TBTF Strike Back! SEC Commissioner Calls FSOC “Vast Left Wing Conspiracy”

Posted on July 18, 2014 by Yves Smith

One of the favored practices of the banking industry in recent years has been to engage in not merely shameless, but truly deranged hyperbole when anyone dares voice so much as an itty bitty threat against their prerogatives. For instance, venture capitalist Tom Perkins had a meltdown in the op-ed section of the Wall Street Journal, conflating criticism of rentier behavior among the 0.1% as an incipient Kristallnacht. Jamie Dimon in March 2009 (yes, you have the date right) had the temerity to complain about the “vilification” of Corporate America over the financial crisis. Even the weak restrictions on executive pay in the TARP produced outcries and desperate efforts to repay the TARP quickly (and the cronyistic Treasury acceded, rather than requiring TBTF banks to get their capital levels higher first).

We witnessed a new outburst of Banking Industry Persecution Complex yesterday from SEC Commissioner Michael Piwowar, who was speaking before an assembly of fellow inmates at the American Enterprise Institute. Piwowar has made it clear in previous speeches that he is opposed to provisions of Dodd Frank that call for the designation of systemically important financial institutions known in the trade as SIFIs, or among the laity, TBTF. He’s also tried claiming the Financial Stability Oversight Council is a threat to the SEC’s power. This is ludicrous since the SEC has never been a banking regulator and its influence is vastly less than that of the Fed and Treasury, and even less than that of the FDIC and OCC, which aren’t subject to Congressional appropriations. As former SEC chairman Arthur Levitt wrote in considerable detail in his memoir, Take on the Street, he’d regularly have Congresscritters, particularly Joe Lieberman, threaten to cut the SEC’s budget every time he tried getting serious about regulations. So Piwowar’s claims about the SEC’s power are either disingenuous or unhinged.