Cantwell takes on the big banks

By Steve Dzielak

Can Washington’s junior senator, Maria Cantwell, be both a technocrat and a populist?

Since November, she has (1) wondered why Treasury Secretary Tim Geithner “still has a job,” (2) criticized the Senate’s plans to fix the financial industry as “inadequate,” (3) declared the unregulated trading of complex derivatives a central driver behind the economic bubble, (4) introduced bills to curb such speculative derivatives trading, (5) attempted to resurrect a strict separation between commercial banks and investment firms, and (6) stood up as one of only 11 Senate Democrats voting to deny a second term for Federal Reserve Chairman Ben Bernanke, who nonetheless was reconfirmed by a 70-30 vote.

Quite a journey from her start in the Senate.

Cantwell defined her role in the Senate as a “policy wonk” just as Enron exploded in the early 2000s, when she fought for corporate accountability through the passage of the Commodities Future Modernization Act, which regulated industry scams such as power derivatives.

Enron was Cantwell’s initiation, but it wasn’t until several years later, she said, that she realized the full significance of the regulatory void. Michael Greenberger, former director of the federal Commodities Futures Trading Commission, told a Senate committee that “there is more regulation in hamburgers than in futures” trading. That “got my attention,” Cantwell said.

In December, Cantwell and Senator John McCain introduced legislation that would bar commercial banks from undertaking brokerage activities. Such a ban would in effect reinstate the Depression-era Glass-Steagall Act, repealed a decade ago. The bill would require financial firms operating commercial banks and investment houses to decide whether to focus on commercial banking or investment banking. Commercial banks would be banned from engaging in insurance. Persuading the Senate to embrace her proposals is especially challenging because Cantwell does not sit on either of the Senate committees with jurisdiction. But she and McCain intend to persevere.

Cantwell has also come out strongly in favor of helping community banks the same way the Federal government helped Wall Street. She supports President Obama’s proposal to use $30 billion in TARP funds to help community banks lend to small businesses. She wants the President to implement the plan immediately, rather than waiting for Congress to act.

“When the big banks were in trouble,” Cantwell said, “we acted almost overnight to help them, without question, with little oversight, and without a general design. Now it’s been more than a year after the crisis and we still don’t have a program designed for small banks.”

Cantwell is still at it. In a recent Seattle Times interview, she accused prominent disciples of free markets of lacking in regulatory zeal. Her targets included former Federal Reserve head Alan Greenspan, Obama economic advisor Larry Summers and, to a lesser extent, Geithner.

“I believe in good old-fashioned American capitalism where you have true competition and transparent markets,” she said. “Getting capital and competition has made our country great. And if the big banks are too big, and they push the small banks out, and more and more concentration of big banks is the norm, that’s going to hurt the competitiveness and effectiveness of getting capital to small businesses.”

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