There is a new report out this morning once again reminding us of the greatest disappointment progressives have in the Obama administration: the lack of toughness in regards to Wall Street. The report, issued by the Campaign for a Fair Settlement (full disclosure: this is a coalition I have helped in various ways since their founding), is probably the most harshly critical analysis yet by a coalition aligned with traditional progressive Democratic groups. The report opens with this damning list of hard-to-dispute facts, and then just goes on from there:
• The Administration has yet to prosecute a single major bank or top level executive for the widespread fraud leading to the system’s collapse.
• Civil penalties have similarly failed to be imposed on top executives, and fines levied against the banks have been so small as to amount to a minor cost of doing business.
• Settlements have left the banks themselves in control of providing relief and restitution to homeowners, giving them credit for cleaning up their balance sheets more than preventing foreclosures.
• Far from showing any signs of having been chastened, the biggest banks are now even bigger, and have successfully slowed down or weakened key elements of the financial reform bills passed in the wake of the collapse.
And signs even early on in the second Obama administration are not encouraging:
• With no mention of Wall Street and the banks anywhere in either his second inaugural speech or his 2013 State of the Union address, the President appears to be wishing the crisis behind him more than addressing its still festering wounds.
• Statements by new appointees like Treasury Secretary Jacob Lew have suggested that they view the “too big to fail” problem as having been largely solved, even as new studies confirm how much the systematically risky banks still benefit from market assumptions that they retain that status.
• Despite having faced withering rebukes for their handling of key cases and settlements, agencies like the Office of the Comptroller of the currency have reignited that criticism in their attempts to amend the disastrous Independent Foreclosure Review settlement, yet again constructing terms far more favorable to the banks than to homeowners and borrowers.
The report barely mentions the Consumer Financial Protection Bureau, the one agency where progressives have generally given the administration better marks, it is mostly dismissive of the good things that passed in Dodd-Frank given how slow regulatory agencies have been in writing rules, and it seems to have little faith in the Residential Mortgage Backed Securities Task Force co-chaired by NY AG Eric Schneiderman- which is notable given that the coalition has historically been relatively close to Schneiderman politically.
So there are two questions that Obama loyalists might ask about this report. The first is whether all this negativity is truly deserved. The second is, why are Wall Street accountability activists so obsessed with this issue?
On the first question, I am sad to say the answer is mostly yes. If I had been writing the report, I would have been more positive about the accomplishments of CFPB, would have given the administration more credit on a few things in terms of Dodd-Frank and a few of the appointments they have made, would have pointed out that Republicans are doing everything they can to starve regulatory agencies of resources, and being the loyal Democrat I am, I would have written the report more diplomatically. But when you add up all the results of the Obama administration’s dealings with Wall Street, it is hard to avoid the fact that life hasn’t changed much at all for the big banks, and that they continue to make money hand over fist while the rest of the economy is stuck in the mood. It is hard to think of any one of the report’s bullets listed above that aren’t accurate. Most damning of all are these absolutely true words in the report’s conclusion:
“The irony in all this is that the areas in which the Obama Administration has been found most wanting by critics for its handling of Wall Street accountability are not the result of intractable differences with a Congress hamstrung in inaction. Instead, they are areas almost wholly under the sole control of the Administration through its executive powers, and carried out largely through cabinet agencies.”
On the second question, the reason Wall Street activists are so obsessed with the lack of toughness toward Wall Street is that Wall Street is ground zero for the rest of the problems in our economy. These monstrously huge mega-banks completely dominate our economy, siphoning off money that might otherwise go into productive uses in the mainstreet economy so that the big bankers can keep speculating away. And when they screw up in ways that hurt the rest of us, even when they blatantly violate the law, the fact that they are never seriously punished means they have no incentive to stop. Until the Obama administration fixes this problem, the rest of the economy is going to keep suffering, and the risk of future financial meltdowns will keep growing.