Progressives and FinReg: Where Do We Go From Here?

A roundtable of thinkers, journalists, and veterans from the financial industry gathered at the Century Foundation, a nonprofit public policy research institution, after the Senate passed its version of a financial reform bill on Friday. New Deal 2.0 was on hand for a deep dive into the day’s topic: what does FinReg mean and where do we go from here?

New Deal 2.0’s Mike Konczal led the talk with an overview of the history, values, and challenges in the fight for financial reform. He highlighted four main areas of focus for the progressive community:

1. Correcting concentrations of corporate power, where steps such as a modern-day Glass-Steagall law and leverage caps can come into play;
2. Promoting shared prosperity, with fixes such as the CFPA and mortgage relief;
3. Government’s role in enforcing transparency, by reforming things such as derivatives trading and ratings agencies;
4. Finance as a means to build the real economy, and not as an end in itself, which should eliminate conflicts of interest and bring back a fiduciary duty to the public.

Afterward, the discussion ranged from a very micro view — what does the current bill do to regulate derivatives trading? — to a zoomed-out view of where progressives and the financial industry stand. What values are we fighting for? How do we fight for them? What are the hurdles?

Participants, including Raj Date, Alan Brinkley,  ND20 contributor Jeff Madrick, Joyce Purnick, and Lance Lindblom, recounted the history of the financial sector. From the 1930’s, when FDR enacted serious reforms, to the 1980’s, when those reforms were relaxed, bankers looked like the characters from Mad Men — taking care of client relationships first and foremost, without a lot of flash. There was a healthy relationship between business, the public and its banks.

Then the regulations were slowly eroded, the crisis began to take effect, and the trust was broken. But the progressive movement, it was pointed out, wasn’t organized on the issue ahead of time. Since the crisis, it’s been about “filling a pothole” by putting money in the sector to stave off disaster. Progressives hadn’t mapped out a clear position, and neither had the Democratic Party, so much of the work since then has been a patchwork game of catch up. Where FDR had a 20-year backbench of thought on the issue, we’re just beginning to map it out.

And now we’re in what one participant characterized as a war — a cultural and intellectual battle against free market assumptions and the entrenched power of the financial industry. All present voiced concern about the throttlehold the financial industry has on politics, and the Democratic Party in particular. Through amassing wealth, the sector has amassed power, which has watered down financial reform and will continue to block necessary steps.

Meanwhile, without a modern-day Pecora Commission to uncover fraud, the anger and the politics to fuel reform have lagged. Both are fueled by scandalous information — take a look at the cases against Goldman Sachs — and we need to uncover more of those stories. But that process is also in nascent form and is moving slowly ahead.

The group also peered into the future. Some coming fights that were highlighted:

Housing policy: foreclosures and underwater mortgages are nowhere near over, and the anger those events cause is going to help fuel continued discussion of the banking sector. Finding solutions for the disappearing middle class will be key.

A VAT tax: as the deficit hawkery takes hold and fiscal austerity measures are pushed, expect a rallying call for a Value Added Tax. This will hurt middle- and lower-income families. Instead, progressives can push for a banking sector tax and get our money’s worth.

The general consensus: the movement needs to get organized, because the fight isn’t over yet.