James Surowiecki, writing in the most recent New Yorker makes the case for approving Elizabeth Warren’s nomination (prediction: it isn’t going to happen, and the Obama administration will leave her to “twist slowly, slowly in the wind”) and argues that the new Consumer Financial Protection Bureau will actually be good for the banks:
The C.F.P.B. hopes to change this, largely by insuring that consumers will be told the true terms of a deal, in a simple and clear fashion. (As an example, it recently released two possible mortgage disclosure forms, and both were two pages long.) This would obviously be good for borrowers. But it would help most lenders, too. For all the talk of the financial industry’s power, its performance over the past decade has actually been dismal. Countless lenders have gone out of business, and many of those still standing saw their stock price decimated after they loaned immense amounts of money to people who couldn’t repay it. The banks thought they were taking advantage of uninformed consumers, but they ended up playing themselves. In a more transparent credit market, almost everyone would have been better off.
This makes perfect sense, except….it only really makes sense if one assumes that Warren’s opponents, if they do not care about consumers, at least care about the long term viability of the institutions for which they work or to which they are beholden for political contributions. It ain’t necessarily so.
The big banks are not worried about going bankrupt. They know that they can count on Uncle Sam to bail them out. But even those who work for institutions that are small enough to fail have reason to prefer the status quo. A lot of Pople have gotten very rich driving the corporations for which they work into the ground. So rich that they are utterly indifferent to whether that entity succeeds or fails in the long run. They know, as well, that they can always go elsewhere, regardless of the long term effects of their actions. If they make money in the short term, that’s all that matters. From their perspective, history has shown that they can make vast amounts of money in the short term by operating in an opaque environment where it is easier to hide their fraud. Would more regulation assure the survival of more of these institutions? Probably. Would the scam artists still be able to rake off outrageous amounts of money? They fear not, and that’s the reason for the opposition.
As for the politicians, the same principles apply. No matter what the Supreme Court may say, in the end, corporations don’t give money, the people who control them give money. So long as politicians please those people, it is immaterial to them whether the corporations for which their donors work continue to thrive.
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