Bart Chilton Pt4: I get around 100 visits from finance reps for every one from community advocates
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I’m Paul Jay in Washington. We’re continuing our discussion with Bart Chilton, who’s a commission of the Commodity Futures Trading Commission here in Washington. Thanks for joining us again.
BART CHILTON, COMMISSIONER, CFTC: Sure.
JAY: So if lack of regulation in the American finance sector was a trigger that led to what we were told was an apocalypse in 2008, 2009, when the–there were closed-door sessions of Congress where people were being threatened, if they didn’t pass the bailout bill, the global economy was going to collapse. It was such dire moments. And they seem so far from memory now. But if in fact it’s because there was so little regulation, what is changed?
CHILTON: If you go back to, really, 1999, that’s when Congress repealed this thing called the Glass-Steagall Act. And that limited banks to traditional banking. It was a Depression-era law. And what that changed is that banks could get very innovative and create all these exotic products, like credit default swaps, like bets upon bets that bundled groups of mortgages would fail. And these things worked out pretty well for a while. But what happened is the banks became so leveraged that any little hair-trigger can make them falter. And we saw Bear Stearns, we saw Lehman Brothers, and then we saw American International Group, the insurance giant, fall, costing taxpayers hundreds of billions of dollars in a hideous bailout that you referred to. While this was going on–and there was a group, by the way, that Congress established called the Financial Crisis Inquiry Commission, FCIC. And their verdict on why this all happened, they pointed to two different entities. One, regulators. And even though I wasn’t there, I plead guilty to regulators having a part in this. And two, the captains of Wall Street who created these exotic programs, these exotic products and programs. For the regulators, it was sort of a dream job. You didn’t have to do much. I mean, literally, you put a sign on your door, “do not disturb”, and take a nap. And then, several years later, when you had Bear Stearns, the regulators sort of said, really? What’s going on out there? And I think regulators weren’t on their game. And so they are to blame. But it was a result of this original law, this Glass-Steagall law.
JAY: Which was supposed to prevent conflict of interest. The banks couldn’t play in every field,–
JAY: –and particularly couldn’t use deposits to go out and make bets.
JAY: So one of the critiques of Dodd-Frank is that it was good PR, that it made it look like there’s a solution coming, but because so much of it was in the realm of regulation and not law, that there was a kind of knowing that when it comes down to writing the regulations, you know, the lobbyists are going to outnumber the reformists 100 to 1, if that, and that it’s going to be very hard to make it effective, that there actually should have been more straightforward laws about proprietary trading and laws about position limits, and not leave it to regulation, and not only that you can slow down regulations, but as I mentioned in the other segment, you know, depending on who’s in power, who gets to appoint the administrators. And, you know, we know from the BP disaster in the Gulf that, you know, you can have regulators that don’t regulate.
CHILTON: Well, two things. There are times I wish the law was more prescriptive, and position limits is one area, because we haven’t–don’t have them in place. And I think there’s a cadre of senators on Capitol Hill that wish they would have been more prescriptive. But by and large, even though it is a challenge, you’re right: there’s never been more money by the financial service sector spent on lobbying than in the first quarter of this year. You know, there’s ten financial service sector lobbyists for every member of Congress, and a lot of those folks have descended on regulators like me in the last year, year and a half.
JAY: Well, what’s the ratio of the meetings, finance sector lobbyists to people trying to get real reforms?
CHILTON: You’re actually–you’re maybe being cynical when you said 100 to 1. It’s probably like that. By and large, consumer organizations don’t have the resources, and there’s many more people interested in these markets, so it’s probably 100 to 1. I want to meet with consumer organizations, and I have, and I encourage them to come in. But they’re not in the markets, and, you know, these are very complicated issues. And so–. But I am–to your point about whether or not this is going to be weakened, that I take issue with, because I think that Congress passed these laws not knowing all the specifics that need to be put in place. And we don’t even know all the things that need to be put in place right now, the meat on the bones of the law, if you will. And so we’re learning and we’re being judicious about it, and all these meetings with people–banks, exchanges, traders, and consumers organizations alike–actually, it’s working pretty well
JAY: We’re going to play a little segment from the Jon Stewart show, which is a sort of a–Stewart’s take on what’s happening on the regulatory front. So here’s a few seconds of it.
The Daily Show with Jon Stewart, exerpt: “[singing] Lobby lobby lobby gets you access here. Lobby lobby lobby gets you access here. Lobby lobby lobby gets you… Stop it, I can’t do this. Blaming lobbyists is a cop-out, Jon, here’s what’s going down. This whole financial reform thing is a sham. The only way that Congress would pass me was if the details of my rules and regulations were left unspecified, giving K-street lobbyists all the time they would need to water me down post-passage. And you know what? Exactly, Boo exactly. Thank you, boys and girls…”
JAY: So this is the perception, you know, from outside, that you’re up against a political power of such weight (because of the concentration of ownership of such weight) that Rob Johnson, who we’ve interviewed quite often, who actually, you know, knows it from the inside–he used to run an investment fund for Soros. But he quotes Dick Durbin and says, when he talks about Congress, he says they own the place. I mean, are you up–how do you deal with the political power of the people you’re trying to regulate, and especially, you know, when most ordinary people don’t understand how this affects them?
CHILTON: Well, it does affect them. These markets actually impact the prices people pay for just about everything, whether or not it’s a gallon of milk or a home mortgage. So it’s important to everybody. People may not understand the mechanics of the futures industry, and that’s okay. But knowing that the futures industry impacts their household budgets is important. And that’s why you need regulators on the job. You know, my view is that, by and large, public servants are really dedicated folks, and, you know, we’re not going to be bought off for lunch or a cup of coffee. And I don’t take any of those things. I like to think after 25 years that I’ve got some integrity in this job, and I want to feel good about it every day I get up.
JAY: But you’re dealing with a Congress that wants to actually give you less resources, less money, not more. You’re dealing with mostly with a Congress that wouldn’t mind if you were slowed down. And the weight of that financial power, you know–.
CHILTON: Well, there are some in Congress; I mean, the bill passed, and the ones that want to slow us down, the ones that want to defund us, voted against the bill to begin with. So we’ve got it on both sides. You’re right: we’re sort of in a whirlwind where we have some people saying go fast, some people saying go slow. The fortunate thing for us is we have a law. So what I swore an oath to was the law. Whether or not I like it or not–. I happen to think the Dodd-Frank law is a fantastic law and important and needed. But regardless of that, the law is what I’m charged with as a regulator to uphold. And so a lot of this noise from the right, from the left, from the middle, impacts me only a little bit. I’ve got some strict constructs to go from, and it happens to be in the Dodd-Frank consumer protection financial reform act.
JAY: Okay. So what happens to all of us if in fact the pressures on your commission are successful, they do slow you down, and you aren’t able to get the kind of regulations and resources it takes to do all this? What’s the consequence of that?
CHILTON: I think you’ll see volatile prices that will continue like we’ve seen over the last several years. I think you’ll see crooks that do the crime and don’t do the time or pay the fine. I think it won’t be a good circumstance. So, you know, this is an important thing that we’re involved in. It’s an endeavor that Congress wanted us to proceed with. And as long as we get the resources to actually implement the law as they saw fit, we’re going to be better–markets will be better, consumers will be better. And the economic engine of our democracy will really receive some activity, and that’ll do better, too.
JAY: Thanks very much for joining us.
CHILTON: Good to be with you.
JAY: And thank you for joining us on The Real News Network.