The more things change, the more things stay the same, right?
Responding to the financial collapse of 2008 Congress passed the much-needed Dodd-Frank financial reform law, which is nearing its one-year anniversary. But critics today sound a lot like those did the last time the country initiated sweeping new safeguards – during the New Deal reforms of the 1930s.
The parallels between the language used both then and now are detailed in a report released today by Public Citizen and the Cry Wolf Project.
Since the Great Depression, Americans acknowledged the necessity of having safeguards in place to prevent another crash of the financial markets, including the creation of the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC), and laws requiring public companies to accurately disclose their financial affairs. Although these are now seen as bedrock protections when they were first introduced, Wall Street cried foul, the new report, “Industry Repeats Itself: The Financial Reform Fight,” found.
“The business community’s wildly inaccurate forecasts about the New Deal reforms devalue the credibility of the ominous predictions they are making today,” said Taylor Lincoln, research director of Public Citizen’s Congress Watch division and author of the report. “If history comes close to repeating itself, industry is going to look very silly for its hand-wringing over Dodd-Frank when people look back.”
In the 1930s, the financial industry elevated its rhetoric during the debate over the Securities Act of 1934, which eventually established the SEC. The president of the U.S. Chamber of Commerce said requiring publicly traded companies to register their securities with a federal commission would force a company to “sign away its constitutional rights to protect its property rights from being taken away from it without due process of law.” Today, the U.S. Chamber of Commerce hails the principles of the 1934 Act.
By 2010, the U.S. Chamber was busy warning, without merit, that Dodd-Frank would harm corner butchers and bakers because “Washington wants to make it even tougher on everyone.” Others cast the bill’s provisions as “stalking horses” for Washington to intervene in “virtually every facet of the U.S. economy” and even ruses for “kicking conservative media personalities off the air.”
The Wall Street crash made it tough on everyone by causing massive job loss and severely hurting those corner butchers and bakers, as well as retirees, families with mortgages and others. The Dodd-Frank Wall Street Reform and Consumer Protection Act is specifically designed to prevent another collapse.
The Dodd-Frank law increases transparency; creates a new Consumer Financial Protection Bureau to ensure that consumers receive straightforward information about financial products and to police abusive practices; improves corporate governance; increases capital requirements for banks; deters particularly large financial institutions from providing incentives for employees to take undue risks; and gives the government the ability to take failed investment institutions into receivership, similar to the FDIC’s authority regarding commercial banks. Much of it has yet to be implemented.
The bottom line is that repetition of rhetoric is not adding weight to industry complaints; it is only making clear that it continuously cries wolf.
To read the full report, visit: https://www.citizen.org/documents/Industry-Repeats-Itself.pdf.