Wall Street keeps saying it’s sorry. It’s sorry for those bad bets on subprime mortgages. Sorry about the stock market crash. Sorry for needing those bailouts. JPMorgan Chase CEO Jamie Dimon has admitted his industry “made its share of mistakes.”
But nobody in Washington is buying their contrition.
“The industry, I think, has a long way to go to demonstrate that they get it in terms of the harm they caused not just to world financial markets but individual families,” Sen. Bob Casey (D-Pa.) told POLITICO.
“It would be really helpful if they showed it by their actions,” said Sen. Jon Tester (D-Mont.).
The PR campaign hasn’t been enough, lawmakers argue. They want the financial industry to stop fighting regulation and accept proposals like the consumer financial protection agency.
“I can tell you that the people that I represent aren’t sitting around, waiting for some sort of speech or statement of contrition,” said Sen. Ron Wyden (D-Ore.). “People are looking for bottom-line changes, and one of them would be the consumer protection agency,” said Wyden, who added that his constituents have been asking if financial lobbyists are going to fight that proposal.
“I said, ‘It remains to be seen. I know that I’m going to fight for you the consumer, and I’m going to insist that there be a consumer protection agency,’” Wyden recalled.
And House Financial Services Committee Chairman Barney Frank (D-Mass.) — who wields incredible influence over the regulatory reform process — has made no secret that the big banks’ persistent image problems are hurting them in the financial reform lobbying wars.
“All the money in the world doesn’t make them effective lobbyists right now,” Frank said in a recent CNN interview. “It can’t erase the record of irresponsibility, poor judgment and abuse of consumers that too many of the big banks have run up.”
But Wall Street leaders argue that this is all a huge disconnect.
Top CEOs publicly, and regularly, claim responsibility for their missteps and are revamping internal procedures in response, they say. But the most explicit example of their atonement, industry officials said, is their embrace of the need for substantial regulatory reform — not the usual stance of any industry.
“Here’s an industry who’s saying, ‘Regulate us, please regulate us!’” said John Courson, president and CEO of the Mortgage Bankers Association, as he detailed how his member lenders have acknowledged their culpability and embraced rules they once fiercely resisted.
Courson, who took the helm of the MBA in January, said he deliberately spent his first public speeches and press events acknowledging “that lenders ... ended up with borrowers getting into products that were not well-designed for them.”
“We have not run away from the fact that there certainly is culpability in our industry,” Courson said.
And the mortgage industry has started to back new rules and is undertaking some self-policing. Courson said his group has reversed its long-standing opposition to licensing individual loan originators. It’s also calling for Congress to place nonbank mortgage lenders — seen by many as particularly guilty of poor and even abusive lending practices — under federal supervision for the first time.
Financial industry supporters also cite dramatically reduced leverage levels, the reduction or elimination of off-balance-sheet vehicles and revamped compensation schemes at most large financial institutions that, despite the negative headlines, focus on long-term performance incentives like stock options, deferred compensation and claw-back options.
“Mistakes were made. And the ghosts of those companies that have failed have prompted the companies to focus on themselves and make reforms,” said Scott Talbott, senior vice president of government affairs for The Financial Services Roundtable, a trade group representing about 90 large financial firms.
But for many Democrats, union leaders and consumer advocates, that’s not nearly enough. They see the financial industry’s nearly united opposition to the consumer financial protection agency as evidence that they are not chastened from last year’s bailout.
“They have done nothing,” declared Anna Burger, secretary-treasurer of the Service Employees International Union, speaking to POLITICO from a protest last week at the American Bankers Association annual meeting in Chicago. “They took trillions of dollars in bailouts, [and] they didn’t stop home foreclosures, they didn’t lower interest rates, they didn’t stop all those excessive fees, they didn’t give consumers a break. Now they’re giving themselves bigger bonuses than ever.”
Industry officials protest that the high-profile fight over creating the consumer financial protection agency has been unfairly interpreted as full-scale opposition to all financial reform.
“We are in heated agreement with the administration on the need for modernization,” said Rob Nichols, president and COO of The Financial Services Forum, a policy group made up of CEOs of the world’s 18 biggest financial services firms, including Goldman Sachs, Citigroup and JPMorgan Chase. “There are some differences on the best policy approaches to achieve this goal, [but] we do support perhaps the two most critical elements proposed by the administration — the need to establish a systemic supervisor to help minimize the chance of a crisis and the need for resolution authority to address a crisis, heaven forbid we have one.”
Industry insiders also point to both the scores of public apologies made by financial leaders and the specific changes that show Wall Street has learned its lessons.
“Leaders in the financial industry have widely acknowledged in countless speeches, op-eds and testimony that changes need to occur; and, in fact, firms have already adopted new policies and internal structures to address these issues,” said Nichols.
Rep. Mike McMahon (D-N.Y.), a rare Democratic defender of Wall Street, thinks some of his colleagues need to back off a bit.
“We have to be very careful that we don’t destroy the industry” with overzealous action, warned McMahon, whose Staten Island district relies heavily on Wall Street. “We want those who did wrong to be held to account. But everyone in this country wants the economy to start growing. Without the financial services industry, without Wall Street, there’s not going to be any growth in this country, there’s not going to be any credit.”