Matt Stoller, writing at Naked Capitalism, has a really important observation about the two political parties and their shared lack of desire to have strong regulators looking at the banking sector.
The hearing was about District Court Judge Jed Rakoff’s refusal to sustain the Citigroup settlement with the SEC. What was interesting about it, from a political standpoint, is that all three witnesses, including the witness brought in by the Democrats, opposed Rakoff’s move and supported the SEC’s position. And one of the top Democrats on the committee, Carolyn Maloney, gave a long-winded opening statement in which she basically took the position that forcing an admission of wrongdoing was just too hard. In other words, many high-level Democratic politicians, for all their gnashing of teeth about the need for regulation, aren’t being truthful. They don’t want regulation, they want to be seen as wanting regulation. And the Republicans, while they want to be seen as the party against regulation, are actually quite happy having regulators they can work with, regulators who protect the banks from state or local level action.
The argument over regulation or deregulation, in some sense, misses the point. We need regulation, obviously. But we also need strongly principled regulators. And neither Barack Obama nor Mitt Romney has any appetite for that.
Stoller’s observation is important in that it crystallizes the sentiment of both parties being captured by Wall Street in an operationally specific way. And in Stoller’s telling, it’s hard to not come away with the impression that the Democrats are a good deal more cynical than the Republicans on the issue of regulation.