Wall Street braces itself for tighter oversight of banks

Progressive Democrats on powerful House committee seen making life hard for bankers

Ms Alexandria Ocasio-Cortez will bring attention to the committee via her social media presence that includes 2.5 million Twitter followers.
Ms Alexandria Ocasio-Cortez will bring attention to the committee via her social media presence that includes 2.5 million Twitter followers.PHOTO: BLOOMBERG

WASHINGTON • Wall Street is bracing itself for a wave of intense scrutiny as a group of progressive Democrats, including social media star Alexandria Ocasio-Cortez, joined a powerful House of Representatives committee overseeing banking activities.

"It's a huge victory," said Ms Ocasio-Cortez, at 29 the youngest member of Congress and a self-described socialist - a word that shocks conservatives, who brandish it as a dire threat.

"I cannot stress how important this moment is. Dems are putting members who rejected corporate campaign money on a committee overseeing Wall St," she tweeted.

Ms Ocasio-Cortez, often referred to by her initials AOC, will bring public attention to the ordinarily drab committee via her strong social media presence that includes 2.5 million followers on Twitter.

Wall Street is trying to figure out the goals of the Democrats, now in charge of the House of Representatives which had, for the past eight years, been under the control of the Republicans.

While the Senate remains in Republican hands and ready to block dramatic changes, Democratic control of the House promises at least to make life difficult for bankers, with tighter industry oversight and lengthy public hearings.

The symbolism is already striking. The committee is headed by Mrs Maxine Waters, 80, a regular target of President Donald Trump's barbs and the first woman and first African-American to head the panel.

Mrs Waters has warned the financial sector that the days of banking deregulation and lax oversight are over. In her first speech as committee chairman last Wednesday, she said the 2008 financial crisis "was a result of Wall Street running amok, with abusive institutions peddling toxic products... with no agency responsible for prioritising consumer protection. Ultimately, the economy was sent tumbling into the abyss".

"Our fear," a banking source told Agence France-Presse, "is that she (Mrs Waters) will reinforce oversight of big banks."

The source expects to see "more CEO hearings in Congress" with the Democrats in charge.

Half of the new committee members belong to the Progressive Caucus, the left wing of the Democratic Party. Several made a splash when they ran for office in last November's election. They include Ms Ayanna Pressley, the first African-American congresswoman from Massachusetts, and Ms Rashida Tlaib, the first Palestinian-American and one of the two first female Muslim lawmakers in Washington.

The newcomers favour tighter banking oversight, but also promise to fight for easier access to credit, more industry diversity, and against housing discrimination.

"I'm looking forward to digging into the student loan crisis, examining for-profit prisons/ICE (Immigration and Customs Enforcement) detention, and exploring the development of public & postal banking. To start," Ms Ocasio-Cortez tweeted.

"Public banking" are two words that send shivers down the spine of Wall Street.

Nevertheless, "Cortez won't set the agenda of the committee; Chairwoman Waters will", a second banking source said.

"We have a lot of differences with her (Waters) but she's been in that committee for 30 years. We know her, she knows us," the source said. "There are bipartisan issues we can work on."

The alliance of progressive Democrats extends into the Senate, where they can count on support from Ms Elizabeth Warren, who has announced her interest in running for president in 2020.

Even though she is confined to the opposition, the 69-year-old senator can make bankers and government officials squirm with tough questions from her perch on the Senate finance committee.

"With Republicans in control of the Senate, Waters' best hope for the next two years is to keep financial issues in the limelight in the hope they influence the election next year," wrote FTN analyst Chris Low. Having Ms Ocasio-Cortez on the committee "will bolster that goal", he said.


A version of this article appeared in the print edition of The Straits Times on January 21, 2019, with the headline 'Wall Street braces itself for tighter oversight of banks'. Print Edition | Subscribe