Braking the banks

When President Barack Obama signed the Dodd-Frank Wall Street reform and consumer protection act almost two years ago, many thought the battle over stricter banking rules was over. Turns out, it was just the start.

In the wake of the recent JP Morgan losses and current LIBOR scandal, the fight over banking regulations continues to rage in Washington as an alphabet soup of federal agencies write the complex regulations to put the Dodd-Frank law in motion.

On the front-lines of this effort is Better Markets, a relatively new advocacy group pushing to ensure new regulations are as strong as possible. Better Markets President and CEO Dennis Kelleher says that if Wall Street’s current practices are not reigned in, the next financial crisis could be right around the corner — and could be much worse.

Kelleher, a lawyer with more than a decade of experience working for Democrats on Capitol Hill, says Better Markets is one of the only groups in Washington advocating for stronger controls. And while the banking industry spends hundreds of millions of dollars every year on lobbying and campaign contributions, Better Markets’ annual budget is around $3 million.

The Better Markets budget comes from Mike Masters, a hedge fund manager in Atlanta. After testifying in Washington in 2008, Masters says he found the conversation was almost entirely about deregulation of the banks. He felt so strongly that the other side needed to be represented that he recruited Kelleher and launched Better Markets in 2010.

Watch our report and sound off below.

 

Comments

  • http://www.facebook.com/people/Richard-Taylor/100003799046893 Richard Taylor

    Banks should be regulated more because when they get in the business of merely aquiring or creating wealth and nothing else then bad things are bound to happen.

  • Stephens Ji A

    Keep pushing this message to the pubic and try to figure a way to get this message to all those middle and lower income people who are mesmerized by the candidates who profess to help them by deregulation and free markets.  Deregulation helped the airline and trucking industry by creating more competition, but the banking industry is totally different.  

    Don’t be influenced by the money.  We need these messages all the time between now andthe election.    

  • Cynthia Strohm

    We need to regulate the banks and wall street.We all live by rules and regulations . Why do the 
    big banks and wallstreet think they are different?It is not fair what has happened to the middle class.Keep up the good work Mr  Dennis Kelleher you are being heard , keep fighting and telling the truth..Thank you PBS again for airing an excellent program..Cindy 

  • Allan Novick

    You missed an important opportunity to educate the lay public (I include myself) on the issues and clear away the many misconceptions and half-truths concocted by the interested parties. Instead of having a debate between Keller and the fellow from American Enterprise Institute, you chose to give them separate interviews. This insured that nothing said by one could be challenged by the other. Jeff Greenfield’s “rebuttals” to the AEI guy was lame and there was no follow up. Since Greenfield didn’t have the requisite expertise, it came as no surpriseI don’t know why you made this choice. A shame.

  • Artaudo

     Peter Walison explains away the financial debacle as a result of the real estate crisis. Totally side steps the Derivatives products and risking market betting on debts which primarily contributed to this. He then points to the Frank Dobbs act as primary regulatory initiatives that have had horrible effects on the markets. HUH!  

  • http://www.facebook.com/dale.stroup Dale Kenneth Stroup

    You buy a sound reliable product you don’t need to buy an extended warranty. If banks bought sound reliable products they would need hedge funds, right?

  • Anmorgan

    The allegation that the economy reached almost 4 percent GDP and then fell because Dodd-Frank was passed is absolute hogwash. I would support more of the conservative agenda if they didn’t lie outright like this. They can’t be trusted….if they have such great solutions, why do they lie?

  • Ron Woodard

    I believe it will take a massive movement to regulate banks.  Banks are not gonna give up power easily.  We are gonna have to make the movement very personal.  The bankers and politicians, who sell out, should be publicly identified and pressured, 24/7, until they break.  

  • http://freeourfreemarkets.org Steve Banicki

    The article below appeared in the New York Times on December 2, 2010. THE MESSAGE IS RIGHT ON! It was written byThomas M. Hoenig, President of the Federal Reserve Bank of Kansas City

    “THE world has experienced a severe financial crisis and economic recession. The Treasury and the Federal Reserve took actions that saved businesses and jobs and may very well have saved the economy itself from ruin. Still, the public seems ungrateful, expressing anger at these institutions that saved the day. Why?Americans are angry in part because they sense that the government was as much a cause of the crisis as its cure. They realize that more must be done to address a threat that remains increasingly a part of our economy: financial institutions that are “too big to fail.” More: http://www.freeourfreemarkets.org/2010/12/too-big-to-succeed.html#more

  • BVA

    Jeff! When
    you ask a question you have to be prepared to follow up on the answer! You of
    all people should know that!

     

    When
    “American Enterprise Institute guy” asserted that federal government
    efforts to encourage home-ownership among the low and moderate income population
    (Community Reinvestment Act of 1977) were the primary cause of the financial
    crisis, YOU had no follow-up! I’m sure if anybody had done any research on this
    guy they would have found that this wasn’t the first time that he has used this
    argument. Also it is a pervasive claim by Conservatives, Republicans,
    right-wing think-tankers, and many business lobbyists.

     

    You could
    have followed up by asking him how he then explains that a study prepared for
    the Federal Reserve, showed that mortgages issued by the regulated banks (that
    were actually under the gun of the Community Reinvestment Act of 1977
    regulations) had a much lower rate of default, foreclosure, and other problems
    than those issued by unregulated non-bank mortgage lenders. [See studies at http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf;
    see also http://traigerlaw.com/publications/The_community_reinvestment_act_of_1977-not_guilty_1-26-09.pdf,
    and " Community
    Reinvestment Act had nothing to do with subprime crisis" at http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html.

     

    And YOU
    could have further asked him to explain how those unregulated non-bank subprime
    mortgage lenders could have issued such huge numbers of subprime mortgages if
    not for the massive 'warehouse lines of credit' given to them by the Wall
    Street banks (who wanted those mortgages in order to create the toxic subprime
    mortgage bonds that precipitated the financial crisis).

     

    YOU could
    have also asked him how he explains Gretchen Morgenson's conclusion (in her
    best-selling book "Reckless Endangerment") that of all the bad actors
    in the subprime mortgage scandal the subprime Wall Street banks were essential
    and were the most to blame-worthy bad actor involved in the scandal (because of
    her further conclusion that those banks understood exactly how low the quality
    of the mortgage they were putting in those mortgage bonds. (See excerpts
    below.)

     

    "Of
    all the partners in the home-ownership push, no industry contributed more to the
    corruption of the lending process than Wall Street [banks]. If mortgage
    originators like Nova Star or Countrywide [unregulated non-banks] were the equivalent
    of drug pushers hanging around a schoolyard and the ratings agencies [S &
    P, Moodys, and Fitch] were the narcotics cops looking the other way, [Wall
    Street] brokerage firms providing capital [warehouse lines of credit] to the
    anything-goes lenders [non-bank] were the overseers of the cartel.” (p.
    263)

     

    “Because
    higher-quality borrowers were still at this time the domain of Fannie Mae and
    Freddie Mac, Wall Street could not hope to compete in this arena.  So the big investment firms [Wall Street banks]
    stepped up their interest in alternative mortgage products offered to sub-prime
    or near-prime borrowers.” (p. 136)

     

    “Years
    after the meltdown, investors began to understand what the due-diligence
    process had uncovered and how badly they’d been burned by Bears Stearns,
    Merrill Lynch, Lehman Brothers, Deutsche Bank, Greenwich Capital, Morgan
    Stanley, Goldman Sachs, and other smaller firms. Lawsuits against these firms
    alleging a dereliction of duty started cropping up in 2010 as investors began
    to realize that Wall Street’s secret loan assessments had identified severe
    problems in mortgages well before they stopped selling them.” (p. 265)

     

    “Wall
    Street had financed questionable mortgages before, of course. But it was a
    during the mania’s climactic period of 2005 and 2006 that these firms’
    activities as the primary enabler to freewheeling lenders really went wild. No
    longer were the firms simply supplying capital to lenders trying to meet
    housing demand across America. Now Wall Street was supplying money
    to companies making increasingly poisonous loans to people with no ability to
    repay them. And the firms knew precisely what they were doing.” (p. 266)

     

    “With
    CDO managers lapping up all manner of mortgages, lenders soon found that their
    production targets were harder and harder to achieve. Countrywide, NovaStar, Fremont, and the rest responded by ramping
    up the profits generated in each loan. This meant steering borrowers who would
    otherwise qualify for lower-cost mortgages into highly profitable but much more
    toxic loans.” (p. 283)
     

  • Denise

    Much of the Dodd Frank has not even been implemented……so how could it be the cause?  The cause…….the banking crash in Europe.  This guy is pablem fed by the RNC.

  • http://oracleofburbank.blogspot.com Mark Etprophet

    I applaud both Masters and Kelleher for their efforts.

    But why should the corrupt people running the show listen to what Better Markets has to say?

    The perpetrators behind these crimes (and their enablers) have already been exposed, and not one has ever been criminally-prosecuted. There doesn’t seem to be any consequences for being exposed, so why would anyone care about being exposed?

    They can point out inequities in any new rules and laws being created, and educate us lay people about what’s happening behind the scenes. But, they have no real power to “make” our leaders do the right things for Americans as a whole. I mean, even Brooksley Born was shot down for trying to prevent the last crisis.

    So, while I commend their efforts fighting on behalf of average Americans like me, I can’t see how they will change the status quo.

  • Ann Underhill

    Try applying the “Martha Stewart test” to the penalties doled out to the perpetrators of the most recent version of large financial institutions manipulating crucial data.  I understand that the JP Morgan Chase offenders will lose 2 years of salary as a punishment for a $5.8 billion dollar loss. Yet Martha Stewart spent time in jail for supposedly benefitting ( a few thousand dollars) from a stock tip and then lying about it. Why isn’t JP Morgan going after its own employees rather than leave the Justice Department to do the job?  After the 2008 debacle, fear ruled. Criminal prosecutions might have knocked down an already shaky house of cards  Now time has passed. Possible financial collapse is not an excuse to avoid dealing with institutions and individuals. .   

  • http://oracleofburbank.blogspot.com Mark Etprophet

     ”Criminal prosecutions might have knocked down an already shaky house of cards”

    And so the perpetrators in the financial industry or their enablers have “said”.

  • BVA

    I completely agree with you!And I further suggest the following:

    A question for the
    Republican presidential nominee:

    “The Obama
    administration appears to have delayed (deferred, suspended, or slowed)
    prosecution and civil litigation against executives of banks, mortgage
    companies, and other financial entities presumably until the economy recovers
    sufficiently so as not to interfere with that recovery.

    “Do you, sir, plan
    to re-institute and/or reinvigorate these deferred investigations, prosecutions,
    and civil litigations against financial executives and entities implicated in
    causing the economic collapse now that the banking and financial sectors have recovered from the crisis?”

  • BVA

    I completely agree with you! 

    See below (or above, depending…) my “question for the Republican presidential nominee”.

  • Maintainer_wiz

    Sorry, but after watching the show I don’t believe Mike Masters (runs a hedge fund) is supporting regulation for the “good of the country”. I believe he’s doing it for himself. Imagine this: with all the new rules and regs which would either outright preclude banks from prop trading, or force them to exit non-prop trading businesses because it would become too expensive to complye and stay in those businesses, who would stand to benefit?  You guessed it, the hedge fund community (and othe non-bank financial intermediaries not subject to Dude-Frank and everyting else).

  • Maintainer_wiz

    Sorry, but after watching the show I don’t believe Mike Masters (runs a hedge fund) is supporting regulation for the “good of the country”. I believe he’s doing it for himself. Imagine this: with all the new rules and regs which would either outright preclude banks from prop trading, or force them to exit non-prop trading businesses because it would become too expensive to complye and stay in those businesses, who would stand to benefit?  You guessed it, the hedge fund community (and othe non-bank financial intermediaries not subject to Dude-Frank and everyting else).

  • guest

    Our banks in this country need thorough over-hauling. We do not have that many banks except Bank of America, Citibank, Wells Fargo Bank and now Chase Bank. The ingredients of Leadership cannot be taught, however; they must be learned as one management expert puts it. There is nothing you can do about your early life now,except to understand it.You can,however, do everything about the rest of your life
    Ernest Hemingway was a depressed man but he wrote very interestingly that the world breaks all of us, and we grow stronger in the broken places. One of the problems with American business is its habit of marching to the style of one leader -as one management expert suggests that it is the wrong way to get things done. That is why most of the companies fail and they close down the doors. That is really serious.
    Everyone in the organization follow the same leader in the wrong direction. It is like one blind person leading another blind and both shall fall into the ditch. I remember the famous story said about the leadership of our first president George Washington. He had lots of friends and he used to invite them to the white house for lunch and State Dinner. One time he had a job opening in his office and there was an official announcement for that job opening. One of his friends ‘Ben’ applied for this and was very hopeful. Whenever you are in power you will have lots of friends and you will also have some who do not always agree with everything you do or say.There was one such person, a gentleman, who I call ‘Dan’, who did not like George Washington policies on political measures.. In fact, he voted against certain reforms brought about by Washington. But Dan had excellent administrative qualities and exceptional abilities on decision-making. Dan was very positive and certain that if we follow his methodologies the countries business will expand and the economy will improve faster
    The State Dinner was announced. As usual, Washington friends and officials appeared for the dinner. Washington invited the candidates also who applied for the job opening at the white house. Washington’s friends showed up. This Dan, who many thought as Washington’s enemy, also showed up. Many of Washington’s friends giggled and made fun of Dan. “This is Washington’s enemy. He should be dumb to apply for this job’. That was their thought. The Dinner was over and President Washington said that he would announce his decision on the selection of the candidate the following day. Next day, the candidates showed up and our Dan also appeared , waiting for Washington’s Decision.
    President George Washington appeared before them and gave a brief lecture about the position and what is required for that position. He said that he found one such person. And that person was Dan.
    Washington’s friends were shocked and disappointed to hear this announcement from Washington.
    They complained and said that Washington was not loyal to his friends, especially to Ben.
    What was Washington’s reply?
    “I know that Ben was my friend and you all helped me during the American War of Independence. I always admired and liked to dance and dine with you. I know that Ben was a good man , but he was not a man of business. Dan is the right candidate for this job because he can work without any fear or favor.”
     
    Washington’s friends shup up.  There is a moral in this story.
     

  • guest

    *breaking