Through the Revolving Door: Wall Street critic becomes a lobbyist

As reported by Minnpost, Tim Pawlenty has gone through the revolving door and come out as the new head of the Financial Services Roundtable.

Former Minnesota Governor and presidential candidate Tim Pawlenty is the new CEO of the Financial Services Roundtable, a bank lobbying firm in Washington D.C., the group announced Thursday. 

The Roundtable represents 100 banking, insurance and investment firms. The group lobbies against the implementation of the Dodd-Frank financial regulation law Congress passed in 2010. 

Pawlenty replaces outgoing CEO Steve Bartlett, who reportedly made $1.8 million in 2010.

According to a Bloomberg article,

The new job means quitting his post as national co-chairman of Mitt Romney’s presidential campaign, Pawlenty said today. 

In a Bloomberg Television interview last year before he ended his presidential run and joined Romney’s campaign, Pawlenty said his “truth message to Wall Street is going to be, ‘Get your snout out of the trough’.” ... 

“Obviously, I was one of the voices saying we need to fix the problems,” Pawlenty said in an interview today. “There’s been an attempt to fix them. Now we just need to make sure they don’t overreach and stifle economic investment and job growth.”....

“We went through a big crisis, had a big reform take place,” Pawlenty said in the interview today, adding that the job now is to insist the changes don’t discourage capital deployment and employment growth. “It’s not a question of repealing Dodd-Frank. It’s a question of refining it,” he said.

As regular readers know, with the exception of the Volcker Rule and the Consumer Financial Protection Bureau, the Dodd-Frank Act was written by the banking industry and its lobbyists for the banking industry.  So, of course the banks and their lobbyists don't want to repeal the Act.

More importantly, the banks and their lobbyists don't want the idea of a second attempt to fix the financial system to gain momentum.

The preferred way to prevent a second attempt at fixing the financial system from gaining momentum is to argue that Dodd-Frank really fixes the problem and just needs to be refined.

However, momentum for a second attempt to fix the financial system is gaining substantial momentum.

As has become abundantly clear since the Bank of England's Andrew Haldane broke the ice in his 2012 Jackson Hole speech, everyone knows that a financial system dependent on complicated rules and regulatory supervision is prone to crash.

The reason that complicated rules and regulatory supervision make the financial system prone to crash is they replace transparency and market discipline.

Fortunately, our financial system is designed not to be dependent on complicated rules and regulatory supervision.

Returning the financial system to its historic roots in the FDR Framework is simple.  It requires that regulators focus on bringing transparency to all the opaque corners of the financial system.

• For banks this means requiring the banks to provide ultra transparency and disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details.

• For structured finance securities this means requiring that the securities provide observable event based reporting and disclose before the beginning of the next business day an activity like a payment or default that has occurred involving the underlying collateral.

Rather than doubling down on more complicated rules and regulatory supervision as proposed under the Dodd-Frank Act, the financial regulators should use their existing authority to compel this transparency.

If they do not have sufficient authority, then, as part of repealing all parts of the Dodd-Frank Act other than the Volcker Rule and the CFPB, the regulators should be given this authority.