As we pointed out, the representative from the Upper East Side, Carolyn Maloney, in being maneuvered into position in an effort to displace Maxine Waters, who would otherwise become either the ranking member or the chair of the House Financial Services Committee, depending on which party wins this fall. The idea of Waters, who is acutely skeptical of bankers and not afraid of making a ruckus, having even more influence on a key committee is something financiers are keen to stop. (Full disclosure: I’m a Waters fan simply by virtue of her remark: “The Tea Party can go to hell. I intend to help them get there.”)
This is typical of the bank lobbyist line on Waters:
“Most of the international banks would start folding their tents” if Ms. Waters were to became chair of the committee, said John Allen James, the executive director of Pace University’s Center for Global Governance, Reporting and Regulation and a former consultant for McKinsey. “She is anti-bank. She doesn’t like anybody that wears a suit and a tie. She yells at them, and says why aren’t you doing more to address the housing problem, why aren’t you doing more to raise the boats of the less fortunate. It is a total misunderstanding of what capitalism is.”
The idea that allies of the banking industry can claim these wards of the state bear any resemblance to capitalist enterprises shows that they are either shameless liars or completely divorced from reality.
By contrast, it is pretty hard to imagine that Carolyn Maloney would do anything that would seriously inconvenience her constituency, which is chock full of top Wall Street earners. But since she is part of the Democratic Party, and the Democrats are going through the motions of being tough on Wall Street, she has to make credible-looking reform gestures.
On Sunday, Alexis Goldstein, one of the lead authors of the well-received Volcker Rule letter by Occupy the SEC and Bill Black faced off against Maloney on the Chris Hayes show. The focus was the Jumpstart Obama’s Bucket Shops Act, which pretty much everyone who knows anything about securities markets, including the head of the SEC, Mary Shapiro. hates. (Note Alexis was NOT speaking as a representative of Occupy the SEC but in a personal capacity).
You need to watch the full segment to get the effect, but Maloney starts out by saying that the JOBS Act probably won’t create many jobs, but she was nevertheless getting complaints about how costly it was for “small” businesses to hire auditors (earth to base, if they are public, they would not qualify as “small” in most people’s book). Goldsmith devastates Maloney with her command of the bill, pointing out that it covers companies of up to $1 billion in revenues, that the tech companies its backers keep invoking have VC firms ready and willing to invest, and the new format well be used by PE firms flipping companies they had taken private back to public investors. By the end, Maloney is telling Goldsmith to send her suggestions for improved legislation and she’ll put it forward (I’ll believe her sincerity when I see action).
As an aside, Goldstein’s schoolgirl look is fantastic protective coloring. I’m sure the people who are up against her have no idea about what is going to hit them until it it too late.
I want to focus on another issue, though, the way Maloney gives a completely misleading stump speech on how gung ho she is on derivatives reform. This is an overview of the issue, from the New York Times late last year (emphasis mine):
Dodd-Frank requires it to oversee so-called swap execution facilities that will trade or process derivatives transactions. Late last year, in the interest of price transparency, the commission proposed that entities applying to be S.E.F.’s must agree to provide market participants with the ability to post prices on “a centralized electronic screen” that is widely accessible. One-to-one dealings by phone would no longer be allowed.
Those on Wall Street who favor the status quo are upset, and have found some sympathy in Washington.
Representative Scott Garrett , a New Jersey Republican, has teamed up with Representative Carolyn B. Maloney, a New York Democrat, to introduce the Swap Execution Facility Clarification Act. It would bar the Securities and Exchange Commission and the C.F.T.C. from requiring swap execution facilities to have a minimum number of participants or mandating displays of prices. Both mechanisms promote transparency…
Because Mr. Garrett opposed Dodd-Frank, his efforts to stop the proposed rule are not surprising. But Ms. Maloney supported Dodd-Frank, so I wondered why she had lent her name to the bill.
In an interview last Wednesday, Ms. Maloney said she had heard concerns about the C.F.T.C. rule from financial firms in her district. “I just felt like that Congress intended multiple competing trade execution platforms and that included voice,” she said. “If you say you can’t have any voice, aren’t you limiting the modes of trade execution?” She also said she was concerned about job losses on Wall Street.
At the end of the segment above, Maloney says she was for regulation and tried supporting Brooksley Born on trading commodities on exchanges. Goldstein pounces on her and asks why she is sponsoring a bill that would water down Dodd Frank on precisely that issue. Contrast this speechifying with her co-sponsorship of the bill. See this extract:
For more of the pros and cons of pre trade price transparency, see this post. What I find most interesting is the closing comment is that the debate is serving to drive more OTC dealers out of the business and to regulated futures exchanges. That’s a terrific outcome if you are in favor of more transparency and less systemic risk.
Matthews tried revisting the topic after the break, but he spent over 2 minutes explaining the issue and Maloney then ran the clock out.
The bottom line here is that anyone who supported the heinous JOBS Act and fronts for bank efforts to water down an already not-strong-enough Dodd Frank is clearly balancing her constituents’ interests to favor those with the biggest checkbooks. And it isn’t hard to guess who they are.