A New York banker has withdrawn from being considered for a top US Treasury position, after coming under pressure in an era of heightened concern about the political influence of Wall Street.
As Antonio Weiss bows out of consideration, it’s a symbolic victory for Sen. Elizabeth Warren (D) of Massachusetts and others seeking to limit banker clout. She vocally opposed his nomination by President Obama to be the Treasury’s undersecretary for domestic finance.
The pull-out by Weiss may signal that a climate of closer scrutiny of Wall Street will linger as a legacy of the 2008 financial crisis – all with an eye toward safeguarding the US economy from the risk of other bubble-and-bust cycles in the future.
Senator Warren is not the only senator or policymaker who holds such concerns.
“I have no personal animosity toward Mr. Weiss but I am very glad he withdrew his nomination,” Sen. Bernie Sanders, (I) of Vermont said in a statement Tuesday. “The president needs economic advisors who do not come from Wall Street. In fact, he needs advisors prepared to stand up to Wall Street. We need economic policies in this country which ask the wealthy and large corporations to pay their fair share of taxes and which create millions of good-paying jobs.”
Don’t think the “revolving door” between Wall Street and Washington policy jobs has suddenly been sealed off, though.
Although Warren has a high profile as a possible presidential candidate, Republicans are now dominant in the Senate – and many of them lend a closer ear to Wall Street interests than Democrats do. Current Treasury Secretary Jack Lew worked for a big bank, just like several of his recent predecessors. And Mr. Weiss himself will still end up helping to guide policy, serving Secretary Lew in an advisory job that doesn’t require Senate confirmation.
What’s clear, in fact, is simply that the battle over Wall Street’s role in Washington will go on. Banks still wield major influence, but now that influence also can potentially be checked by populist senators, some independent-minded regulators, and a more skeptical public.
A next stage in the battle could come as banks try to get the Republican-controlled Congress to lighten financial regulations imposed after the 2008 crisis. (Already banks have sought and won a rollback in oversight of the investments known as “derivatives.”)
Some economists say over-regulating banks can create risks of slower economic growth, but others say the real danger lies in allowing banks to take too many risks.
“One top priority now should be attempting to strengthen the safeguards in the Dodd-Frank financial reform legislation. Repealing or rolling back that legislation poses a major fiscal risk,” economist Simon Johnson of the Massachusetts Institute of Technology told a House hearing on the economy Tuesday. “The fact that this is not currently scored by the Congressional Budget Office does not reduce this risk or make it any smaller.”
He said the 2008 crisis showed the risks of financial firms taking great risks without sufficient buffers of capital on their books. “Systemic risks materialized suddenly and with devastating impact,” Mr. Johnson said.
Passion for such concerns is strongest on the left, but some Republicans share the worry.
One sign: When AFL-CIO leader Richard Trumka recently sent letters to big banks asking them to explain why they give financial bonuses when executives exit to take influential policy positions in Washington, he got some support from conservative press.
The editorial page of The Wall Street Journal said the Trumka letters raise important questions.
For all the power banks still have, through campaign donations and lobbying, they’ve also taken a hit in public opinion.
Gallup polling on confidence in various institutions find only about 26 percent of Americans have strong faith in banks. That’s better than opinions of Congress, but it’s far below the above-50 levels that were common for the banking industry in Gallup polls before 2007.