Why Banks have Undue Influence on How They are Regulated

As Simon Johnson from the Baseline Scenario points out, banks, and in particular, Citigroup have huge amount of political power. Why? Well, when most of your alum run important financial agencies or are members of the Fed Reserve or Treasury that works in your favor. Or as we all know, setting the fox to guard the henhouse leads to a big conflict of interest.

Senator Warren articulated this beautifully in a speech last week before Congress on how much power Wall Street has.

“Mr. President, in recent years, many Wall Street institutions have exerted extraordinary influence in Washington’s corridors of power, but Citigroup has risen above the others. Its grip over economic policymaking in the executive branch is unprecedented. Consider a few examples:

Three of the last four Treasury Secretaries under Democratic presidents have had close Citigroup ties. The fourth was offered the CEO position at Citigroup, but turned it down.

The Vice Chair of the Federal Reserve system is a Citigroup alum.

The Undersecretary for International Affairs at Treasury is a Citigroup alum.

The U.S. Trade Representative and the person nominated to be his deputy – who is currently an assistant secretary at Treasury – are Citigroup alums.

A recent chairman of the National Economic Council at the White House was a Citigroup alum.

Another recent Chairman of the Office of Management and Budget went to Citigroup immediately after leaving the White House.

Another recent Chairman of the Office of Management of Budget and Management is also a Citi alum — but I’m double counting here because now he’s the Secretary of the Treasury.

That’s a lot of powerful people, all from one bank. But they aren’t Citigroup’s only source of power. Over the years, the company has spent millions of dollars on lobbying Congress and funding the political campaigns of its friends in the House and the Senate.”

Mmmm, how do we ensure the Regulators remain neutral while getting the best and brightest financial minds to work in Government? At the very least, it is good for us to know these conflict of interests exist.

Share on Procurious

First Voice

  1. Matt:

    “In a controlled (or mixed) economy, a legislator’s [or regulator’s] job consists in sacrificing some men to others. No matter what choice he makes, no choice of this kind can be morally justified (and never has been). Proceeding from an immoral base, no decision of his can be honest or dishonest, just or unjust—these concepts are inapplicable. He becomes, therefore, an easy target for the promptings of any pressure group, any lobbyist, any influence-peddler, any manipulator—he has no standards by which to judge or to resist them.” Ayn Rand

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.