The Financial Oligarchy is Winning

Despite the fact that the U.S. banking and financial sector engaged in illegal, unethical, and criminal behavior which blew up the national and global economy, the weak regulatory response known as Dodd-Frank is being systematically defanged by Congress. As reported in the New York Times,

In the span of a month, the nation’s biggest banks and investment firms have twice won passage of measures to weaken regulations intended to help lessen the risk of another financial crisis, setting their sights on narrow, arcane provisions and greasing their efforts with a surge of lobbying and campaign contributions.

The continuing assault on the 2010 Dodd-Frank law has achieved remarkable success, especially compared with the repeated failures of opponents of another 2010 law, the Affordable Care Act.

 This has been accomplished not only by Republicans but also with the support of a significant number of Democrats. And, also reported and consistent with the long-running pattern, the Obama administration has been complicit in allowing the financial sector to roll back the minimal progress

Proponents of regulation say that they are badly outgunned by an army of Wall Street lobbyists, and complain that the Obama administration has been too weak in its response.

“The president was slow in drawing the same kind of line on financial reform that he did on health care,” said Barney Frank, the retired chairman of the House Financial Services Committee who helped write Dodd-Frank.

None of this should be surprising, if distressing, since the financial sector essentially serves as a ruling elite in determining political-economic policy. Not only were campaign contributions from the financial sector among the largest supporting Obama’s election and re-election, those appointed to oversee and re-regulate the financial sector came from the institutions that contributed to the crisis.

It is worth returning to the seminal piece by the former International Monetary Fund (IMF) official Simon Johnson, who wrote in his Atlantic piece titled “The Quiet Coup” that the U.S. is ruled by a “financial oligarchy”:

… elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

…Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.

If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform.

Unfortunately, the financial oligarchy today is more concentrated and more powerful than ever.