Kaiser’s book begins with a Sept. 18, 2008, meeting of congressional leaders, Treasury Secretary Paulson and Federal Reserve Chairman Bernanke.
Washington Post veteran Robert Kaiser’s latest book, “Act of Congress: How America’s Essential Institution Works, and How It Doesn’t,” provides an insider’s view of the making of Congress’ response to the 2008 market crash, the Dodd-Frank Act.
He begins with a Sept. 18, 2008, meeting of congressional leaders, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke. Paulson asked Congress for $700 billion, arguing that another Great Depression was looming. Bernanke warned that Wall Street meltdowns are always followed by depressions in the rest of the economy. Main Street cannot be shielded from Wall Street, and Congress needed to act quickly, he warned.
Act it did, passing the Troubled Asset Relief Program in October of that year. The ink from President George W. Bush’s signature had barely dried when Treasury announced that it would not bother with the troubled assets part of TARP. Paulson chose instead to use the money to invest in troubled companies, an idea he specifically rejected when meeting with Congress.
TARP was meant to keep the ship afloat, with an overhaul coming later.
The longer-term legislation, the Dodd-Frank Act of 2010, began when President Barack Obama told House Financial Services Chairman Barney Frank that the administration would largely write the bill. The Massachusetts Democrat agreed. House Republicans played little role, as Frank and the House Democratic leadership were able to force the legislation through.
The Senate was a different story. Banking Chairman Christopher J. Dodd, D-Conn., worked hard to come to an agreement with Republicans. While the legislation passed the Senate mainly on party lines, Kaiser’s book makes clear that the biggest roadblock to securing GOP votes was the creation of the Consumer Financial Protection Bureau, a harbinger of the struggles over the CFPB and its leadership that endure today.
Meanwhile, the law’s “Volcker rule,” a ban on proprietary trading by banks, is confounding the regulators tasked with its implementation. Named after former Federal Reserve Chairman Paul Volcker, it seeks to prevent Federal Deposit Insurance Corporation-insured banks from taking risky bets. The line between banned proprietary trading and market-making, an essential function performed by banks to keeps markets liquid, however, is unclear.
From left, Lisa Peng, daughter of Peng Ming, Grace Ge Geng, daughter of Gao Zhisheng, and Ti-Anna Wang, daughter of Wang Bingzhang, hold pictures of their imprisoned fathers during a House Subcommittee on Africa, Global Health, Global Human Rights, and International Organizations hearing in the Rayburn House Office Building titled “Their Daughters Appeal to Beijing: ‘Let Our Fathers Go!’”
Each year since 1990, CQ Roll Call has reviewed the financial disclosures of all 541 senators, representatives and delegates to determine the 50 richest members of Congress. This year's report, derived from forms covering the calendar year 2012, shows it took a net worth of $6.67 million to crack the exclusive club.