Hensarling’s Nihilist Choice
Since Congress enacted the Wall Street Reform and Consumer Protection Act in 2010 in response to the biggest Wall Street crash since 1929, the economy has improved. Unemployment is down. Bank loans are rising, even bank profits are setting records.
These facts apparently don’t figure in the legislative nihilism — a rejection of principles — of Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee. In the next few weeks, he promises to reintroduce his monster package of bank deregulation measures from the last Congress, which he dubbed the Financial CHOICE Act. “CHOICE” is not an acronym. Hensarling capitalizes it, perhaps, thinking that shouting a point makes it more forceful. In short, he wants to gut the Wall Street Reform, returning law to the time before the 2008 crash.
The measure he introduced last year kills the Volcker Rule restrictions on bank gambling (instead of loan making). It eliminates reforms on pay that motivated bankers to take excessive risks. It eliminates many of the safeguards designed to prevent another mega-bank bailout. It cripples the Consumer Financial Protection Bureau (CFPB). It adds make-work analysis for bank police agencies designed to paralyze any new rules. And there are more than 200 other derailments. To list the problems is to list the sections of the bill. Rep. Maxine Waters (D-Ca.), the ranking Democrat on the committee, calls it the “Wrong Choice Act.” Sen. Elizabeth Warren (D-Mass), calls it a “big wet kiss” for Wall Street.
And if that 513-page gift to Wall Street wasn’t generous enough, this week he added more than 50 sweeteners. Here are a few:
· It strips CFPB’s the authority of to pursue cases where a lender has used “unfair, deceptive or abusive practices.” This means the CFPB would not have been able to pursue the Wells Fargo case. The bank created nearly 2 million accounts for unwitting customers as part of high-pressure sales quotas. The CFPB’s case resulted in penalties for the bank, restitution for customers who were charged fees on accounts they didn’t want, the termination of the CEO and other managers, and a potential federal criminal prosecution.
· It nullifies a new rule from the Department of Labor (DOL) that requires Wall Street agents to put their client interests ahead of their own interest in commissions. Unsuspecting customers are often steered into inferior investment products that pay the broker more. The Hensarling measure requires that any DOL rule must be substantially similar to one adopted by the Securities and Exchange Commission (SEC). The SEC hasn’t acted on the issue.
· It effectively eliminates the ability of average shareholders of publicly traded companies to submit resolutions for a vote at annual meetings. These resolutions have led to important reforms over the years, such as requiring the chair of the board to be someone other than the CEO. The Hensarling bill would require shareholders to hold 1% of the company in order to submit a resolution. At JP Morgan, this would require a holding of more than $3 billion.
· It prohibits the SEC from adopting a rule whereby shareholders could nominate director for corporate boards that would appear on the ballot. Perhaps one of the most glaring problems in corporate governance is the fact that boards are insulated, and there are only as many candidates as there are board seats. Even though many large corporations have as much influence on the nation as a city, there are no true elections for these boards, even for their shareholders.
Again, to list the problems with these sweeteners is to list them all.
Why can any sentient lawmaker propose or support such a massive mistake?
Wall Street showers political contributions on the members of Hensarling’s committee, and this brimming shopping cart of a bill presumably reflects that. Hensarling himself will complete his tenure as chair at the end of this Congress in 20 months (because of party rules on term limits). He may view this as a bucket list. With the Senate and Trump Administration revealing no granular details about their plans, what Hensarling calls “CHOICE 2.0” might be considered his opening bid on eventual three-way negotiations.
But if only a small fraction of these measures become law, the nation will return to a time before the 2008 financial crash. That’s not a good choice. That’s nihilism.