Matt Stoller is a fellow at the Roosevelt Institute. You can follow him on twitter at http://www.twitter.com/matthewstoller
Did you know that most international banks would leave America if Congresswoman Maxine Waters became the Chairwoman of the Financial Services Committee in the House of Representatives? Apparently, that’s what the financial services industry is saying. An expert at Pace University and former McKinsey consultant named John Allen James actually argued this in an article that was breathtaking in its viciousness. He claimed that Waters, a sitting Congresswoman for over twenty years, simply hates people in suits and ties. That’s how arrogant the industry has become.
There’s a reason for the hyperbole.
Last month, Yves highlighted this article, which technically was on the coming fight between senior Democrat Maxine Waters and senior Democrat Carolyn Maloney over the top spot on the Financial Services Committee now that the bank-friendly Barney Frank is retiring. Maloney, of course, is the driving force behind several initiatives to deregulate Wall Street, including the JOBS Act (which Alexis Goldstein took down in Maloney’s face on Up with Chris Hayes). She also pushed a bill through committee to get rid of a significant derivatives regulation by redefining a transparent public swaps exchange as two guys talking on the phone. Maloney as ranking member of the Financial Services Committee would be a victory for the New Democrat caucus and its banking allies. Waters, of course, carries her own baggage. She is under an ethics cloud, which had dragged on for years inconclusively (but I suspect will wrap up without consequences). She is widely hated by the financial services community, and she supported problematic policies around Fannie and Freddie in the 1990s and early 2000s.
Still, how would Rep. Waters do as ranking member? Or let’s say the Democrats take the majority (unlikely but possible), how would she do as Chair? I suspect we’d see one thing we never saw from a Democratic Financial Services Committee – a subpoena. My experience with Waters has two parts – I was with her when she stumped against the pro-war Democrat Joe Lieberman in a Senate primary in 2006, something Democrats simply never ever ever ever do against each other. Ever. But she did it. And I saw her work on policy responses to the financial crisis, focusing on low income housing, foreclosures, and a bit on derivatives (the New Dems really carved that out as their own). Her record of hearings is clear as Chair of the Housing Subcommittee – she wanted to fix HAMP and deal with foreclosures. She opposed Larry Summers as a possible candidate for the World Bank Presidency, and is one of the more aggressive skeptics of the IMF.
She also tried to bring the foreclosure fraud to light. In late 2010, there was a set of internal and external meetings in the Financial Services Committee on the concept of foreclosure fraud, securitization issues and the housing crisis. This series crystallized the issues, brought forth a series of experts to testify, and put the banking industry on the spot. While too late to have a legislative impact on the crisis, these forums served as a way to focus the unfolding scandal of robo-signing and teach the press and judges that the problem was real and taken seriously by elite lawmakers. The one open hearing was held late in 2010. The person who spearheaded the charge for these hearings was Rep. Maxine Waters, using her platform as the Chairwoman of the Housing Subcommittee and her staff to drive an educational campaign inside of Congress.
Most people know her for ethics quandary, or Fannie and Freddie support, or because she’s black and aggressive, an archetype that white American males in finance really do not like. But she has a record, and while mixed, it’s clear that she would be a different kind of committee leader than we’ve seen in the past few years.
This is why the banking industry and Maloney’s staff are engaged in a low-level, bitter, and important fight over the committee positioning. It’s hard to beat Waters, because the Congressional Black Caucus would get extremely angry at such an obvious attack on their institutional prerogative granted by seniority. But there are probably internal deliberations at party fundraising committee and with the Democratic leadership where lobbyists are letting the Democratic elites know just what a ranking member or Chairwoman Waters would mean to fundraising. And of course, there are the nasty anonymous attacks from lobbyists calling Waters crazy.
Read these quotes from bank lobbyists, and you’ll see what I mean.
“Just the name,” said one financial industry lobbyist, “sends shivers up the spine.”
“She is wacko,” said one New York banking lobbyist. “She is very flamboyant, very old school. She is not one of these younger, sophisticated members of Congress. She has no grasp of the technical side of finance. She was elected during a different time in history and she hasn’t read a book since.”
“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.”
Even if the status quo in Washington were to entirely reverse itself—and the Republicans were to retake the White House and the Senate, and the Democrats captured control of the House—bankers say they still would have a reason to be afraid. Committee chairs are granted vast powers in Congress, and Wall Streeters expect that a Chairwoman Waters would haul them before the committee routinely. The big banks could face the prospect of regularly trekking down to Washington (on commercial airlines, one assumes) to explain their lending or hiring practices.
“She is in the mold of the grandstanding politicians,” said Anthony Randazzo, the director of economic research for the Reason Institute, who has testified in front of the Financial Services committee. “When she asks questions, she doesn’t want to know an answer, or know what my opinion is as an expert. She is always trying to push particular idea or trying to get out of the process some statement that she could criticize, or trying to back up some preconceived notion of hers.”
And so most of Wall Street is hoping that a local representative, Congresswoman Carolyn Maloney of the East Side, emerges as an alternative to Ms. Waters. “You have different versions of Democrats and Maloney is far more moderate,” said Mr. James. “And she would be under the influence of Schumer and Bloomberg and Cuomo, who say don’t kill the goose that lays the golden egg.”
“I have talked to a lot of Democrats in Congress and there is a sense among them that seniority would not be triumphant in this case,” said one Wall Streeter closely aligned with Democrats in the House.
“People in finance are incredibly concerned,” said one Hill insider close to both Ms. Maloney and the financial community. “They worry that Maxine will be incredibly unpleasant to work with. She doesn’t have a history of being a partner, while Maloney, people are finding out, does.”
And then there’s Rep. Waters.
“Let me let you in on a secret: I am the senior-most person serving on the Financial Services Committee,” she told the 2012 California State Democratic Convention last month. “Barney Frank is about to retire, and guess who’s shaking in their boots? The too-big-to-fail banks and financial institutions and all of Wall Street because Maxine Waters is going to be the next chair of the Financial Services Committee.”
I don’t now if that’s true. And there are obvious blemishes in Rep. Waters’s career. But the bank lobbyists make a pretty compelling case for her being the senior Democrat on the committee.