Governed by Greed

The Wall Street Reform and Consumer Protection Act of 2010 became law last July. Its first words promised “to promote… accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices.” But to get the bill passed, its well-meaning congressional sponsors had to compromise away toothy provisions like those requiring a strict separation between depository banking and financial trading.

The history behind that lame law is sadly relevant to understanding how some among corporate America’s super-wealthy now dominate Ameri-can politics and policymaking in ways that make yesteryear’s Gilded-Age capitalists and robber barons look like simon-pure civic do-gooders by comparison.


The Banking Act of 1933 strictly separated investment banking from commercial banking and imposed many other restrictions on what today we would call “financial services” firms. In every decade thereafter, assorted corporate interests pushed to repeal the law in whole or in part. In the early 1980s, as the number of members of Congress for whom the Great Depression was no mere chapter of a history book decreased, the lobbyists in Gucci loafers almost got their way. But in 1986 President Ronald Reagan’s unexpected support for a major bipartisan corporate-loophole-plugging tax reform law, the sudden October 1987 stock market plunge and the scandals surrounding the savings and loan industry temporarily broke big business’s political momentum.

In 1999, however, Congress passed and President Bill Clinton signed the Orwellian-named Financial Services Modernization Act. The law’s “modernization” provisions begat financial mega-businesses different in form but identical in consumer-exploiting function to those 19th-century corporate conglomerates that Teddy Roosevelt had broken up through vigorous use of the Sherman Antitrust Act of 1890.

The 2010 law did not come close to undoing the 1999 act. Worse, for almost a year now, President Barack Obama has left many key federal financial regulation jobs entirely vacant.

How did it come to this? I will leave the deeper explanations to theologians, philosophers and social critics. My answer centers on the fact that lobbying to influence public policy has become ever more supremely lopsided in ways that favor business interests.

For example, as the political scientists Kay Lehrman Schlozman, Lee Drutman and others have documented, between 1981 and 2006 the ratio of business lobbyists to union and public interest lobbyists working in Washing-ton, D.C., rose to 16:1 from 12:1, including nearly 2,800 lobbyists (up from about 1,500) representing just the Standard & Poor’s 500 corporations.

According to the Federal Election Commission, the U.S. Chamber of Commerce is the single biggest spender on lobbying, with no close second. Between 1998 and 2010 the chamber spent nearly $750 million. Its recent expenditures have shattered all records: $91 million in 2008, $144 million in 2009 and $132 million in 2010.

Many of the other biggest spenders on lobbying are business interests like big oil companies. By contrast, the union membership rate for private sector workers is now below 7 percent (it was nearly 12 percent in 1983) and falling. Public employee unions now claim about 7.6 million workers, but even the American Federation of Teachers’ Political Ac-tion Committee ranked only 26th on the F.E.C.’s 2009 list of the top 50 PAC contributors. And public employee unions are now under political assault in many state capitals.

In 2010, in Citizens United v. Federal Election Commission, the Supreme Court removed the last remaining legal barriers to corporate “electioneering communications” and related political “independent expenditures.”

By doctrine and tradition, the Catholic Church stands against all who selfishly exploit people for profits. But if Catholic bishops hope to be any real political counterweight to the worst elements in U.S. big business today, they need to pick up their game, speak out far more and pressure Catholics in Congress to fight for working families and to protect the needy from the greedy. Labor Day 2011 would not be too soon.

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Mike Evans
7 years 6 months ago
Perhaps the 4th of July wouldn't be too soon, either. I watched some of the UCCB meeting on TV in Seattle. Mostly a huge amount about 'maintenance' issues within the church. Except for a short lively discussion about preaching (the need for quality), the entire activity was uninspiring and ultimately irrelevant to greater concerns in our country. The bishops must strongly speak up for the poor and neglected, for the unemployed and hungry/homeless, for seniors and children, all who are being ignored and short-changed in the current budget snafu. Both parties need to be chastised and challenged to rise above their petty politics. The recent Calif. Catholic Conference joint statement would be a good place to begin with a national statement. Otherwise, the church will simply remain the silence of the lambs.
John Walton
7 years 6 months ago
So they're selfishly greedy.  Perhaps the producer of amonia fertilizer shouldn't complain that under the new law their cost to hedge their exposure to natural gas prices will increase sharply, perhaps you're mutual fund manager shouldn't complain that their trading counter-party is unable to move a position because "proprietary trading" is now prohibited, perhaps the middle class family in East Orange NJ shouldn't complain that they can't get a mortgage on that new house in Kenilworth NJ since mortgage broking has been killed off by the new law. 

Dr. DiJulio would do well to skip a few lunches in the faculty club and go over to the Wharton School for a few lessons on the laws of unintended consequences.

ed gleason
7 years 6 months ago
 Jack Walton suggests the answer is more Wharton School.. like the Distinguished graduate Donald Trump.. By the way I just completed a mortgage with Chase who solicited my business. Maybe Jersey has other problems..
Robert Asselin
7 years 6 months ago
Banking reform is necessary, but Wall Street influence in Washington and anti-regulation philosophy (despite the 2008 crisis!) continue.  Read 13 Bankers by Simon Johnson and James Kwak.  Hopefully, the presidential campaign will help the public understand the need for common-sense regulation and breaking up the "too big to fail" banks that are now more dangerous after having been strengthened by our government.
Andrew Di Liddo
7 years 6 months ago
I find it ironic that John writes this article pointing out that the Church is against those who exploit others for profit.  Come on JOHN!!!!!!!  If the exploiters are PRO LIFE, You are all for them!  The church, by supporting Republicans because of their PRO LIFE stance, put into power the biggest exploiters since the Great Depression. Because they were pro life ( in lip service only) you forgave them all the business exploitation of others and all the environmental exploitation they do in the name of profit.  John, you embody the concept  of hypocrite and Pharisee.

Charles Erlinger
7 years 6 months ago
I remember in the late 1940s doing a little research on how the democratic process works and coming to the conclusion that governing is a balancing act between competing interests.  Over the years I have thought that my conclusions at that time were a little sophomoric, but in still later  years I have begun to think that maybe they weren't all that sophomoric.  I have come to be a little more conscious of the probability that the interests that are competing are not terribly concerned about what we like to call the "common good."  I also am more conscious of the likelihood that idealogues are prone to support measures that have undesirable unintended consequences than are principled pragmatists.  There just seems to be an idea abroad that compromise in practical matters of governance involving people of many shades of belief is a mortal sin.  In addition, having been in a position that required forecasting from time to time, I have learned that a forecast of the long term social consequences of a particular piece of legislation is not something to be greatly depended upon.  We just don't know when, how soon or how late, people will realize past mistakes and decide to correct them, especially in our democracy (but not only in our democracy).  I am not advocating that the bishops should say nothing on the subjects raised by the author, but I am suggesting that more low-key grass-roots encouragement of individuals to get involved in the political process, including of course voter registration and voting itself, will in the end have a better result.  Also, when  you get involved at the precinct level,  you may heartily dislike those that you meet there.  That's a real test of commitment.
C Walter Mattingly
7 years 6 months ago
First, we should concede that the 1999 act passed under President Clinton was probably a harmful bill, as John states. But the foundations of the problem, the violation of the free market system by unwise government actions, has been overflooked, resulting in an oversimplified and distorted view of the evolution of the situation.
Those causes, of course, are well-known: the federal guarantee of Fannie and Freddie mortgages took the risk out of the equation for the lenders, resulting in a emasculation of the essential risk factor in the free market. This ultimately replaced the free market with an I win you lose market. Then, early in the Clinton administration Longview Capital, a hedge fund, borrowed huge amounts of money from investment bankers such as Bear Stearns on a currency speculation, which bet turned against them. The failure and loss of these funds would have harmed the economy and perhaps lead to the default/firesale of those investment banks which had unwisely forwarded the monies to the fund, resulting in fired CEO's, etc. But the government intervened and worked out a bailout that violated free market principles. Thus the speculators knew that if they got into severe troubles that might affect the economy of the country, the government would bail them out. Again, heads I win, tails you lose. This was in effect a green light to speculators that the free market punishments of excessive risk would be mitigated for them by government officials. So the risk-taking expanded. Add to this Barney Frank demanding that banks make bad loans to those who could not afford them to enable them to become homeowners, all guaranteed by Fannie and Freddie, and you can see the dry wood being piled on the forest floor.
John rails against those who selfishly exploit others for profit, which certainly occurred in this mortgage crisis. Yet with the Liar loans and no down payment mortgages mandated by our government, the number of those doing the selfish exploitation is likely to include a far greater number of morgagees than bankers and mortgagors. Having lied about their incomes (57% of those in that type of loan by over 25%) to get the loan, often with no down payment, when the value of the home dropped, many simply walked away from their mortgages and left them in the hands of the banks and, ultimately, the taxpayer, with Fannie and Freddie on the hook for $150 billion and counting. The greatest number of greedy exploiters were our middle class citizenry, aided by Barney Frank as well as President' Clinton's unwise policies.
Other aspects of the article are contradicted by various sources. John bemoans the diminished power of union groups, yet according to the former president of the SEUI, that union alone raised $61 million for President Obama's presidential campaign. Those are some real fat cat numbers.
Craig McKee
7 years 6 months ago
Instead of selling themselves short for the crumbs of Catholic school vouchers, the USCCB could be teaching a very simple lesson to politicians on BOTH sides of the aisle:
Charity begins AT HOME!
Bring the troops HOME!
WE need the money in AMERICA!

Factoid on today's news: 31 states are in debt for a total of 86.1 BILLION dollars.

Fact: Annual Cost of Iraq/Afghanistan wars: $80 BILLION dollars.


$1.23 TRILLION AMERICAN DOLLARS spent overseas on FOREIGN WARS since 9/11. And for what? Shuttered public parks on the 4th of July weekend? Closed driver's license bureaus, suspended state lotteries, massive teacher layoffs and unpaid furloughs?

Memo to ALL politicians (and the church officials they USE):
7 years 6 months ago

“Protect the needy from the greedy” is a marvelous way of putting one aspect of our obligations as followers of Jesus  to “bear one another’s burdens”).  Sure wish this idea would become a guide to action amongst this country’s power brokers..  Currently it appears that the guide is more like “Feed the greedy from the table of the needy”.

For example, consider the budget impasse over proposals to increase taxes on the very wealthy.    The same politicians who oppose raising taxes,  even on those with a taxable income over a million dollars per year , support a budget that will further impoverish millions of already very poor people.    These pols include a number of Catholics, e.g. Congressmen John Boehner and Tim Murphy, and Senator Pat Toomey.  

Spending cuts are necessary to preserve some type of Social Security, Medicare and Medicaid system over the long term.   However I consider it a crime to make these cuts in a way that further impoverishes poor people.  Surely the super rich can be called on to make some “sacrifices” (if giving up an extra 10% of a taxable income over a million dollars can honestly be called a sacrifice as compared with reducing the food allowance for a family already experiencing hunger) .

Many pieces of financial legislation over the past twenty years, including deregulation and the tax cuts of 2001 and 2003, weren’t orchestrated by the needy, and certainly didn’t benefit the needy, but a disproportionate share of the benefit has gone to increasing the percentage of national wealth owned by the richest 5 or 10 percent.   It appears that this legislation was  orchestrated by the greedy, for the greedy.  To insist that tax cuts for the super rich remain in place even as poor people are being more impoverished amounts to feeding the greedy from the table of the needy.    

On behalf of poor people in this country I plead with all who in effect are advocating feeding the greedy from the table of the needy; please reconsider what you are doing.




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