According to Sen. Elizabeth Warren, the political system is rigged to help Wall Street. For that, she blames Republicans, lobbyists and President Obama.
Yet, Warren is not entirely immune from the urge to help powerful financial interests — at least when they are local.
As reported by the Boston Globe’s Christopher Rowland, Boston-based Fidelity Investments was able to water down new rules proposed by the Securities and Exchange Commission that were aimed at regulating the mutual fund industry in the aftermath of the 2008 financial crisis.
The SEC wanted to impose a new liquidity standard on mutual funds, and replace a fixed $1 share price with a more accurate “floating” share price. But by the end of an aggressive Fidelity lobbying campaign, the capital requirements were eliminated and the“floating” share price applied only to funds that serve large, institutional investors.
“The lobbying pressure was relentless,” Sheila Bair, former chairwoman of the Federal Deposit Insurance Corporation and now head of the nonprofit watchdog group Systemic Risk Council, told the Globe.“It is a good example of how the narrow interest of the industry prevails in this debate.”
Given her populist image, it would be more in character for Warren to fight such a narrow industry interest. In this case, she did not. When Fidelity’s top executive, Abigail P. Johnson, personally lobbied the SEC in 2012, Warren stayed out of the fight. At the time, Warren was running for Senate against incumbent Republican Scott Brown, whose biggest source of funding came from Fidelity employees, according to a news report by the Globe’s Beth Healy.
While it made political sense to avoid antagonizing the mutual fund giant, Warren’s silence was Fidelity’s gain.
As the lobbying battle dragged on into 2014, Warren and Ed Markey — now both representing Massachusetts in the Senate — objected, through their staffs, to proposals that Fidelity didn’t like. They didn’t cite industry complaints; they cited concerns of local politicians. A compromise was reached, which, according to Rowland’s reporting, favored the mutual fund industry.
In a statement to the Globe, Warren’s office said the SEC rules were“an important first step” and stressed a need to “balance the risks that money market funds can pose to the economy against the need to maintain money market funds as an important investment alternative.”
Compromise is not a crime. It’s a natural part of politics. But when compromise comes down on the side of powerful financial interests, that’s exactly the kind of politics Warren is said to be fighting. And she’s taking that fight to the national stage.
“The game is rigged and the Republicans rigged it,” she said recently in Minnesota.“Republicans believe this country should work for those who are rich, those who are powerful, those who can hire armies of lobbyists and lawyers,” she said in Colorado.
She doesn’t leave Democrats off the hook, either. In an interview with Salon, she said of Obama, when “the going got tough, his economic team picked Wall Street. … Not families who were losing their homes. Not people who lost their jobs. Not young people who were struggling to get an education …”
Pronouncements like that keep Warren’s name in the mix of potential White House candidates, which she insists is of no interest to her. Yet the super-liberal wing of the Democratic Party revels in the Wall Street-rigging gospel according to Warren and sees her as an alternative to Hillary Clinton.
But as the back story on Fidelity shows, ideological purity is hard to sustain in the real world of politics — especially in the real world of local politics.
© 2014 The Boston Globe