A recent book on the passage of the Dodd-Frank abomination, Act of Congress, How America's Essential Institution Works, and How It Doesn't by Robert Kaiser, gives a detailed picture of the thuggery and bribery used by Wall Street, and its agents like Barney Frank, in passing the bill in 2010, minus the Cantwell-McCain amendment on Glass-Steagall.
This is the kind of pressure Congressmen and Senators must stand up to—with the aid of an aroused citizenry.
The following elements of that thuggery come from a review-in-process by Stuart Rosenblatt.
The first resistance Frank had to kill was the movement for a Pecora Committee hearing. In January, 2009, historian Ron Chernow penned an op-ed calling for the convening of such a committee, and Congressmen John Larson (D-CT), Sen. Byron Dorgan (D-ND), Sen. Richard Shelby (R-AL) and even Nancy Pelosi (D-CA) echoed his call. Barney Frank immediately attacked this idea as "silly" and moved to shut it down. He invoked Moody Analytics henchman Mark Zandi and quoted his book Financial Shock, as his authority. Frank finally allowed the creation of the Financial Crisis Inquiry Commission, a watered down investigation. But he did it on condition that its report would be issued months after Dodd-Frank had passed the Congress.
Barney tolerated no opposition within the Wall Street- steered Financial Services Committee. On the one hand Frank would attack Carolyn Maloney (D-NY) for daring to question the bailout of AIG's counterparties, or William Clay (D-MO) for questioning why all the bailout money was going to Wall St and not Main St! Then the book details Frank's manipulation of other members, such as Mel Watt (D-NC), Ed Perlmutter (D-CO), Bill Foster (D-ILL), and Jim Himes (D-Goldman Sachs, CT), whom he brought under his wing with offers to "study" and "contribute" to the writing of the "historic" legislation.
As the House version was nearing passage, Kaiser showed the lengths to which Frank was prepared to go with the Congressional Black Caucus to secure its support. When the CBC realized it was being had, and demanded changes, Frank bought them off by bringing in Goldman Sachs' Lloyd Blankfein personally to "work over" the CBC. Blankfein orchestrated a deal by agreeing to help Percy Sutton's radio empire avoid financial ruin in New York. The CBC was pacified. But when Frank still wasn't sure if he could control their votes, he adroitly kept them out of the final tabulation.
Kaiser details in the book the huge amounts of money Wall St spent lobbying for Dodd-Frank. He also cites reports from Public Citizen and the Center for Responsive Politics who said that the financial institutions retained the services of almost 1500 former government employees to lobby the 111th Congress. Seventy five were former members of the House and Senate, who were lobbying their friends. (p. 131).
Sen. Mitch McConnell and other Republican Senators made numerous trips to Wall Street to sell their souls and raise large amounts of money for the National Republican Senate Committee. As the money poured in, Republican attacks on Wall Street and bailouts disappeared.
- Defeat the Ghost of Glass-Steagall -
The memory of Glass-Steagall hung over the battle around Dodd-Frank like the Ghost of Shakespeare's Hamlet. It had to be crushed. Dodd, Frank and Act of Congress spewed out unbridled venom against sponsors of this policy, whether it was proposed as Glass-Steagall legislation, or Blanche Lincoln's Derivatives bill, or the Merkely-Levin echo in the form of a Volcker Rule.
The biggest cover up in the book is that it fails to even mention that there were six bills in the Congress calling for a return to Glass-Steagall bank separation! In the House alone there were five bills, all sponsored by Democrats, demanding the return to Glass-Steagall. In the Senate, the Cantwell-McCain Glass-Steagall bill, S. 2886 had so much support that Glass-Steagall enemy and Wall Street errand boy Mark Warner was forced to pen an op-ed against the bill. The five bills in the House were all killed by Barney Frank, and were not even mentioned in the book.
When Blanche Lincoln filed her bill in April of 2010, all pent-up hell broke loose. Her bill proposed that all commercial banks spin off their derivatives trading operations into a separate entity. The Treasury Department, Federal Reserve, FDIC and other regulators attacked it, When Maria Cantwell rose to demand that Lincoln's language be included in the Dodd bill as it was about to pass the Senate, she was viciously attacked by all quarters.
Cantwell had made herself somewhat of an expert on the evils of derivatives speculation. She was not cowed by these bullies, and countered by organizing a letter to Harry Reid demanding that the "derivatives" section, i.e. Lincoln's language, be the foundation of the Dodd bill! It was signed by six Democrats and Olympia Snowe, and freaked out both Dodd and Reid, who realized they would need these votes for cloture and passage. Lincoln was in a tough primary fight and had the backing of many more Senate Democrats. Ultimately, her language was included in the bill. Wall Street and Dodd planned to eliminate it in the Conference Committee final version.
Cantwell was less successful with her own Glass-Steagall bill, which she attempted to attach onto the Dodd bill as an amendment. Wall Street went into a tear, and Harry Reid led the attack. He was concerned with getting enough votes on his cloture motion to cut off debate; he needed Cantwell, Feingold and other holdouts. He bargained with Cantwell that if she voted for cloture, he would give her a debate and vote on Glass Steagall. Kaiser vividly describes the pressure heaped on Cantwell by Reid and Dodd, including a scene on the floor of the Senate. Reid and Dodd organized a stampede of Senators to make their way back to Cantwell's seat to convince her to vote with Reid. "Jesus Christ Harry, cut it out", she shouted to the entire Senate! After an intense fight, Cantwell gave Reid her vote in exchange for a vote on Glass-Steagall. Having secured Cantwell's vote to end cloture, he promptly reneged on his promise and killed her bill.
- In the Conference Committee -
After the House and Senate passed their respective versions of the Dodd-Frank Reform Act, the scene turned to the Conference Committee. The fight was renewed against the Lincoln derivatives amendment (Section 716) and the Merkley-Levin Volcker Rule, both of which had survived the Senate vote.
The massive mobilization against Lincoln's Section 716 brought to the fore everything that had been lurking beneath the surface. Lincoln's amendment threatened to scuttle the entire bill.
According to Kaiser, the Treasury staff and Chris Dodd's staff were "convinced that Lincoln did not fully understand the issue (sic!)... They openly distrusted her staff... Lincoln was under intense, though publicly unseen, pressure. Some of it was coming from the House. A group of moderate House Democrats, members of the New Democratic Coalition, and others from New York, with ties to the financial sector, had come together in opposition to Lincoln's Section 716, and were demanding changes. They had broad support from many experts who weren't particularly sympathetic to the banks. Volcker and Sheila Bair of the FDIC had both publicly criticized the section as a bad idea. A worried Barney Frank went to Steny Hoyer and Nancy Pelosi and said, 'I'm telling you, this will bring the bill down.' He needed their help." (p. 340,344)
A flurry of meetings ensued. Frank addressed one group of Agriculture Committee leaders together with Reid, Pelosi, Dodd, Blanche Lincoln and others. He announced that the bill could blow up, and that sixty or more House Democrats would defect if Section 716 was not changed. Lincoln countered that she had the support of key Senators, and would not budge. Six hours later, Deputy Secretary of the Treasury, Neil Wolin, Geithner's profane hitman, was dispatched to meet with Lincoln's staff. Despite a severe browbeating, Lincoln's staff did not capitulate, and the meeting broke up with no compromise. The White House was furious.
Geithner called Lincoln again. Rahm Emanuel, White House Chief of Staff, summoned her banking staff to the White House for a vintage Emanuel expletive-laced tongue-lashing. When this did not succeed, Obama himself invited Lincoln to the Oval Office to work her over. He threatened her: if she did not agree to compromise on Section 716, they could not guarantee her re-election. There is nothing like a touch of Chicago-style mob politics to change a person's mind, but Lincoln remained non-committal.
Obama's hard-cop approach failed, so they sent in CFTC Chairman Gary Gensler to meet with Lincoln's staff. Gensler was a "soft cop", who had hitched his horse to the Obama cart. After a two hour meeting, they seemed to have a deal. But nothing was nailed down, so the next day, Democratic Whip Steny Hoyer met with a group of New Democrats and New York bank operatives Joseph Crowley and Gregory Meeks. They wanted a deal for their Wall Street masters. They organized a group of House members to march over to the Senate to "confront" Lincoln to write a new version of the amendment.
Eventually, under brutal, Stasi-like pressure, Lincoln succumbed to a compromise. Banks would be allowed to trade derivatives based on bank assets, including interest rate swaps, foreign exchange swaps, credit default swaps, and gold and silver. All others, mostly commodities, would be spun off into new affiliates, with their own capitalization. (p. 349) Wall Street got what they came for.
The Dodd-Frank bill finally passed, and Wall Street had triumphed. In the process, they were forced to put their vicious methods on display, as well as their ownership over most of the Congress. It was a typical muscle job.
That is the real of truth behind Act of Congress.