The Balance of Power
After a financial crisis, power shifts from Wall Street to Washington—but only temporarily. Wall Street is expert at clouding complicated, commercial issues in the banner of national interest. Regulate Wall Street, they say, and money will move to international markets where there is less regulation. This resonates in Washington where constituents need jobs, and corporations need access to capital. Besides, Washington can be bought cheap. Congressmen and Senators need money to get re-elected. Few industries have more money than Wall Street.
In 2008, as Washington focused on the mess created by the banks, Wall Street spent a record $95.3 million on lobbying firms, up from $88.2 million in 2007.14 From the 1990 to 2012 election cycles, Wall Street contributed $829.4 million to political campaigns. In 2010, Wall Street’s political contributions totaled $97.2 million. In 2008, when Washington was debating bail-out packages, Wall Street’s campaign contributions totaled $167.1 million. Before the credit crisis of 2007, Wall Street doled out $80.4 million in the 2006 election cycle.15
Meanwhile, Wall Street is expert at delaying the implementation of rules that would impact the ability of banks to make money. Many of the provisions of the much-hyped credit crisis laws will take years to implement. Some of the new laws, like the much vaunted “Volcker rule” that is intended to ban banks from using their own money to fund proprietary trading desks, even require a study ...