By James Kwak
A couple of weeks ago, Max Abelson got some investment bankers who used to work at Lehman to say what they really think about ordinary people:
“[Lehman]’s just not that big of an event. But that’s not what people want it to be, so they’ll make it not that way if they can. They just want to be mad and don’t know what they’re talking about and want to be outraged.”
“When I read this, I giggle a little bit. Because $50 billion is a s—load of money, but in the grand scheme of things, $50 billion is a drop in the ocean.”
“Yappers who don’t know anything.”
Well, the commercial bankers are not taking this lying down. They are out trying to prove that they can be just as offensive.
Speaking of the proposed Consumer Financial Protection Agency, bank president Robert Braswell had this to say, according to the News & Record of Greensboro:
“The consequences to the consumer will be equal or worse than what they’re trying to legislate away,” said Robert Braswell, president of Greensboro-based Carolina Bank. . . .
Banks, he said, will pass on added costs to consumers or stop offering some services, such as free checking. Braswell said when he has been on lobbying trips to Washington on behalf of bankers groups, congressmen and congressional staffers did not seem receptive to points made by those in the industry.
“There is no consideration to (whether it’s duplicative); there’s no consideration as to cost,” he said. “Those who are behind this legislation are absolutely ill-informed and under-educated . . . They refuse to consult with anyone who does possess the requisite knowledge.”
This isn’t even worth a point-by-point rebuttal. Insofar as the CFPA is duplicative, it duplicates powers that existing regulators didn’t use; and it also extends consumer protection to the nonbanks, which were not regulated at all. If free checking only exists because banks are gouging other customers, then free checking shouldn’t exist. Oh, and Tim Geithner, Michael Barr, and Elizabeth Warren are “under-educated”? I guess I am, too.
I would be encouraged by Braswell’s claim that congressmen and their staffers are not receptive to points made by the industry . . . except that it’s not true. Anyone who knows what is going on in Washington knows that the bank lobbyists have been punching holes in the legislation successfully for the past seven months. Maybe they’re not receptive to Braswell, but there are plenty of industry spokespeople doing a much better job — and not talking about it in public.
By the way, on the subject of Lehman and yappers, John Hempton has some good evidence that, yes, other banks were doing it, too. The main evidence is that Bank of America’s end-of-period assets were consistently lower than their average assets, which implies that they were doing something at the end of every quarter to massage the size of their balance sheet down. (Hempton also found matching imbalances in a specific counterparty’s balance sheet.) We had a brief exchange about whether there might be some business reason for this consistent imbalance (for example, in high-ticket sales businesses, most of the sales are clumped at the end of each quarter — but that’s an income statement thing, not a balance sheet thing), and he is pretty certain that there is no other explanation.