WASHINGTON, DC – America’s presidential campaign is already well underway. The election is not until November 2016, and very few candidates have formally thrown their hats into the ring, but the competition to promote and develop ideas – both behind closed doors and publicly – is in fully swing.
Earlier this month, Citigroup took advantage of this formative political moment by seizing an opportunity to score a tactical victory – but one that amounts to a strategic blunder. Using legislative language apparently drafted by Citi’s own lobbyists, the firm successfully pressed for the repeal of some of the 2010 Dodd-Frank financial reforms. The provision was then passed after it was attached to a last-minute spending bill – a tactic that ensured very little debate in the House of Representatives and none at all in the Senate.
At a stroke, Citi executives demonstrated both their continued political clout in Washington and their continued desire to take on excessive amounts of financial risk (which is what this particular legal change permits). Lobbying to be allowed to load up on risk is exactly what Citi did during the 1990s and 2000s under Presidents Bill Clinton and George W. Bush – with catastrophic consequences for the broader economy in 2007-09.
As a result, breaking up Citigroup is under serious consideration as a potential campaign theme. For example, in a powerful speech – watched online more than a half-million times – Senator Elizabeth Warren responded uncompromisingly to the megabanks’ latest display of muscle: “Let’s pass something – anything – that would help break up these giant banks.”