At the Better Markets conference last week at George Washington University – “Five Years On, Learning Lehman’s Lessons from the Panic of 2008: Are We Better Prepared for the Next Financial Crisis?” – former Senator Ted Kaufman, now a visiting professor at Duke University School of Law, told the audience that “if you want to give up hope” on financial reform, just go look at a study by his colleague at Duke, Professor Kimberly Krawiec.
The study is titled — “Don’t Screw Joe the Plummer: The Sausage Making of Financial Reform.”
It was published earlier this year in the Arizona Law Review.
In it, Krawiec looks at comment letters and meeting logs in the pre-proposal phase of the Volker Rule.
The 8,000 letters were overwhelmingly from the public — with more than 7,000 form letters or modified form letters. They were from angry citizens demanding that the government get tough with the banks.
The phrase “Don’t Screw Joe the Plummer” — comes from one of the comment letters.
“It’s a direct quote from one of the individual comment letters we looked at,” Krawiec said.
“It captured the tone of the individual comment letters. Generally, they went like — the banks have made a mess of everything and we know how they contribute to you politicians.”
“Now, here you are out to screw ‘Joe the Plummer’ yet again. So, pass the Volker Rule and stop screwing the little guy.”
“I retained all the grammar, punctuation, and spelling as in the original,” Krawiec told Corporate Crime Reporter in an interview last week. “Part of the point was to illustrate the vast divide between a detailed and sophisticated set of industry letters and the short, angry, and much less sophisticated letters from the general public.”
The meetings, on the other hand, were overwhelmingly institutional — Wall Street firms, their law firms and lobbying groups — meeting one on one with the various federal agencies tasked with coming up with a rule that would ban proprietary trading by banks, among other things.
Of the 450 meetings held with federal agencies to discuss the Volker Rule in the pre-proposal phase, 351 (78 percent) were financial institutions (the Leader Board: JP Morgan Chase 27 meetings, Goldman Sachs 22, Morgan Stanley 19, Barclays 14, Credit Suisse 14, Citigroup 13).
Thirty-five of the meetings (7.8 percent) were with big corporate law firms representing the banks (Sullivan & Cromwell 11, Davis Polk 9, Debevoise 8).
Thirty-three of the meetings (7.3 percent) were financial industry lobbying groups or trade associations (SIFMA 8, Financial Services Roundtable 5).
Nineteen of the meetings (4.2 percent) were with public interest and labor groups (Americans for Financial Reform 5, AFL-CIO 3).
And twelve of the meetings (2.7 percent) were with other persons (Senator Levin and staff 5, Senator Merkley and staff 5 and Paul Volker and staff 2.)
So, that’s fully 93 percent of the pre-proposal Volker Rule meetings were with financial institutions, their law firms and lobbying groups.
“Much of administrative law is designed to give both transparency and the notion that many voices will be heard in the rulemaking process.”
“That seems to me to be a failure with respect to the Volker Rule.”
“I’m not suggesting that that’s unusual. But that’s the one I studied. And I do make some comparisons to other rulemakings.”
“You have individuals making their voices heard,” Krawiec said. “The agencies know they are angry. But when it comes to the heart of the matter — the meetings — it’s all financial institutions. There are some representation from public interest groups, but not a lot.”
Krawiec is now conducting a follow up study of the meetings and comment letters in the post-proposal phase of the Volker Rule.
Krawiec hopes to publish that study sometime before Thanksgiving.
[For the complete transcript of the Interview with Kimberly Krawiec see 27 Corporate Crime Reporter 36(12), September 23, 2013, print edition only.]