Did Mitt Romney catch President Obama smooching with Wall Street?
The Dodd-Frank act, the Obama administration's response to the 2008 financial crisis, was designed to be a slap in the face to Wall Street after big banks nearly toppled the economy. But Mr. Romney, slamming the president on Wednesday during their first debate of the campaign season, claims the regulatory overhaul was “the biggest kiss that's been given to New York banks I've ever seen.â€
That argument might seem strange to Wall Street. If Mr. Obama is cozying up to Lloyd Blankfein and Jamie Dimon, that's news to them. Most big bank executives find Mr. Obama disengaged, even aloof. And some never forgave the president for his unflattering depiction of them as “fat cats.â€
As for Dodd-Frank, Wall Street has spent three years â€" and hundreds of millions of dollars â€" trying to kill or tame the law. Mr. Dimon, the Democrat who runs JPMorgan Chase, once said that new rules stemming fro m Dodd-Frank “would damage America.†(He supports other aspects of the law).
Mr. Romney on Wednesday said he supports some regulation but also called for the repeal of Dodd-Frank. When pressed to explain what would replace the law, the Republican nominee declined to provide specifics.
Despite being one of Mr. Obama's signature accomplishments, Dodd-Frank has played a back seat to health care and broader economic issues on the campaign trail. But the debate on Wednesday brought Dodd-Frank to the forefront.
For his part, Mr. Obama defended the law and attacked an era of deregulation that he says enabled Wall Street recklessness. “Does anyone out there think that the big problem we had is that there was too much oversight and regulation of Wall Street?†Mr. Obama said on Wednesday.
Mr. Romney countered with a common criticism of Dodd-Frank - that it labels some financial institutions as “systemically important.†Mr. Romney called this policy “an enormous boon†for Wall Street because “it designates a number of banks as too big to fail, and they're effectively guaranteed by the federal government.â€
It was this rule that Mr. Romney seemed to interpret as a big kiss to the banks. “I wouldn't designate five banks as too big to fail and give them a blank check.â€
Mr. Romney's claims echoed the concerns of Republican lawmakers, who say that Dodd-Frank enshrines several banks as so important that the government would need to rescue them in times of trouble. Dodd-Frank, critics say, did little to break up the nation's biggest banks but left small community banks without implicit government backing and fighting for survival.
But that's not the full story.
For one, Democrats note that the “systemically important†brand is actually meant to strike down the perception that banks are “too big to fail.†As Mr. Obama pointed out on Wednesday, these firms must produce so-called living wills and face other measures that empower regulators to wind down big banks in an orderly fashion.
Mr. Romney's decision to single out five New York banks is also suspect. The designation applies not only to Wall Street banks but to dozens of insurance companies, conglomerates and other major banks scattered across the country. Politico's Morning Money newsletter on Thursday quoted an anonymous executive saying “If he'd named names, it would have been his top five contributors.â€
Dodd-Frank supporters also argue that the designation of SIFI - systemically important financial institutions - is hardly a wet kiss. It comes with heightened capital requirements and regulatory scrutiny.
Of course, it's not like Wall Street has never been kissed before. The Clinton administration, at the behest of big banks, tossed out Depression era reforms like the Glass Steagall Act, which prevented banks from buying insurance companies. And when the banks grew so bloated that they nearly burst in 2008, Congress came to their rescue with hundreds of billions of taxpayer dollars.
But is Dodd-Frank the giveaway that Mr. Romney alleges? If so, the Obama administration is kissing but not telling.
