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Roose writes: "With two largely symbolic bills in seven months in office, the question must be asked: What is Elizabeth Warren really doing here? They're directed to her fellow legislators. And their message is simple: On issues involving Wall Street, the center isn't where you think it is."

Sen. Elizabeth Warren testifies during a hearing on Capitol Hill about the Consumer Financial Protection Agency. (photo: Joshua Roberts/Bloomberg)
Sen. Elizabeth Warren testifies during a hearing on Capitol Hill about the Consumer Financial Protection Agency. (photo: Joshua Roberts/Bloomberg)


Elizabeth Warren's Long Game Against Wall Street

By Kevin Roose, New York Magazine

13 July 13

 

esterday, Senator Elizabeth Warren undertook a big act of financial rabble-rousing, by introducing a bill that would reinstate key provisions of the 1933 Glass-Steagall Act that were repealed in 1999. The new bill would essentially force big bank holding companies like Citigroup and Bank of America to split in half - commercial banking on one side, investment banking on the other - and hypothetically make the entire banking system safer and less crisis-prone by (a) shrinking banks, and (b) reducing the amount of risky stuff that goes on at the commercial banks where normal people keep their savings accounts. She's calling this bill the "21st Century Glass-Steagall Act" and promoting it using the slogan "Banking should be boring."

The bill, which Warren has already said won't get support from the Senate Banking committee, is the second piece of legislation Warren has sponsored since taking office that has virtually no chance of passing. In May, she introduced the Student Loan Fairness Act, which for one year would bring student loan interest rates down to the rates the Federal Reserve charges banks. That bill was called "embarrassingly bad" by the Brookings Institution, and the new one isn't faring much better among policy wonks.

So, with two largely symbolic bills in seven months in office, the question must be asked: What is Elizabeth Warren really doing here?

One theory, held by most of the Wall Streeters I've spoken with about Senator Warren, is that she's simply playing for attention. They see her grandiose bills and made-for-YouTube tirades against financial excess and lax regulation as shallow populism, designed to garner reelection, solicit donations, and boost her reputation as a badass. Even one ex-financier I spoke to recently said he thought Warren was doing "showy stuff," not meant to make it into actual law.

The second theory, also held by some conservatives and financial-industry lobbyists I've spoken to, is a variation on the first and posits that Senator Warren is basically the Steve Stockman of the left - a principled true-believer whose refusal to abide by the horse-trading, pragmatic legislative process leaves her with a bunch of unsupportable, silly-sounding bills. In this theory, getting attention isn't the goal, but it often looks that way.

But there's a third theory. It's the one that acknowledges that Senator Warren is, pound-for-pound, one of the smartest and savviest legislators in Congress, and imputes to her a far more complicated motive than simple attention-seeking or "gesture politics."

It's the long-game theory.

This theory says that Senator Warren isn't trying to change individual laws, so much as move the entire political discussion of the financial sector to a different rhetorical arena and force other legislators to join her there. In this theory, Warren's anti-bank bills and activism aren't meant mainly for her constituents in Massachusetts, for the Internet audience, or even for Wall Street. They're directed to her fellow legislators. And their message is simple: On issues involving Wall Street, the center isn't where you think it is.

Wall Street, and finance generally, is one of the issues where the views of Congress have traditionally differed sharply from the views of the masses. Most surveys show that a vast majority of Americans support tougher regulation on banks; yet, because the financial sector's campaign contributions and lobbyists have an outsize impact on Congress, the debate about how to rein in Wall Street excess has taken place on the financial sector's turf. On Main Street, around 60 percent of people think Wall Street banks are too big and should be broken up. But to find that position in Washington, you've typically had to look to the leftmost fringes.

Now Senator Warren, along with other pro-regulation legislators like Sherrod Brown and David Vitter, are shifting the center. The Brown-Vitter bill, which would have basically broken up banks by imposing tougher capital requirements on large financial institutions, won a nonbinding 99-0 vote in the Senate and was taken seriously by legislators in both parties. (Brown-Vitter did considerably less well when it came to getting actual, binding support.) For her 21st Century Glass-Steagall bill, Senator Warren has brought aboard co-sponsor Senator John McCain - a truly amazing about-face, given that McCain not only voted for the original Gramm-Leach-Bliley Act that repealed the original Glass-Steagal, but hired that bill's lead sponsor, Phil Gramm, as a senior economic adviser for his 2008 presidential run.

Senator Warren's regulatory push hasn't changed Wall Street yet. Most financial regulations that take actual effect are written by agencies like the CFTC and the SEC. And in those agencies, debates about how Wall Street should be regulated still take place in fairly small windows. (Commissioners might disagree about how to regulate, say, overseas derivatives trading, but nobody in the CFTC is proposing outlawing certain kinds of derivatives entirely.)

But it's entirely possible that Senator Warren is proposing reforms she knows have no chance of passage, simply to widen the boundaries of debate. This is a basic tenet of negotiation. If you want a 20 percent raise, you ask for a 40 percent raise. But this isn't traditionally how the game over financial regulations has been played. By loudly advocating for policies that are outside the narrow confines of traditional political acceptability, she's expanding what political theorists call the Overton window and forcing other politicians to consider more moderate views that would have seemed fringe several years ago.

The new Glass-Steagall bill doesn't make a tremendous amount of sense. As Senator Warren herself told Andrew Ross Sorkin last year, repealing Glass-Steagall wouldn't have prevented the financial crisis or stopped the $6 billion London Whale trading losses at JPMorgan Chase. Bear Stearns and Lehman Brothers were both investment banks with no commercial banks attached to them, and their activities wouldn't have been prevented under the original Glass-Steagall. Neither would the activities of AIG, Fannie Mae, or Freddie Mac. And, as Matt Levine notes, the primary drivers of the financial crisis - mortgage lending and the use of derivatives like credit default swaps - were both permissible under the old Glass-Steagall regime.

If Senator Warren herself is willing to admit that reinstating Glass-Steagall's bank-separation provisions wouldn't have prevented the financial crisis, she must have another motive for introducing it. And I suspect it's more complicated than grandstanding or staying true to principles.

The truth is that many senators don't know what capital ratios or rate swaps are, never mind being able to write legislation around them. And in the same way that Wall Street's informational advantage gives it an automatic edge over ordinary investors, Warren's knowledge of the financial markets gives her automatic authority in Congress. Even if she's a freshman senator, her knowledge has allowed her to coalition-build like a veteran. And that ability - not a single bill or years of Internet fame - is what could make her quest to reform Wall Street successful.

Bankers and their lobbyists shouldn't be worried that Senator Warren's new Glass-Steagall legislation will pass. It won't. And passing is largely beside the point. The more interesting achievement is that she's managed to bring ideas like these into the realm of political acceptability and get support from both sides of the aisle for them. Warren's "make banking boring" campaign may look silly to finance-world cynics, but it's entirely possible that she's engineering a new political consensus that will do much more damage to Wall Street in the long term than simply breaking up a few banks.


 

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+119 # Tiffany49 2013-07-13 16:24
Keep up the good work! Go Elizabeth
 
 
+56 # Eldon J. Bloedorn 2013-07-13 22:42
Elizabeth is a long-term winner. She'll be around for a long time. And, don't think she can be bought out.
 
 
+14 # Joe Bob 2013-07-14 00:33
Gotta do what works....
 
 
+38 # ganymede 2013-07-13 23:02
Here's a prediction: With Elizabeth Warren we finally have someone who can use her force of moral power and intellect to finally deal with the banksters who have hijacked our economy and country. She will inspire Obama, who has done his best, and who history will treat much better than most people think, but it's really needed a powerful woman who can handle, once and for all, the servile, ignorant rightwingers in Congress. The rightwingers and Tea Party neo-fascists really have not had much going for them except obscene amounts of money from the Koch Bros and their counterparts over the past 20 years as they tried to privatize the entire country including all its inhabitants. I believe the tide is turning, and even middle Americans,who have lived uncomfortably in their sublime ignorance, and who have been thoroughly brainwashed,are starting to listen to Warren and the 2-3 dozen progressive Democrats in the House and Senate. She will even overwhelm our irresponsible corporative media. Sen. Elizabeth Warren is truly the hope and strength we've been waiting for.
 
 
+40 # ghostperson 2013-07-13 23:03
No doubt Wall Street sees Warren as a self-promoting grandstander. Denigration is the elite's prelude to a full frontal attack.

The sentient public sees Warren as smart as a whip, a brain trust where finance is concerned and most important: as the rare politician who commands and inspires trust that she has John Q's interests at heart.

Her public statements, if given by someone with an outie rather than an innie, would make the individual an icon of strength and paragon of knowledge. But the mere fact that an innie is involved allows the upper tier misogynists to characterize Warren as a bitch, the ultimate, vituperative merit eraser--they think.

I say to the 1% and Wolves of Wall Street: It would only be a plus for us if she were a bitch. That's just icing on an already delicious cake.

For the time being, we'll just settle for Warren's Bible-Belt, Heartland horse sense and frighteningly-b rilliant critical analysis about what these assholes have been doing to us. There isn't a one of them that could go toe-to-toe with Loverly Liz. Go Boomer Sooner.
 
 
+3 # CuttySark 2013-07-13 23:12
The author, Kevin Roose, spends his first five paragraphs spreading the kind of Liz Warren propaganda that the usual suspects hope to inject into as many homes and heads as possible. Then he takes off his black hat and starts sounding like Our Liz may have a plan and a chance after all. What were you waiting for, Mr. Roose?
 
 
+29 # jlg 2013-07-13 23:57
Slowly, slowly catchee monkey! I believe that Elizabeth knows what she is doing, and Wall Street's day's of playing fast and loose with our country and our money are NUMBERED! What we need is more Senators like Sherrod Brown and David Vitter, who will join her and bring about the change so desperately needed - Jeff Merkley for example!
 
 
+25 # unitedwestand 2013-07-14 00:15
It does seem like no matter what good meaning Senators like Warren try the system is so rigged and so broken that it may never be fixed. At least Sen. Warren is bringing attention to the issues. Both bills that she has presented should be passed. She is a hero in my book and I wish there were more like her.
 
 
+30 # BeaDeeBunker 2013-07-14 00:24
Senator Warren is very smart. She is co-opting the 40 year old right wing technique of controlling the argument, but doing it in a positive way rather than the right's negative way.

The right wing has been getting away with 'murder' for far too long. Controlling the argument has been their way of controlling the agenda. There are so many examples of this, that it just makes my head spin. I'm dizzy, and about to fall down, and I left my clapper thing that I usually use to summon help just out of reach. So stupid of me!

But, I do recall one scene in particular in the last few years that still sticks in my mind as a prime example of successful right wing brain washing, and how utterly crazy it was to watch it happen right before my eyes.
The scene was an anti Obamacare rally, and the camera was scanning the audience reacting to the speaker's diatribe (my description-not the official word). A man, obviously a senior citizen, held up a sign that read the following: Keep the Gov't off my Medicare!!
That was it for me. I lost my grip on reality and went straight down the rabbit hole to join Alice on her scary journey.

Senator Elizabeth Warren has lit the lamp that will eventually lead me and us out into the clear air of fairness...simp le fairness is what I am seeking for my country. I'm real tired of Wonderland...ri ght wing style.
 
 
+15 # OpportunityForAll 2013-07-14 00:33
What a patriot is Elizabeth Warren.
 
 
+22 # GDC707 2013-07-14 00:35
You are neglecting the more important aspect of Warren's long game. Wall Street's criminal shenanigans are going to continue. The loophole ridden Dodd-Frank Bill assures that. By hollering loudly now, Elizabeth is going to look like the only responsible adult in the room when the house of financial cards collapses the next time. It is a question of intelligent positioning.
 
 
+22 # NOMINAE 2013-07-14 00:35
The knowledge that this Senator demonstrates, and the dismal grasp of these subjects among the rest of the Senate, never mind the kids in the House, demonstrates the need for Senators and Congresspersons to be more than 22-yr-old kids with an eighth grade education.

When one is ignorant about and / or hostile to Science, Technology, Finance, and other subjects in which adults participate, and around which huge power revolves in the real world, there is no way for them to *ever* enter an intelligent vote on *ANY* subject.

This condition powerfully pleases their corporate owners who do not *WANT* them thinking for themselves, but take note, scumbags, there's a shift afoot in the firmament.

Elizabeth Warren is a catalyst for CHANGE. If she does nothing else, she has ALREADY changed the "narrative", and the "conversation" in Washington. This Senator is going full-charge to change the "business-as-us ual" cynical corruption that permeates our government.

Senator Warren is *DEMONSTRATING* the fact that the "emperor has no clothes", and she is doing it in broad daylight, in front of the entire WORLD !

And, cheer up, Wall Street Greed Heads, freshman Senator Warren is just NOW getting warmed UP !
 
 
+15 # DeadlyClear 2013-07-14 02:15
If we want our economy to return this bill needs to pass. Investors will not come back to the market without some safeguards and assurances that the game has changed. We néed 100 more Elizabeth Warrens.
 
 
+7 # SOF 2013-07-14 02:51
Go for what we want. You are right on. The people will support; left and right know the banks are villains and have heard of G/S Act. Go for it!
 
 
+10 # jsluka 2013-07-14 02:52
I sincerely hope Ms Warren has exceptionally good personal security. Americans are now the most violent people on Earth, and she is likely to be assaulted or assassinated; remember the saying "Only the good die young?" Look what happened to Gabrielle Gifford. I pray for America, and for her safety!
 
 
+6 # kalpal 2013-07-14 05:36
Under no circumstances will Wall Street permit any laws to pass that will impede the gowth of the coffers of the uber wealthy. It is easy and very inexpensive to buy right wing legislators who will obstruct any act that may cut into profits of the rich possibly allow the middle class to breathe more easily.

We have the cheapest Congress money can buy, not the best.
 
 
-11 # Bruce Gruber 2013-07-14 06:14
An interesting series of suppositions formatting Wall Street uncertainties regarding the 'little lady' against whom they have invested so many of our dollars.

This depressingly whiny expression of the impossibility of a legal, moral or equitable future preferred by ... 'true-believer( s) whose refusal to abide by the horse-trading, pragmatic legislative process' ... is noteworthy.

There are few if any crumbs of balance authored here. "Pro-regulation " legislators are described as "shifting" the center'. Personally, I view the 'center' as the carefully propagandized, misinformed and then polled divided public blame game.

This is tripe salted with a few concocted presumptions about 'impossibility' , 'impracticality ', 'lack of realistic' acceptance of reality and similar dismissive disdain for principled leadership. No mention of the "Citizens United" gazillion dollar hostile takeover of the regulatory, elective and judicial underpinnings of these United States of America.

Everything in this article seems to have been cobbled from the ALEC and the Heritage Foundation infused with a K Street mentality.
 
 
+4 # tedrey 2013-07-14 06:25
"The Brown-Vitter bill, which would have basically broken up banks by imposing tougher capital requirements on large financial institutions, won a nonbinding 99-0 vote in the Senate," but when it was introduced as non-binding, it got only two sponsors. They will say they want what the public wants, but will never allow it to actually happen. They are Wall Street's lackeys, not our servants. And they lie 24/7.
 
 
+2 # RobertMStahl 2013-07-14 06:33
Price fixing to gain market access is the big issue. It has been going on forever however. More importantly, then, it has gestated to the global level, so this is very big, like the dissolution of the Old Guard requiring learning by the public, in general. For the price fixing bubbles having turned into foam, then slime, silver manipulation is about the most egregious. Matt Taibbi has it right that everything is set to fall like a duck in Cheney's cross hairs unless this comes out in the open.
http://www.silverseek.com/article/gatas-bill-murphy-chris-powell-call-out-gold-and-silver-market-manipulation-conspiracy-criti
 
 
+12 # Carol R 2013-07-14 06:48
How about a forth idea of why Elizabeth Warren is speaking out: It is the right thing to do!

Average Americans are tired of the power purchased in Congress by lobbyists and huge campaign contributions.

Elizabeth Warren for President!!! She is one of the few Congress members who is speaking out to help average and poor people. A government of the people, by the people and for the people has gotten lost.
 
 
+8 # Walter J Smith 2013-07-14 07:25
I like what Senator Warren is doing; it is throwing into comic relief the absurdities of business as usual bipartisan collusion that Wall Street's pampering is all they are supposed to be doing; and that is exactly what they have been doing right on through the current legislative stalemate: handing billions of dollars in corporate welfare to Wall Street. The Big Ag bill is only the latest in a streak of bipartisan collusion that runs all the way back to Ronald Reagan.

But the article suffers from too much pandering of the usual propaganda. "Most financial regulations that take actual effect are written by agencies like the CFTC and the SEC." Wall Street's lobbyists write the regulations, laws, exceptions, etc., and to claim otherwise is to reveal astonishing ignorance.

Nevertheless, reportorial ignorance will hardly deflect Senator Warren from her crusade to put the Democratic Senators on notice: which side are you on? Most of them are still decidedly on Wall Street's side; thus the impossibility of getting decent banking & finance legislation.

They failed when the owned both houses in 2009-2010; Nancy Pelosi & Harry Reid, with a little help from their loyal allies, throttled that banking-finance governance opportunity. Thus the Dodd-Frank bill was stillborn. It governs nothing.
 
 
+14 # gotsmarter 2013-07-14 08:42
Senator Warren gets it. And she has the guts and integrity to follow through. I'm trying to think of another Senator with brains and guts and integrity. The list is short. We the People--every single one of us, the taxpayers--must speak at the polls.
 
 
+4 # JSRaleigh 2013-07-14 09:19
I don't think we're likely to see real reform until someone takes a few bankers out and shoots them "pour encourager les autres".
 
 
+1 # Cailleach 2013-07-14 11:35
I've heard that there are people sharpening their guillotines--ye s there still are such things--they're used to cut large amounts of paper, but i"m sure they can be converted to other uses.
 
 
+11 # reiverpacific 2013-07-14 09:22
Bein' a economic/financ ial dim-bulb and not very au courant on the minutia of Glass-Steagal, I leave the finer points of the debate to those of you who study such things in depth.
But here's the simple political point I get from this article: "a bunch of unsupportable, silly-sounding bills. In this theory, getting attention isn't the goal, but it often looks that way" .
Well, if attention-getti ng isn't part-point of what Mrs Warren is doing, then what is prithee? In her wisdom, Warren HAS to do a bunch of what appears to be grandstanding.
And who is she trying to get the attention of, as the major networks pretty much ignore her and the lobbyists try to drown her out?
As the article points out, it's to widen the debate and shift the center -or balance of power-play if you prefer, always tipped well to the right of the scales of representation by the overabundance of lobbyists representing the heavy-hitters and barely the squeak of a mouse from a few practically-ign ored truth-telling voices, especially by the mass-media, on behalf of the people.
What she is best at is translating and interpreting banker/broker econo-speak better that these arrogant, be-suited goons can do themselves! That's what scares the livin' shit outa them, prompting them to circle their wagons and try to mock her.
It appears that the challenge is to get the owner-media to carry her message, in which case I can only say "Good luck"! Peruse the foreign press or the 'alternative' in the US.
 
 
+8 # cnaran36 2013-07-14 11:49
Sen Warren dont change your style or sell out. The large banks & our government both sleep in the same bed. There is massive conflicts of interest & no one with the power to break it up has the cojone_ to do it. Why? of course they are profiting ($$$$) from this policy. Wall Street is the cancer of america, left unregulated will cause another Depression/Mass ive Recession as we are still experiencing. American regulators should SEIZE all 21 Trillion in illegal OFFSHORE accounts, use it to pay the national deficit (17T) leaving a surplus for the country to enjoy.
 
 
+9 # Jaysson Brae 2013-07-14 13:02
Warren's the only one in the entire US Senate who's even TRYING to do anything sensible about predatory banks and Wall St. ghouls.

She deserves much praise -- and she needs every progressive person's support
 

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