At some point in 2009, a power shift occurred in US politics. Big financial institutions went from needing Washington’s help in avoiding an abyss to Washington seeking their help for economic recovery and job creation.
Just the day before he called them the “fat cats” of Wall Street and reminded the bankers of taxpayer largess in saving their institutions in 2008-09. But then he pleaded with them to speed up lending to small businesses and to support proposed regulations aimed at preventing another financial meltdown.
This sort of hard bargaining with an organized interest group usually goes on behind closed doors in Washington. Just look at all the benefits quietly thrown at lobbies for doctors, pharmaceutical firms, AARP, and others to win support for Mr. Obama’s healthcare proposals.
After 10 months in office, the president now sees K Street as a two-way street when he wants – or doesn’t want – something from powerful lobbies.
That’s why it is telling to see Obama’s tug-of-war with Wall Street playing out in public, most notably in Congress where lobbyists are swarming over financial-industry reform legislation that has passed the House and awaits action in the Senate.
On Sunday, Lawrence Summers, the director of Obama’s National Economic Council, labeled the industry’s effort to “gut” reform as “a bit rich” after it took a taxpayer bailout. Obama then declared he will not let the banks “thwart reforms.”
Still, the president acted surprised when the bank executives told him of their support for certain reforms that their own lobbyists oppose. This “disconnect” is now supposedly being resolved.
But the bigger disconnect is really in the president’s own party. Many top Democrats in Congress still take contributions from the financial services industry in what is called a “culture of deference” toward Wall Street. For the 2010 legislative elections, campaign donations from the securities and investment sector are now more than $10 million, with most of that for Democrats, according to the Center for Responsive Politics.
Obama needs to be willing to call out fellow Democrats who take money from the industry, otherwise the financial industry stands a good chance of weakening the reform bill, especially if a proposed new consumer agency is eliminated. The industry now has close to 2,000 lobbyists at work on Capitol Hill, or about five for every member of Congress.
Obama is now in open battle with Wall Street. “If they wish to fight common sense consumer protections, that’s a fight I’m more than willing to have,” he said after the bankers meeting.
But first, the president needs to do battle with Democratic lawmakers who have sticky fingers for campaign money from this huge lobby.