By Simon Johnson
During the Dodd-Frank financial reform debate in early 2010, newly elected Senator Scott Brown of Massachusetts was referred to as an ATM for the bankers – meaning that whenever they needed some more cash, they would stop by his office. It was not paper money he was handing out, of course, it was something much more valuable – rule changes that conferred a greater ability to take on reckless risk, damage consumers, and impose higher future costs on the taxpayer.
Mr. Brown had this ability because he represented the final vote needed to pass Dodd-Frank through the Senate. He could have asked for many things – including greater consumer protection, a more thorough investigation into mortgage practices, and reforms that would have cleaned up unscrupulous lenders. He asked for none of those changes – or anything else that would have made the financial system safer and fairer.
Instead, Senator Brown’s requests were designed to undermine the Volcker Rule – i.e., he was opposing sensible attempts to limit the ability of big banks to place highly dangerous bets (and to blow themselves up at great cost to the rest of us). Mr. Brown seems to have been particularly keen to allow big banks to invest in hedge funds of various kinds – and the Boston Globe reported recently that he has continued to push in this direction behind the scenes. Continue reading