__ The Senate Financial Overhaul Bill __ For Consumers, It’s a FinReg Flop!


On April 19 I wrote an article critical of an amendment proposed by Senate Durbin to the Senates’s FinReg bill which would have capped the interest rate ceiling on consumer loans at 36%. Senator Durbin said that he tried to pick an interest rate high enough that even the biggest banks could not object.  Guess what?  They objected.    

Senator Durbin did not get his way with his 36% interest rate cap.  What the American public got instead was a kick below the consumer belt by Senate Republicans.    According to Reuters, the Senate  gave a 35 -60 thumbs-down vote on the Senator Sheldon Winehouse amendment, that could have put the brakes on predatory consumer loan lending.  What the Senate did for consumers was to let the large national banks, which do most of the credit card business in the United States, continue to be allowed to charge basically any rate anywhere that they wanted.  Their rate limitations, to the extent that there will be any, will largely be determined by the laws of corporate friendly Delaware and South Dakota which, essentially, have no interest rate limitations for consumer loans.  States will not be allowed to set their own interest rate caps within their states on lending done by national banks.

I haven’t looked at the analysis of the Senate vote, but I think I can safely stick my neck out and say that the 60 votes were overwhelmingly Republican ones.  If they want to vote their conscience for special big banking interests, then so be it.  But voting against an issue that gives the states more regulatory rights doesn’t quite jibe with the Republican Party line – that is, unless it is convenient to do so.  The Winehouse vote just confirms that the Republicans use state’s rights’ issues only when it is politically expedient (Bush-Gore comes quickly to mind).  I guess that there isn’t a constitutionally based principle in their bodies when it goes against their Wall Street buddy-banks.  It’s sickening. 

 Unless the House of Representatives does something drastic in the reconciliation process (don’t get your hopes up), the die is cast.  Of course, that means that we can look forward to endless TV commercials; mail solicitations will start rolling again; and people will continue to get fleeced.  But according to 60 Senators, that’s OK.  In fact, not was it only OK, they pressed the button that will make it happen.

I wouldn’t count on increased disclosure on credit card statements to do much of anything to alter the consumer loan landscape.  You don’t have to put in capital letters on the front of someone’s credit card statement that they will likely get in financial trouble.  They already know it.



President Obama has appointed an eminently well-qualified nominee in Elena Kagan to be the next Justice on the United States Supreme Court.  It is a bit odd that she has had aspirations her entire life to become a member of the Supreme Court yet, for some reason, chose a career path where she has never actually been a judge.  One cannot help but wonder why her career has meandered in so many directions, but I am sure we will get an answer during the nomination hearing.  No doubt there will be many questions and musings on the matter.  At this point, I guess it would be better to stay curious and refrain from judgment.

The last 5 failed nominations to the Supreme Court were all made by Republican Presidents. Nixon had failures with Clement Haynsworth and Harold Carswell primarily because of the nominees’ tracks records with respect to civil and women’s rights.  Reagan had a notorious and somewhat unexpected  failure with Robert Bork for two reasons – his advocacy of constitutional originalism and his role as acting Attorney General in the firing of Archibald Cox in the Saturday Night Massacre.  Reagan also had a failure with Douglas Ginsberg, whose name was withdrawn, after he confessed to having smoked some dope back in his student days.  And, finally, George W. Bush had a failure with Harriet Miers when it was widely determined that, in addition to having never been a judge, she was simply unqualified for the position.

With media scrutiny so intense since the days of LBJ, one wonders why the vetting process for High Court nominees has been so poor.  One would naturally think that a Supreme Court nomination is an act that the Office of the President would want to spend some considerable time planning – for example, similar to national disaster relief contingency plans.  On the other hand, maybe that is exactly why it doesn’t work so well.   Judging from the national responses to 9/11, Katrina, New Orleans, and various other calamities, the Executive planning process has not worked so well there either.  On the other hand, maybe a nomination is a different planning animal entirely.  It could be that until the spotlight is truly on someone, you just never know what is going to happen – either from within or from beyond.

The advice and consent process that we have all come to be so familiar with, particularly since the Bork days, could best be described as an iterative and monotonous one and not purely a contentious one.  The process never seems to get re-scripted; it just seems to be re-played over and over.  The Senate Judiciary Committee questioning process itself has been honed to almost a precise formulaic set of questions – many probative, some just plain annoyingly unanswerable.  In the former group we can expect interrogatories on judicial activism, legislative power,  due process, the Establishment Clause, and federalism with respect to the Commerce Clause and the 14th amendment.  In the latter, we will hear probings about gay rights, abortion, campaign financing, and other constitutional issues likely to be confronted by the Court now or in the near-term.  Bottom line is that the nominee needs to be well-prepared in constitutional theory and case-law, show a calm and even judicial temperament, and show some signs of just being oneself  (but not overly so).

Luckily for this nominee, the Senate has been (and continues to be) overwhelmed by financial matters of immense proportion.   Having been through the throes of the financial meltdown, TARP, auto manufacturer bailouts, health care reform, and the synthetic derivative mess with Goldman Sachs and the investment banking bunch, the nomination process might be a welcome relief for the Senate to take a break to do something that it knows how to do.  To say that financial oversight has not been the strong suit of the United States Senate is not an understatement.  That has been fully confirmed during the recent hearings of the Senate Permanent Subcommittee on Investigations.  On the other hand, it could cut the other way for nominee Kagan.  Some of the Senate’s other political problems might roil over to her hearing.  Let’s hope that will not the case.

Just for fun, how about some predictions:

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Senator Levin: Boy, that Timberwolf was one shitty deal.              

Senate Permanent Subcommittee on Investigations (2010)

Caractacus Pott: And after that, Vulgaria became a free country.

                                                Chitty Chitty Bang Bang (1968)

I have a weakness for watching special televised hearings conducted by the United States Senate.   I don’t know exactly why.  Maybe it’s because the choreography is so predictable regardless of the dancers.  Maybe it’s because I like feeling in the thick of the great debates in American politics while  just sitting in my robe eating donuts.  Maybe it’s because I truly believe that these shows are the ne plus ultra of caricatured theatrical debate.  Or, maybe, it’s because I continue to have hope that America can work out its problems right in front of my eyes. 

Other than the news media, I don’t really know how many other people share my interest.  After watching a good Senate hearing session, I am usually fired up enough to want to discuss it with somebody – really anybody.  I usually discover, however, that most people I know either didn’t have the time to watch or just plain didn’t care to watch.   Most of my follow-up Socratic dialogues, therefore, are simply my own loud rejoinders directed to the TV commentators.  

The Goldman Sachs hearing was, to my mind, one of the best hearings of all time.  It was delivered in three episodes, all of which occurred in one day (I understand that there is a lot of other work being conducted in the Senate).   For whatever reason, the Senate wanted to get this over in a hurry – a slash, burn, and get out of there sort of thing.  I believe that they had a good reason for this – namely, that the longer they questioned their witnesses, the more that they would show how little they knew about Wall Street and its machinations.  They judged that just about perfect.

One of my favorite portions of the debate was a segment of questioning by Senator McCain.  He went into a dramatic trance, slowed the meter of his voice down to where it just put you on the edge of your chair . . . waiting.   It turned out to be a wait in vain.  While he had some pointed questions that were building suspense about a particular deal, he didn’t have any idea what it was about when the Goldman witness interrupted his line of attack.  McCain, suddenly realizing that he was on the verge of confirming that this line was just a brainless monologue,  awkwardly stopped and yielded back to the Chairman.  It was a pitiful performance from him, but we’ve seen it for years.  Remember when he stopped his presidential campaign just before a scheduled debate to buzz into Washington in the midst of the financial meltdown to intervene in the crisis.  When he arrived at the table, he just sat there like the lightest of the lightweights – without so much as a clue about what was happening and what needed to be done.   

The attention-getting highlights though were provided by the Chairman of the Subcommittee, Carl Levin.  Senate decorum suffered considerably when he repeatedly uttered the “sh” word – over and over again.   I think it was entirely proper for him to use the word once, when he quoted the Goldman email the first time.  But to repeat the word again and again?  I am not sure if there has been a definitive count of the “sh” word that he used in the hearings, but some have said it was 13 times.  I’ve also read 30 to 50.  I listened to most of the hearing and would guess that the count is closer to 13, but it could have been 50.  It was way too many times more than once.

There was another word that was repeated ad nauseum during the hearing.  This one did not come from the Senatorial side but, instead, from the Goldman people.  The word “risk” was used by Goldman so often that it got to the point where I though some smart Senator might call them on it.  Over and over again Goldman interjected the word.  They used it euphemistically in every conceivable way.  None of their clients ever lost money – they just assumed too much risk.  Goldman never made any money – they just reduced the risk of their negative positions.  As a market maker, Goldman matched the risk that one client wanted to assume with the risk of another.  And if one client’s risk could not be matched with another client, then Goldman themselves assumed the risk – that is, until they decided to offload the risk and “get closer to home.”  You got the feeling from Goldman that it was a caretaker of  risk for the world, simply caught as an arbitrageur in the midst of an extremely volatile and risky situation.  One of Goldman’s main witnesses was, in fact, their head of their risk management department.  Wow, did the Senate Committee person responsible for that witness selection get suckered in advance by Goldman’s risk rhetoric, or what? 

All and all, Goldman used the word “risk” hundreds of times.  How could anyone not notice this?  Not one of the Senators did.  They were too wrapped up in the scripts prepared by their staffs.  There was not a thoughtful questioner in the entire bunch of Committee members.  If any of them would have just listened carefully to something other than their own babble, they just might have been able to penetrate the digression and repetitive shield that Goldman had erected.  But, not a chance.  The hearing turned out to be a marathon – but a marathon that was unnecessarily run in circles.

Now – don’t you wish you would have watched?

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