Noah Bierman and Michael Levenson of the Boston Globe
an e-mail exchange showing that Sen. Scott Brown sought to weaken implementation of new regulations meant to provide better oversight of the financial industry. The regulations in the Dodd-Frank bill were passed in the wake of the crisis that led to the worst economic downturn since the 1930s.
The Massachusetts Republican has made frequent note of the fact that he was the deciding vote in favor of the bill. This is meant to bolster his credentials as a protector of the little guy, an important campaign point since his opponent in November will be Elizabeth Warren. Her stubborn and aggressive efforts to shield ordinary Americans from predatory lending and other business practices are the foundation of her campaign to capture Brown's seat, which he won in a special election after Sen. Edward Kennedy died. But Brown's claims have a problem:
At issue in Brown’s e-mails is the Volcker rule, a particularly contentious provision of Dodd-Frank. The rule, championed by Paul Volcker, a former chairman of the Federal Reserve, prevents commercial banks from speculating heavily in higher risk investments. Banks are federally insured, which means that if they fail, taxpayers must reimburse many depositors.
Brown’s role in helping to loosen the Volcker rule in advance of casting his vote on Dodd-Frank has been well-documented. Notably, he helped create a provision that allows banks to invest up to 3 percent of their money in riskier investments such as hedge funds and private equity funds, and to own up to 3 percent of an individual fund - additions that won him Wall Street support.
But e-mails obtained by the Globe show that Brown’s work on behalf of the financial sector did not stop when the law was passed. In the second stage, as regulators began the less publicly scrutinized task of writing rules amid heavy pressure from the banking sector, Brown urged the regulators to interpret the 3 percent rule broadly and to offer banks some leeway to invest in hedge funds and private equity funds.
Brown suggested loose interpretations in other areas such as hedge funds and taxing of carried interest. The latter is a key factor in Mitt Romney's effective income tax rate of less than 15 percent.
The Globe quoted Simon Johnson, a former chief economist at the International Monetary Fund and now a professor at MIT who has praised Warren, as saying Brown’s e-mails amount to a “significant loosening of the regulations and absolutely serving the interests of people who do not want to have meaningful reform. This is a treatise on how to gut the thing.’’