Tuesday, September 1, 2009

New Chairman Of the Banking Committee Has Previous Experience as Tool of the Banking Industry

Last year when talking about the influence that the banks have in the Senate, Majority Whip Dick Durban said "they frankly own the place". Apparently that wasn't enough:

If Senator Tim Johnson ascends to the chairmanship of the Senate Banking Committee, the biggest winners will be Wall Street, pay-day lenders and credit card companies. The biggest losers: widows and orphans.

No, really.

In late 2006, the South Dakotan spoke out against an effort by his fellow Democrats to cap the interest rates that members of the military pay for short-term loans. "This time it's military. Who's to say it isn't going to be widows and orphans or other sympathetic groups in the future?" he griped in an interview with the American Banker.

That's the man who's next in line to lead the Banking Committee if the current chair, Sen. Chris Dodd (D-Conn.), as expected, vacates the position to take the Health, Education, Labor and Pensions Committee chair left empty by the death of Ted Kennedy.

Meanwhile, Democrats are hoping to push through the most sweeping financial regulations in a generation, including the creation of a government panel that would regulate financial products with an eye toward consumer protection. All of that will have to go through the Banking Committee.

Consumer advocates and backers of a regulation overhaul are deeply concerned that handing the committee to Johnson would be a death sentence for reform.

"He's got a long track record of supporting small predatory loan companies, pay-day loan companies," said one longtime consumer advocate, who spoke on the condition of anonymity because he would have to work with Johnson as banking chair.

. . .

For years, according to letters he's written to trade groups, he's been complimentary of the "voluntary" steps they've taken to establish industry "best practices" - a thinly veiled effort to avoid regulation of interest rates that, on an annual basis, can top 1,000 percent

In 2006, Johnson was the keynote speaker at the annual pay-day lender convention, thrown by the Community Financial Services Association of America.

Johnson's support for pay-day lenders is perhaps only trumped by his backing of the credit card industry.

This past May, arriving at an annual conference of the Online Lenders Alliance - a trade association for a shadowy Internet-based, short-term lending industry that operates largely outside of regulatory oversight - Johnson and Dodd were met by a HuffPost reporter.

"Are you here to congratulate the chairman on his consumer protection victory?" Johnson joked with the reporter, referring to Dodd's sweeping credit card reform that had passed that same day. The reason that was funny: Johnson was the only Democrat to vote against the bill and side with the credit card companies.

"It may exist, but I can't think of a single instance in my ten years when Tim Johnson has supported a consumer protection in the financial services arena. Actually, I can't think of a single instance where he hasn't opposed a consumer protection reform. Although I'm sure such an instance must exist," said another terrified consumer advocate.

Johnson cast a key vote with the banks earlier this year, rejecting an important effort by Senate Democrats to allow homeowners to renegotiate mortgages under the protection of bankruptcy. The "cramdown" measure fell 15 votes short of overcoming a Republican filibuster.

. . .

"Everyone is very nervous about it, because he is definitely very, very pro-industry. As irritating as Dodd can be, carrying their water for years, he's better than Johnson," said another advocate who wouldn't speak on the record for fear of alienating the soon-to-be chairman.

Johnson as chair of the banking committee with Geithner and Summers in the white house creates a trio of suck that would probably kill any type of meaningful financial reform. Although I doubt it was what he intended, I feel like Durbin's outburst will be go down in history as one of the most prescient quotes of our time.

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