Report: Brown has helped stall the implementation of Wall Street Reform

The Boston Globe reported yesterday that much of the 2008 Dodd Frank bill to reform Wall Street is stalled.

From yesterday's Globe:

Government regulators have missed more than half of their rule-making deadlines, with just 120 of the 398 regulations enumerated by the law in effect, according to a tally by the Wall Street law firm Davis Polk. Key provisions are still months away, most notably the so-called "Volcker Rule" meant to rein in banks' appetite for risky investments and prevent a repeat of the 2008 meltdown that led to the public bailout of some of the country's largest financial institutions.

Below we argue that one big reason this has occurred is tied to Scott Brown and his large campaign donations from Wall Street. In particular, the Volcker Rule is being weakened and stalled. This rule is a key part of the bill that protects us from risky bank investments like those that caused the collapse in 2008.

The short of it:

  1. 1. Scott Brown has taken large sums of campaign contributions from Wall Street.
  2. 2. While the Wall Street reform law was being written, Brown worked to water down the Volcker Rule, a key part of the bill.
  3. 3. After the law was passed, Brown continued to work against Volcker in the regulatory process.
  4. 4. As reported yesterday, Wall Street reform, particularly implementation of the Volcker Rule, continues to be stalled.

5. Conclusion: Scott Brown has repeatedly worked on behalf of Wall Street.

Now in detail:

June 28, 2010

The Boston Globe reported on the loopholes Brown inserted into the Volcker Rule bill, including allowing banks to put up to 3 percent of their capital into riskier hedge funds and private equity:

Brown had been focused on a series of exemptions from the so-called Volcker Rule, named after former Federal Reserve chairman Paul Volcker, who is now an economic adviser to President Obama and proposed the plan. The rule is designed to limit the investment options of large institutions, trying to crack down on the speculative activity that played a major role in the 2008 economic collapse. But Brown sought and won two changes to how the Volcker Rule would be applied. First, he insisted that financial institutions that use banks only for limited purposes, such as MassMutual and Fidelity, were exempt.

Second, he demanded that banks be permitted to invest a portion of their capital in hedge funds and private equity funds. Brown called for a 5 percent cap, but negotiators settled on 3 percent.

June 30, 2010

Bloomberg News reported that Brown was behind some of the changes to the Volker Rule

Scott Brown, the Massachusetts senator who was among four Republicans voting in favor of the Senate bill, demanded some of the changes to the Volcker rule.

It also read:

Volcker Said to Be Disappointed With Final Version of His Rule ... As first envisioned, the Volcker rule would have banned banks from running private-equity and hedge funds, an attempt to curb risk-taking that fueled the financial crisis. Last-minute congressional negotiations aimed at winning Republican support led to a compromise that allows banks to invest up to 3 percent of their capital in such funds. Volcker, the 82-year-old former Federal Reserve chairman, didn't expect the proposal to be diluted so much, said a person with knowledge of his views. He's content with language that bans banks from trading with their own capital, the person said.

December 12, 2010

Not only did Brown water down the Volcker Rule, but he has received large amounts of contributions from those it would regulate. The Boston Globe reported on Brown's efforts to weaken the Wall Street reform bill by watering down the Volcker Rule and deleting a proposed tax on big banks and hedge funds.

Brown's efforts benefited large Massachusetts companies such as MassMutual Financial Group, Liberty Mutual Insurance, Fidelity Investments, and State Street Corp., whose executives and political action committees contributed $29,000 to Brown during the three-week period he was extracting the concessions from Democrats. They also benefited major out-of-state institutions such as Goldman Sachs, UBS, and JPMorgan Chase.

The same article reports that:

Donations poured in as Brown's role grew; With vote near, financial sector delivered $140k ... Campaign contributions to Senator Scott Brown from the financial industry spiked sharply during a critical three-week period last summer as the fate of the Wall Street regulatory overhaul hung in the balance and Brown used the leverage of his swing vote to win key concessions sought by firms. Those and other out-of-state financial interests gave Brown a total of $50,000 during the period.

The Globe further reported that even as Scott Brown was working to scuttle financial reforms opposed by Wall Street, these same big banks and hedge funds were filling his campaign coffers. From mid-June until the Fourth of July, according to a Globe analysis of his campaign finance reports, the Massachusetts senator took in $140,000 from banks and investment firms and their executives, including companies based in the state, such as MassMutual and State Street Corp. That is 400 percent more than the $28,000 received on average by all Republican senators during the same three weeks.

June 4, 2012

More recently, the Globe reported: "Senator Brown sought to loosen bank rules" after the bill was passed. Basically, Brown continued to try to water down the law by fighting for loose regulations in its implementation.

Senator Scott Brown has trumpeted his role in casting the deciding vote in favor of the 2010 Wall Street overhaul, but records show that after he voted for the law, he worked to shield banks and other financial institutions from some of its tough provisions. E-mails between Brown's legislative director and US Treasury Department officials show that Brown advocated for a loose interpretation of the law so that banks could more easily engage in high-risk investments ...

At issue in Brown's e-mails is the Volcker rule, a particularly contentious provision of Dodd-Frank. The rule, championed by Paul Volcker, a former chairman of the Federal Reserve, prevents commercial banks from speculating heavily in higher risk investments. Banks are federally insured, which means that if they fail, taxpayers must reimburse many depositors. ...

But e-mails obtained by the Globe show that Brown's work on behalf of the financial sector did not stop when the law was passed. In the second stage, as regulators began the less publicly scrutinized task of writing rules amid heavy pressure from the banking sector, Brown urged the regulators to interpret the 3 percent rule broadly and to offer banks some leeway to invest in hedge funds and private equity funds.

And now yesterday, July 16, 2012

The Globe reported that two years after signing, the bill is mostly stalled in implementation. This bill is critical to protecting us from another financial crisis due to Wall Street run amok.

The evidence is clear: Scott Brown has continually worked on behalf of Wall Street.