Jaime Dimon, JPMorgan Chase’s CEO, suggested today that the new Basel III rules, which will require large banks to hold more capital, were un-American, and that he hopes US bank regulators will not go along with the international banking community. Meanwhile, in the UK, the government is about to require banks to separate their retail operations from their investment banking operations, but it’s fair to say that any proposal to bring back the Glass-Steagall Act is probably dead on arrival here as far as the US big banks are concerned. And don’t get me started on US banks’ opposition to legislation aimed at solving the mortgage and foreclosure crisis.
What’s going on here? Why is the US banking lobby doing such a good job at fending off reform? In antiquity, there were three basic modes of persuasion:
- Ethos. Is the speaker someone who seems to be worthy of belief? The banks haven’t exactly given us reason to trust them on policy in the last few years.
- Pathos. Does the argument appeal to the emotions of the listeners? I don’t have a poll to cite, but I think it’s a safe bet that Americans don’t like bankers much these days.
- Logos. Does the argument make sense and compel the listener to accept it? This is, of course, more contested, but I think there are strong arguments for tighter regulation and higher capital requirements for systematically important financial institutions and for banks that are under the FDIC’s umbrella.
If the banks score so low on these three measures of persuasiveness, why aren’t we seeing stronger moves to regulate the US banks? I think there is a fourth mode of persuasion in play:
- Dineros. According to Opensecrets.org, the banks spent millions of dollars more on lobbying in the years after the 2008 crisis than they did before, and in 2011, they have already spent almost $33 million.
It seems pretty clear that $33 million, and the promise of more in the coming election year, is worth a lot of ethos, pathos, and logos!
