From Glass Ceiling to Glass-Steagall

From Glass Ceiling to Glass-Steagall

Elizabeth Warren teaches CNBC anchors banking history. 

 

Eliz­a­beth War­ren is a fluke and should never have been elected in the first place. Not only is she well-versed in pol­icy, she devises it. Not only is she con­sid­er­ate of the views of her con­stituents, she also con­sid­ers her oppo­nents’ stances (before she effec­tively rebuts them). Not only does she rep­re­sent Mass­a­chu­setts, she seeks to rep­re­sent the coun­try at large.

All of these seem like great qual­i­ties to have in all our politi­cians. That’s why War­ren, a for­mer pro­fes­sor and the mind behind the Con­sumer Finan­cial Pro­tec­tion Bureau, should never have been elected. Take for exam­ple the fol­low­ing inter­view she recently gave on CNBC:

 

In the clip, Sen­a­tor War­ren dis­cusses her pro­posal to bring back the Glass-Steagall Act. First enacted in 1933, Glass-Steagall sep­a­rated com­mer­cial and cor­po­rate bank­ing, ensur­ing that com­mer­cial deposits (i.e. the sav­ings under your pil­low case that you deposit at the bank) are sep­a­rated insti­tu­tion­ally from the far riskier lever­ag­ing typ­i­cal of cor­po­rate banking.

War­ren tells the story of the enact­ment of Glass-Steagall, which existed until 1999 when it was effec­tively repealed by the Graham-Leach-Bliley Act, and how this New Deal era leg­is­la­tion insu­lated U.S. econ­omy from the con­stant boom-and-bust cycle that char­ac­ter­ized much of its history.

War­ren con­cedes that bring­ing back Glass-Steagall isn’t the sil­ver bul­let for fix­ing all of our finan­cial woes, but she does point out that our finan­cial ser­vices sys­tem remained rel­a­tively sta­ble until a wave of dereg­u­la­tion began to weaken Glass-Steagall in the 1980s.

When the host dis­agrees about whether the his­tor­i­cal record cor­rob­o­rates Warren’s claim that Glass-Steagall helped usher in a period of rel­a­tive finan­cial sta­bil­ity, War­ren rebuts him with a detailed and assertive reca­pit­u­la­tion of the facts while also acknowl­edg­ing his position.

In other words, War­ren knows what she is talk­ing about and isn’t afraid to engage with crit­ics while allow­ing them to save face when she knows she is right.

These qual­i­ties of well-informed assertive­ness and coura­geous lead­er­ship are hard to find in pol­i­tics because our demo­c­ra­tic sys­tem selects for incom­pe­tence and weak­ness. We assume that a politi­cian lives or dies by the approval of their con­stituency come elec­tion time. That assump­tion has increas­ingly been fur­ther from the truth.

Politi­cians, in fact, live or die by the vast amounts of money they must raise for them­selves and oth­ers. Take a look at the fol­low­ing CQ Roll Call arti­cle about Repub­li­can Sen­a­tors and Sen­ate hope­fuls gath­er­ing together for marathon fundrais­ing ses­sions to raise money for their cam­paigns and the National Repub­li­can Sen­a­to­r­ial Com­mit­tee. As Roll Call points out, the push comes as Repub­li­cans attempt to counter the Democ­rats recent fundrais­ing streak:

The effort to get more sen­a­tors per­son­ally involved was intended, in part, to help reverse a trend. Recently, Democ­rats have been far more gen­er­ous in com­mit­tee dona­tions out of their per­sonal cam­paign accounts.

In the 2012 cycle, 20 of the Demo­c­ra­tic Sen­a­to­r­ial Cam­paign Committee’s top 25 largest con­trib­u­tors were sen­a­tors’ cam­paigns, and they gave a total of $8.6 mil­lion, accord­ing to fig­ures com­piled by Polit­i­cal Money­Line. By com­par­i­son, nine of the NRSC’s top 25 con­trib­u­tors were sen­a­tors’ cam­paigns and col­lec­tively gave just more than $1 mil­lion. Many of the GOP’s top dona­tions came from joint fundrais­ing committees.

“We’ve been stress­ing that with Repub­li­cans,” NRSC Chair­man Jerry Moran said in an inter­view, just after mak­ing calls him­self. “Almost all sen­a­tors have con­tributed from their lead­er­ship PACs, which is lim­ited to $15,000. And then the request is: Can you do more from your own polit­i­cal campaigns?”

Not only must politi­cians spend end­less time on their own cam­paigns, they must also con­tribute to over­all party fundrais­ing. As the Demo­c­ra­tic side of fundrais­ing shows, cour­tesy of this Huff­in­g­ton Post story, “call-time” (the euphemistic term for one-on-one fundrais­ing) takes up a sig­nif­i­cant por­tion of time for both the Con­gressper­son and his or her staff:

“It bites into your pri­vate life. It bites into your leisure time,” said for­mer Rep. Bar­ney Frank (D-Mass.), who is now being con­sid­ered for a Sen­ate seat. “You shouldn’t only do what you have to do, you should be able to read. … It cuts into time mem­bers spend with each other.”

“Any mem­ber who fol­lows that sched­ule will be com­pletely con­trolled by their staff, handed state­ments that their staff pre­pared, speak­ing from talk­ing points they get emailed from lead­er­ship,” said Miller. “They cer­tainly are going to be ask­ing ques­tions to wit­nesses at hear­ings that their staff sug­gested. If they offer an amend­ment it will be some­thing that lead­er­ship sug­gested they offer … to try to give them a lit­tle boost back home.”

Spend­ing so much time on fundrais­ing nat­u­rally pushes mem­bers of Con­gress away from crit­i­cal think­ing and prin­ci­pled posi­tions towards more con­ser­v­a­tive, tech­no­cratic, and less provoca­tive policies:

Work­ing a sched­ule like that as a fresh­man teaches a mem­ber of Con­gress about the institution’s pri­or­i­ties. “It really does affect how mem­bers of Con­gress behave if the most impor­tant thing they think about is fundrais­ing,” [Rep. Brad] Miller said. “You end up being nice to peo­ple that prob­a­bly some­body needs to be ques­tion­ing skep­ti­cally. It’s a fairly dis­turb­ing sug­gested sched­ule. You won’t ask tough ques­tions in hear­ings that might dis­please poten­tial con­trib­u­tors, won’t sup­port amend­ments that might anger them, will tend to vote the way con­trib­u­tors want you to vote.”

[For­mer Rep. Tom] Per­riello said that the drive for fundrais­ing winds up con­tain­ing “an enor­mous anti-populist ele­ment, par­tic­u­larly for Dems, who are most likely to be hear­ing from peo­ple who can write at least a $500 check. They may be lib­eral, quite lib­eral in fact, but are also more likely to con­sider the deficit a big­ger cri­sis than the lack of jobs.”

The time spent fundrais­ing, he added, also “helps to explain why many from very safe Dem dis­tricts who might oth­er­wise be push­ing the con­ver­sa­tion to the left, or at least will­ing to be the first to take tough votes, do not – because they get their lead­er­ship posi­tions by rais­ing from the same donors noted above.”

With lim­ited staff resources and time, atten­tion is clearly diverted away from pol­icy and into pol­i­tics. That often explains why lob­by­ists infest many cor­ners of Con­gress (as much of the pol­icy work ends up being out­sourced to them). The lack of time spent on pol­icy explains why tech­no­cratic poli­cies that fit exist­ing mod­els and come with “binders full of data” are pre­ferred. Solu­tions backed by sim­plis­tic easy-to-understand mod­els cor­rob­o­rated by lots of sta­tis­tics are appeal­ing because they are quick, seem­ingly unim­peach­able solu­tions to our tough­est prob­lems. Politi­cians and their staff have no rea­son to care­fully con­sider the com­plex­ity of the prob­lems and the fail­ure of pre­vi­ous poli­cies to address these issues.

In other words, politi­cians are encour­aged to be very good at rais­ing money and look­ing good (and not much else). If you are knowl­edge­able and thought­ful before you run for office, it seems likely that the demands of the job will wear down what­ever reserves of courage, lead­er­ship, and intel­li­gence you once held so dear to the func­tion­ing of our demo­c­ra­tic system.

As one of the CNBC hosts says in the close to the above clip: “No one wants to look professorial.”

 

About Sarang Shah

Sarang Shah is the founder of Distilled Magazine. He is also a graduate of the Georgia Institute of Technology and Trinity College Dublin. His most recent stint was at the University of Cambridge. He has worked in the fields of computational neuroscience, theoretical physics, international affairs, journalism, and politics.