By Peter Schroeder - 06/19/12 09:00 AM EDT
For Steve Bartlett, it’s easy to explain why he has chosen to retire from representing the nation’s largest financial institutions as head of the Financial Services Roundtable.
“I can sum it up in two words: It’s time,” he said earlier this month from his downtown office, just blocks from the Capitol.
“2012 is a good transition year,” he said. “There’s going to be a new administration, even if it’s the same president. There’s going to be a new House and a new Senate.”
When Bartlett leaves the lobbying shop at the end of the year, he’ll have plenty of scars, as he was one of the leading voices of the financial industry in a city where “bailout” has become an expletive.
But to hear Bartlett describe it, the nation’s financial industry is chastened following a swath of bad behavior that nearly led to its collapse, dragging down the economy with it. Lessons learned, the industry is now rebuilding itself — and its reputation — one day at a time.
“We still recognized that we’ve been humbled, and so we’ve got our heads down and we’re serving the American people,” he said. “But we’re solid.”
Bartlett maintains that even if the American people, and members of Congress, want to vilify the financial industry, they cannot avoid it.
“We finance everything that happens in the economy,” he said. “It’s going to be financed by the financial services industry or it’s not going to happen.”
Although Bartlett says the financial industry is back on solid ground and working to win back its reputation, it’s clear how tenuous the industry’s standing is, and how quickly the public can be reminded of the collapse.
One need look no further than JPMorgan Chase, the nation’s largest bank and perhaps its most well-regarded. One trader in London cost the bank billions of dollars on a bad trade and forced its chief executive, Jamie Dimon, to head to Capitol Hill to explain himself.
The billions in losses have opened up a new front in the tug-of-war over Dodd-Frank, with Wall Street skeptics using the bad trade as fresh evidence of the need for tight restrictions on the financial sector. Bartlett, not surprisingly, sees it differently.
“Clearly, JPMorgan Chase didn’t like the idea of losing $2 billion,” he said. “Clearly, they made some mistakes in where they managed their risk, they found it, they disclosed, they paid for it and they suffered for it.
“In a way, that’s kind of the end of the story … the system worked,” he added.
JPMorgan’s botched trade marks just the latest round in the long-running fight over financial regulation. The Dodd-Frank financial reform became law nearly two years ago, but huge pieces of it are still not in place as regulators work to turn the policy ideas into practical reality.
Bartlett said the industry is not against reform wholesale, arguing that the crisis proved the need to change how the government addresses broad risk in the financial system.
“The whole market came to near collapse, so we had to have some changes,” he said.
But there’s plenty of “mischief” in the Dodd-Frank legislation and it is “virtually inevitable” that Congress will revisit the law in 2013 after campaign fervor fades, he added.
He is not shy in describing areas of the law he finds problematic. For example, the “Volcker Rule,” which is aimed at preventing banks from making risky trades for profit that could endanger them, Bartlett described as a “two-headed monster.”
But he and the industry split with GOP critics of Dodd-Frank by wanting to see regulators receive heightened funding to implement it. At every opportunity, Republican appropriators have pushed to slash or at least block millions of dollars in new budget authority for financial regulators now charged with implementing the sweeping law. But the industry sees it differently.
“You don’t get better regulations by strangling the funding,” he said.
Bartlett holds the line on an idea that is gaining some momentum on both sides of the aisle – breaking up the nation’s largest banks. The idea has received support from both Sen. Sherrod Brown (D-Ohio), and Richard Fisher, president of the Dallas Federal Reserve Bank and one of the Fed’s most conservative “hawks.” They have argued that the system would be better off if the nation’s banking titans shrank in size.
But Bartlett dismisses such calls as “fuzzy thinking” and “easy populism.”
“There’s a reason why we have large financial institutions. The reason is we have a large economy,” he said. “The largest 1 percent of the banks in America provide 60 percent of all small-business loans, so if you don’t want small-business loans, then break up the largest 1 percent of banks.”
Bartlett does not temper his case for a robust financial industry and in fact depicts it as integral to the success of the nation.
“This industry is responsible for financing the lives of every American in a competitive way … that allows Americans to live better lives,” he said. “At the end of the day, we have to get it right or the country just stops.”