform legislation last November, he and other members of the banking committee have been embroiled in closed-door negotiations over issues like a new consumer protection agency, ending the government's implicit bailout guarantee for failing banks, and creating the power for regulators to unwind or "euthanize" too-big-to-fail and too-intertwined-to-fail banks. The fate of consumer protection, in particular, has become a lightning-rod issue in the financial reform talks between Dodd and Corker. Dodd has insisted he doesn't care where a new consumer-protection agency is housed—the Federal Reserve and the Treasury are two potential locations—so long as it's "independent," meaning having a presidentially-appointed leader, independent budget, and rule-writing and enforcement powers. GOPers, however, have pushed back against that independence, arguing that any new agency shouldn't have enforcement authority.

How the consumer protection battle plays is just one key issue to look for in Dodd's draft. While you're at it, here are five more to watch for on Monday:

  • Payday lenders: Corker, whose home state of Tennessee is a stronghold for these loan sharks, reportedly pushed to gut oversight of payday lenders. The House's financial reform bill, passed in December, included no such exemptions, and consumer advocates say no new set of comsumer protections is complete without a crackdown on these guys.
  • Bank oversight: The latest proposal to leak out of Dodd's talks has been letting the Federal Reserve keep oversight of the 23 biggest banks—those with $100 billion or more is assets—and creating a super-regulator to oversee the remaining banks, stripping the FDIC of its power and possibly merging several other regulators. The House's plan wouldn't create the super-regulator, but would merge two existing regulators and keep some oversight with the Fed.
  • Banning risky "proprietary trading": There've been rumblings that Dodd might include the "Volcker Rule"—a ban on proprietary trading, or when taxpayer-insured banks engage in trading for their own gain (not their clients') or invest in casino-like operations such as hedge funds and private equity funds. The House empowered the Fed to ban this risky trading, and a Senate bill announced yesterday would prohibit it as well. It's unclear whether we'll see a similar ban in Dodd's bill.
  • Fed as bailout king: In the recent financial crisis, the Fed stepped in to rescue the housing markets and essentially backstop the country's banking system and credit markets. There's been little to no discussion coming out of Dodd's talks on whether he'll put a cap on the Fed's bailout power; the House bill would set a $4 trillion cap and add new safeguards when the Fed wanted to flex its bailout muscles.
  • Derivatives in the dark: Dragging the $300 trillion over-the-counter (OTC) derivatives market onto exchanges and into the light of day, where trades and prices are visible, is another key reform issue. A Democratic Senate aide said last month that the Senate could include an exemption in its derivatives regulation that would essentially exempt two-thirds of the OTC market, a move that would let off many institutions who use derivatives for speculative reasons, not purposes of risk management or hedging. How Dodd's new bill tackles the derivatives question will be a telling sign of whether he truly wants to enact tough reform, or whether he's offering mere window dressing.

Dems: Ban Banks' Gambling

| Wed Mar. 10, 2010 11:08 AM PST

Senators Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) are the latest lawmakers calling for a tough crackdown on Wall Street banks engaging in risky, leveraged betting with their own funds, or what's called "proprietary trading." Levin and Merkley told reporters today that they're introducing a new bill, the Protect our Recovery through Oversight of Proprietary (PROP) Trading Act, that would mostly ban taxpayer-insured banks from engaging in proprietary trading, prohibit them from sponsoring hedge funds and private equity funds, and impose new limits on banks' financial reserves to cushion for losses. The senators said the goal of the legislation, which is co-sponsored by Senators Ted Kaufman (D-Del.), Sherrod Brown (D-Ohio), and Jeanne Shaheen (D-NH), is to prevent banks insured with taxpayer dollars from imperiling the economy and requiring government bailouts, as they did in 2008 and 2009. "It’s important that we not allow ever again this kind of threat to our financial system," Levin said, "and in order to do that we would put restrictions on these non-banking institutions that are too big to fail as to what kind of proprietary trading they could engage in."

In many ways thre bill resembles the White House's "Volcker Rules," backed by President Obama and former Federal Reserve chair Paul Volcker, which would also ban proprietary trading. But critics of the White House's plan say it isn't likely to solve the problem its supporters claim it will. This kind of risky internal trading, they say, is a small portion of banks' activities, and thus a minor part of the problem. In his statement to reporters, though, Levin countered that banks' financial reports "tell a very different story." He pointed to statements and regulatory filings from Bank of America, Goldman Sachs, and others showing that these institutions suffered far greater losses from prop trading than they've let on, and that several of these banks have previously said half their earnings have come from prop trading.

Bailed-out Banks on K St. Spree

| Wed Mar. 10, 2010 8:35 AM PST

Bailed-out automakers like General Motors and Chrysler and their banking brethren who the government rescued in 2008 and 2009 are on a K Street shopping spree. As The Hill reports today, those companies that pleaded for billions in government funding to stay afloat are now hiring the top lobbying firepower that Washington has to offer, making sure their voices are heard as Congress tackles a spate of new bills like comprehensive financial-reform and health-care legislation.

General Motors, for instance, has hired three big lobbying outfits—Public Strategies, Navigators, and Dutko Worldwide—to press lawmakers on issues such as tax reform and auto safety, the latter a hot-button issue given the recent hearings in Congress on Toyota's safety woes. And two big-name players in the banking world—Goldman Sachs and Morgan Stanley—have ramped up their lobbying arsenal as well in the past two or three months. In December and January, Goldman hired the Harold Ford Group and Gibson Dunn & Crutcher to lobby on financial-reform legislation, and Morgan Stanley retained the law firm Sonnenschein Nath & Rosenthal in January to work on financial-reform—an issue that could have seismic effects on how the two firms and the rest of Wall Street do business.

This ramp-up of lobbying firepower, especially among the big banks, almost surely means a weaker financial-reform bill will emerge from Congress. As our own Kevin Drum reported earlier this year, Big Finance's foot soldiers in Washington pretty much own capital already. And if Goldman and its allies are now beefing up their ranks even more, you can bet they'll win more than a few victories in watering down any effort, however well-intended, to rein in the big banks.

Corker Shills for Payday Lenders

| Wed Mar. 10, 2010 6:16 AM PST

Sen. Bob Corker (R-Tenn.), the top GOP negotiator in the Senate's arduous financial-reform talks, is doing the dirty work for one of the dirtiest of financial industries: payday lending. Corker, the New York Times reports today, is pushing hard to throw a loophole in Senate banking committee's bill for the payday lending industry—essentially a form of loan sharking—to blunt any new oversight. The move sets up a potential showdown with Sen. Chris Dodd (D-Conn.), banking committee chair and leader of the financial-reform talks, whose November draft of legislation empowered a new, independent consumer-protection agency to crack down on payday lenders, among other non-banking institutions.

According to the Times, while a consumer agency tentatively agreed to by Dodd and Corker might be able to write new regulations for payday lenders, it would have to consult with other regulators to enforce those rules. Consumer advocates have repeatedly said gutting a consumer agency's rule-enforcement power would kneecap the new agency and limit its usefulness. And if the Senate goes lightly on the payday lending industry, it's likely to set up a battle between the House—whose bill last winter called for new oversight of the industry—and the Senate when the two try to merge their bill.

Corker's support for the payday lending industry is no surprise given the power the industry wields in his home state. The main trade group for payday lenders, the Community Financial Services Association, was founded in Tennessee in 1999, and has donated $1,000 to Corker. Corker has also received thousands more in donations from other heavy-hitters in the payday lending business, like $6,500 from the founders of Advance America, a leading payday lender. And overall, the industry's lobbying efforts almost tripled between 2005 and 2008 to maintain lax regulation of their industry, while at the same time business is booming for payday lenders. Especially with all those unemployed workers to prey on.

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