JUAN GONZÁLEZ: As the Trump administration enters its second month, Republican lawmakers
have begun a legislative attack on the Consumer Financial Protection Bureau, which was created
in response to the economic crisis nearly a decade ago.
The bureau was created under the Dodd-Frank legislation, which is also coming under attack
by Republican lawmakers and the White House.
Last week, President Donald Trump signed an executive order to repeal a Dodd-Frank anti-corruption
measure requiring oil and mining companies to disclose payments to foreign governments.
He has also vowed to chip away at other parts of the legislation.
Earlier in the month, Trump said JPMorgan CEO Jamie Dimon was giving him advice on what
to do with Dodd-Frank.
PRESIDENT DONALD TRUMP: We have some of the bankers here.
There’s nobody better to tell me about Dodd-Frank than Jamie, so you’re going to tell me about
it.
But we expect to be cutting a lot out of Dodd-Frank, because, frankly, I have so many people, friends
of mine, that had nice businesses.
They can’t borrow money.
They just can’t get any money because the banks just won’t let them borrow, because
of the rules and regulations in Dodd-Frank.
AMY GOODMAN: One of President Trump’s fiercest critics has been Massachusetts Senator Elizabeth
Warren, who’s spoken out against Trump’s efforts to dismantle Dodd-Frank.
SEN.
ELIZABETH WARREN: The 2008 financial crisis cost millions of people their jobs, their
homes and their savings.
And in response, Congress passed the bipartisan Dodd-Frank Act, which aimed to prevent big
banks from blowing up the economy again.
Now, President Trump has called Dodd-Frank a, quote, "disaster," and he has vowed to,
quote, "dismantle" it.
He started down that road two weeks ago when he issued an executive order on financial
regulation.
And he’s put two men—Steve Mnuchin and Gary Cohn—who have spent a combined—combined
42 years at Goldman Sachs, in charge of rewriting the rules to help big banks, like Goldman.
AMY GOODMAN: To talk more about what a rollback of Dodd-Frank and the Consumer Financial Protection
Bureau would mean for consumers, we are joined by Sheelah Kolhatkar, a former hedge fund
analyst who’s now a staff writer at The New Yorker.
She’s also author of the new book Black Edge: Inside Information, Dirty Money, and
the Quest to Bring Down the Most Wanted Man on Wall Street, which we will also talk about.
Sheelah, welcome back to Democracy Now!
It’s great to have you with us.
SHEELAH KOLHATKAR: Thanks for having me.
AMY GOODMAN: So, let’s talk about Dodd-Frank, the people, the bankers that President Trump
is surrounding himself by, which might surprise many of his supporters, because he had decried
Goldman Sachs and the very banks that he is now deeply involved with.
Can you talk about first Dodd-Frank?
SHEELAH KOLHATKAR: Sure.
Well, Dodd-Frank, obviously, was the major legislation passed in the wake of the 2008
financial crisis.
It is over a thousand pages long.
It has many critics.
There are flaws with it.
However, many people, including Elizabeth Warren, who we just saw, agree that it has
made the system safer.
It has required banks to keep more capital on hand, meaning they have a larger cushion
in case they encounter some kind of problem.
This was a big issue in 2008.
It has pushed the banks to stop doing proprietary trading, which is basically a form of gambling—depending
on who you ask—with their own money.
And these are taxpayer-backstopped banks, so many people believe that banks should be
focused on their stated purpose.
Their purpose in the economy is to take capital that people have to invest, and channel it
to businesses through loans, through IPOs.
I mean, they are the engine of the economy, and businesses can’t grow without, you know,
access to capital, which banks are supposed to provide.
And what we’ve increasingly seen is that banks have become more focused on speculative
trading to make money.
And this has been a very profitable strategy, although, of course, when it doesn’t work
out well, it can completely blow up the economy, as we saw.
But, you know, really, this legislation is intended to reorient them towards their purpose
in our economy, which is helping companies grow and helping the economy grow, not speculation
in the market.
JUAN GONZÁLEZ: But one of the big complaints of banks, as I understand it, has been, one,
the requirements now that they not be as leveraged, that they have more assets on hand in case
their loans go bad, and also the impact of the financial protection agency that was developed
in terms of the limitations on how they can abuse consumers.
And I’m wondering now how you’re seeing the Trump administration moving in these areas?
SHEELAH KOLHATKAR: Well, of course, the banks and the financial lobby have been screaming
and protesting these new rules all the way along.
And as we saw, the implementation of Dodd-Frank happened over a period of years; there was
intense, drawn-out fighting over every little thing.
And now we have this sort of stunning reversal with the new administration in Washington.
I mean, as you mentioned, President Trump campaigned—it certainly sounded like he
was campaigning against Wall Street.
He complained and screamed about bankers all the time and the system being rigged.
He criticized Hillary Clinton for giving speeches to Goldman Sachs.
But now, I mean, there’s a lot of confusion, because, of course, there are so many mixed
messages coming out of his administration, and we’re still trying to figure out what
his plans are.
But he has basically installed a handful of not quite the same wealthy Wall Street financiers
we’ve seen before, but people, incredibly well-off Wall Street experts, who have spent
their entire careers in hedge funds, in private equity, at big investment banks.
They are the ones advising him on what to do.
And it’s really hard to believe that those people are going to be reflecting the interests
of many of the voters who put Trump into this position in the first place.
AMY GOODMAN: Earlier this month, White House Press Secretary Sean Spicer described the
Consumer Financial Protection Bureau as an unconstitutional agency.
PRESS SECRETARY SEAN SPICER: The Dodd-Frank Act is a disastrous policy that’s hindering
our markets, reducing the availability of credit and crippling our economy’s ability
to grow and create jobs.
It imposed hundreds of new regulations in financial—on financial institutions, while
establishing unaccountable and unconstitutional—a new agency that does not adequately protect
consumers.
AMY GOODMAN: So, that’s Sean Spicer.
Your response, Sheelah?
SHEELAH KOLHATKAR: Well, I would mention one recent example of the Consumer Financial Protection
Bureau doing its job: the Wells Fargo scandal.
So, that was a case where the enormous bank, Wells Fargo, was found to have been pushing
its employees and not monitoring them, to the point where they were opening up accounts
for customers that those customers had not asked for.
And this caused widespread damage.
It damaged people’s credit ratings.
People were charged fees.
I mean, it was a total scandal.
And the CFPB is the one that brought that to light.
So, I guess my question would be: It’s fine to criticize it, but what is your alternative
option?
Because Republicans have been fighting and trying to water down the powers of this agency
since it came into being.
It’s one thing to say that you want to get rid of it, but, I mean, I would really like
to hear what their alternative plan is, because we need to know those details, you know?
JUAN GONZÁLEZ: Well, I want to go back to Senator Elizabeth Warren speaking last week.
SEN.
ELIZABETH WARREN: On any issue, but especially on something as important as the rules in
place to stop another financial crisis, we need to start with facts—real facts, not
those alternative facts that the administration has become known for.
And the facts show that Donald Trump is wrong and his chief economic adviser is wrong about
every major reason that they’ve given to tear up Dodd-Frank.
Commercial and consumer lending is robust.
Bank profits are at record levels.
And our banks are blowing away their global competitors.
So, why go after banking regulations?
The president and the team of Goldman Sachs bankers that he has put in charge of the economy
want to scrap the rules so they can go back to the good old days, when bankers could take
huge risks and get huge bonuses if they got lucky, knowing that they could get taxpayer
bailouts if their bets didn’t pay off.
We did this kind of regulation before, and it resulted in the worst financial crisis
since the Great Depression.
We cannot afford to go down this road again.
JUAN GONZÁLEZ: That was Senator Elizabeth Warren last week.
And what about this issue of why the banks so badly want to get rid of these regulations?
And also, the tie to the subject of your book, which is hedge funds, and the involvement
of banks even with hedge funds?
Yes?
SHEELAH KOLHATKAR: Well, so, the period that I really describe in this book is sort—it
was like a flowering of insider trading in the hedge fund world that the government kind
of investigated and cracked down on.
But a lot of that took root during the—from the mid-2000s to 2008, '09, ’10, when they
really started to crack down on it.
And I think it's really important to put it in context.
I mean, a lot of this crime that I write about happened during the same period of time when
the mortgage fraud housing bubble inflated, that literally blew up and led to the financial
crisis, and this coincided with a period of serious deregulation in Washington.
And, in fact, during many of those key years, the head of the SEC, which is responsible
for policing the market and making sure it’s fair for everyone, he did not believe in regulation.
The chairman, Christopher Cox, essentially said markets can regulate themselves.
He discouraged SEC attorneys from bringing enforcement actions against people on Wall
Street.
They did not—they were discouraged from even interviewing prominent financiers.
I mean, they were supposed to kind of take a hands-off approach.
And look what happened at the end of it.
We had this huge blow-up of crime and fraud.
And, you know, I would argue that we are still paying the price for that.
And the dynamic that was created at that moment led to widening income inequality, and I think
that has contributed directly to the situation we’re in now.
AMY GOODMAN: We’re going to talk more about your book, Sheelah, after this break.
Sheelah Kolhatkar is a staff writer at The New Yorker.
Her book is quite remarkable, very hard to put down, Black Edge: Inside Information,
Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street.