Wall Street Perks Aren't Your Priority or Mine

July 24, 2013
Dear Friend,

Something troubling is happening in the House of Representatives and it's time you heard about it.

The popular narrative has been that the Congress is doing nothing. But it’s actually far worse than that. In fact, when it comes to blocking and tackling for Wall Street and the financial services industry, the Republican majority in the House has been very busy. 

I wish the Republican leadership was addressing problems like unemployment, the rising cost of education, climate change, immigration, and replacing the sequester with balanced and thoughtful budget reform. Instead, it seems like every week we see another bill that weakens regulation and oversight of Wall Street. Here are some examples:
  • H.R. 1062 – SEC Regulatory Accountability Act (Passed House on May 17, 2013): Designed to further hamstring the already underfunded Security Exchange Commission (SEC), this legislation requires the SEC to complete a host of redundant cost-analyses before being able to issue a regulation, thereby dramatically impairing the SEC’s ability to be the Wall Street watchdog, protect investors and maintain fair and efficient capital markets.
  • H.R. 1256 – Swap Jurisdiction Certainty Act (Passed House on June 12, 2013): Remember derivatives? Warren Buffett calls them “financial weapons of mass destruction.” This legislation suspends key reforms to the derivatives market that were established by the Wall Street Reform Act, increasing the likelihood of more AIG-like failures.
  • H.R. 1564 – Audit Integrity and Job Protection Act (Passed House on July 8, 2013): Healthy capital markets depend on reliable, unbiased financial reporting. This legislation takes a step backwards toward the days of Enron and darker markets, allowing large corporations to hand pick their own auditor and to keep the same firm in perpetuity.  It negates rules that might improve the autonomy of independent accounting firms charged with reviewing the books of our nation’s largest corporations.
  • H.R. 992 – Swap Regulatory Improvement Act (Passed Committee, Expected on House Floor in 2013): Known colloquially as the “Citi Group Bill” (given two critical sections of the legislation were drafted almost entirely by Citi Group lobbyists and lawyers), this legislation would exempt broad classes of derivatives from new regulatory oversight – allowing Citi and other financial institutions to trade derivatives with the indirect financial backing of the US taxpayer.
  • H.R. 2374 – Retail Investor Protection Act (Passed Committee, Expected on House Floor in 2013): Many Americans would be surprised to find-out that some financial advisors have no legal responsibility to recommend investments that are in the best interest of their client. Instead, the investment need only be “suitable,” allowing brokers to steer individuals towards investments that may offer a robust commission for themselves, but are not the best option for their client. The Department of Labor has been working to strengthen the standard for advisors that are helping Americans with their retirement planning. This legislation would throw a wrench in the gears, delaying action to improve critical consumer protections.
  • H.R. 1077 – Consumer Mortgage Choice Act (Expected in 2013): After the mortgage market meltdown, Congress acted to strengthen mortgage standards and the Consumer Financial Protection Bureau has been working diligently to prevent mortgage brokers from receiving bonuses for steering clients towards riskier, more expensive mortgages. This legislation creates loopholes to the qualified mortgage rules currently being considered by the CFPB, potentially reintroducing the harmful incentives that led to the financial crisis.

No one at the local 4th of July parades told me it was their top priority to deregulate derivatives. And I doubt many of your neighbors are arguing that corporations need more lenient auditing standards.

So whose priorities are these? And how has Congress gotten so out of touch with the people we are entrusted to represent?

The fact is, our policy agenda is being warped by the big money political game that must be played every two years. In the 2012 election, Wall Street spent over $660,000,000 to drown out the voices of every day Americans. And you can be sure they are at it again – dolling out campaign money and running ads so they can write laws that favor them, often times at the expense of everyday Americans.

We need a new system of citizen-owned, grassroots-funded campaigns so that candidates will be, in the words of James Madison, “dependent on the people alone.” That’s why I introduced a measure called the Grassroots Democracy Act. This bill would ensure that the American people “own” our democracy and that it works for the public interest, not special interests.  For more information, go to my website at sarbanes.house.gov/issues/grassroots-democracy-act.

There’s an old saying:  he who pays the piper calls the tune. For too long, Wall Street and other special interests have exploited big money dependency in our political system to call the tune. We must break that dependency so Congress fights for your priorities, not theirs.

Congressman John P. Sarbanes
Maryland's Third Congressional District