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Dodd-Frank: Wall Street Won The Lobbying War

Though you may hear Wall Street’s puppets in Washington howl about how terrible Dodd-Frank is, the reality is the banksters ultimately won in the struggle to rein them in according to a report by ReutersThe report affirms what almost everyone said at the time – kicking the rules for Dodd-Frank from Congress to regulators meant Wall Street would dilute and thwart most of the substantive regulations.

Despite the near universal calls for more oversight of Wall Street after the financial crisis, financial industry lobbyists have worked effectively behind the scenes to allow the very financial instruments that brought about the 2008 financial crisis to remain unregulated and out of sight.

In some cases Wall Street lawyers such as Keith Higgins have literally help write the rules by being appointed to SEC committees. The result requires little speculation.

“What’s playing out is exactly what we were worried about,” said Sheila Bair, former chairwoman of the Federal Deposit Insurance Corp. “Most everything is going into these private markets where regulations require little visibility of what’s happening.” 

With their access to off-balance-sheet entities largely preserved, the banks continue to hold vast sums of securitized loans offshore and off their books. Together, JPMorgan Chase & Co, Bank of America Corp, Citigroup, Wells Fargo & Co, Goldman Sachs Group Inc and Morgan Stanley hold nearly $3.3 trillion of securitized loans in off-balance-sheet entities.

Residential mortgage-backed securities offered on the private market increased to 78 percent of all new offerings last year from 46 percent in 2013 according to Reuters. In other words, here we go again.

The fundamental problem in all of this is really – surprise, surprise – a political system dominated by money. Congress did not kick the rule-making to regulators by accident, it was what the big contributors of both political parties wanted them to do. While the pressure was on politicians to be tough on Wall Street in the spot lights of public hearings, the ability to toss the decisions over how (or whether) to restrain Wall Street to regulators let them please their donors without obviously betraying their constituents.

The response from progressives to Wall Street’s criminality has been to try and create transparency, but that is easily outmaneuvered in a city run by game players. The real challenge is to prevent the special interest bribes in the first place.

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Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.

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