PAUL JAY: 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: 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CHILTON: If you go back to, really, 1999, that's when Congress repealed this thing called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,--
CHILTON: Absolutely.
JAY: --and particularly couldn't use deposits to go out and make bets.
CHILTON: Absolutely.
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.