Congressman Ed Royce (R-Fullerton) has long campaigned against corporate welfare—the practice of congressional subsidizing multimillion-dollar conglomerates, usually in exchange for political favors or campaign contributions. As co-chairman of the Porkbusters Coalition, Royce has targeted myriad wasteful government programs, including the $188,000 budgeted for studying insect noise, $100,000 for export strategies for mahi-mahi and a whopping $12.7 million for a Swine Research Center. He's also battled government subsidies of such corporations as Dole Fresh Fruit, McDonald's and Exxon, to name a few.
Regrettably, Royce's principled stand against big-business interference in government evidently doesn't extend to protecting consumers from lightly regulated banks and financial institutions, as evidenced by his support of Senate Resolution 900/House Resolution 10, the so-called “Financial Modernization Act,” versions of which passed both the House and the Senate.
“I look forward to working on the final version of this important legislation that will save consumers billions of dollars annually by allowing competition between banks, insurance companies and securities firms,” says Royce, a member of the House Banking and Financial Services Committee.
The act—evidently “Modern” in the sense of early 20th-century Modernist art—effectively repeals the Glass-Steagall Act of 1933, which restricted dealings between banks and securities agencies. The new act would allow banks—previously barred from investing in the stock market or owning or being owned by securities companies—to play in the biggest casino of them all, Wall Street's securities market.
President Bill Clinton is expected to sign the act, the latest incarnation of which included Royce as one of the authors. Federal Reserve Board Chairman Alan Greenspan believes it will result in greater competition between financial institutions, as opposed to, say, the creation of near-omnipotent financial monopolies.
“Consumers of financial services,” argues Greenspan, “are denied the lower prices, increased access and higher-quality services that would accompany the increased competition associated with permitting banking companies to expand their activities.” He went on to say, “We cannot afford to be complacent regarding the future of the U.S. banking industry. The issues are too important for the future growth of our economy and the welfare of our citizens.”
To say this seems optimistic is an understatement. It is unclear whether the estimated $15 billion per year the act supposedly saves will be translated into consumer savings or merely into profit for the less-regulated banks. Nor is it clear whether it's wise to repeal Depression-era legislation designed to rein in financial institutions that ran unchecked during the speculative boom of the 1920s.
But perhaps the aspect of this act that's caused the most concern is the decrease in consumer privacy. Writing for the LA Times, columnist Robert Scheer observed that “lobbyists for the financial oligarchs defeated a crucial amendment to this legislation proposed by Senator Richard C. Shelby (R-Alabama) that would have required bankers, stockbrokers and insurance agents to get consumers' permission before sharing what should be personal information about you.”
What the act does, effectively, is allow financial institutions to share consumers' personal information “with an unaffiliated third party to perform services or functions on behalf of the financial institution and to enter into certain joint marketing arrangements for financial products or services.” The consumer then has to be notified—afterward—and is given the option of “opting out” of the bank's services.
Scheer points to the immense amounts of money lobbyists spent—$163 million in the past two years—to defeat this amendment and speed the bill's passage. Quite a bit of this cash—$576,635—has flown to OC representatives, including Royce ($144,626), Garden Grove Democrat Loretta Sanchez ($119,315) and Newport Beach Republican Christopher Cox ($196,656). Unsurprisingly, all six members of OC's congressional delegation voted in favor of the House version of the bill. “Congressman Royce is never influenced by anything but his own judgement and opinion,” said a spokesperson from Royce's office. “I'm not saying money doesn't influence the political process—of course it does—but with Congressman Royce, it doesn't. . . . If the Congressman was influenced by campaign contributions, you'd see the transportation industry writing checks left and right.”
Indeed, it seems incongruous that Royce—who has made a career out of attacking corporate welfare—would be swayed by campaign finances, but sources close to him have indicated that Republican leaders regularly exert extreme pressure on Royce to get him to follow the party line, tactics thought to have been excised from the supposedly gentler, Gingrich-free Congress.
But there may be something in the fact that the financial industry is Royce's greatest supporter. In the last election cycle, financial companies and trade groups gave him $100,000 more than any other industry.
American Bankers Association lobbyist Ed Yingling told the LA Times the act is “probably the most expensive issue that Congress has ever dealt with. This was our top priority for a long, long time. The resources devoted to it were huge, and we fought for it tooth and nail.”
No kidding. Perhaps faced with that sort of pressure—both financial and political—even the “courageous, pork-busting” congressman has a price.
