Last month, as the financial reform process appeared to be going poorly for the banks, Wall Street lobbyists told the Washington Post that they would be looking to Barney Frank for leadership in working out a reform compromise that pleased the banks. While the populists shook their fists, grown-ups like Frank would figure out how to capitulate to Wall Street behind closed doors.

Frank’s moment has finally come. The Huffington Post’s Ryan Grim is reporting that the Congressman from Massachusetts is going to bat for big banks by pushing compromise language on derivatives that will gut the tough reforms sought by Senator Blanche Lincoln.

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A new report from Public Citizen and the Center for Responsive Politics sheds new light on the incredible scale of the financial sector’s lobbying effort. The report has found that the sector employs over 1400 former lawmakers and Congressional staffers.

Last month, we issued a report on the big bank lobby in collaboration with the Campaign for America’s Future. “Big Bank Takeover” identified more than 240 revolving door lobbyists working for one of the six major banks and their principal lobbies.

But expand the scope to include other banks, private equity firms, hedge funds, accounting firms, credit unions, and so on, and the number grows much, much larger. Wikipedia research shows that the number of revolving door lobbyists employed by the industry as a whole is literally larger than the number of soldiers that typically constitute a battalion. This is what the public interest is up against.

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There is a surprisingly tough provision in the current financial reform bill that would force commercial banks to spin off their derivatives trading desks, but big bank lobbyists are fighting hard to make sure Congress strips the language out of the bill.

One rumor floating around Washington is that Democrats will hold off on an amendment that weakens the language until Senator Blanche Lincoln’s primary election in Arkansas on Tuesday. The derivatives language originated in the Senate Agriculture Committee, chaired by Lincoln. A delay will essentially help Congress avoid electoral accountability for caving in to the big banks.

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Tom Carper has proposed an amendment to the financial reform bill that would severely weaken consumer protections to the point where it is understood to be one of the more destructive changes to the bill. Yesterday, Zach Carter wrote an excellent piece analyzing its potential consequences for financial reform:

There are two consumer protection amendments getting serious attention on the Senate floor this week, one of them positive, one of them incredibly destructive. Both revolve around the concept of “preemption”—the ability of federal regulators to block states from enforcing laws aginst banks that operate within their borders. Over the past decade, state regulators tried to crack down on subprime outrages, but federal regulators stepped in to protect the megabanks. If we want to establish a fair financial system, we have to empower states to take action against abusive banks.

That’s what makes a new amendment from Sen. Tom Carper, D-Del., so dangerous.

At OpenLeft, Chris Bowers has called the amendment “the most dangerous to Wall Street reform.”

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In 2008, economist Nouriel Roubini popularized the term “shadow banking system” to describe the non-bank financial institutions that eventually helped spur the collapse of the financial system: highly-leveraged hedge funds, investment banks, and the like. This shadow system fueled Wall Street profits for years before eventually necessitating massive bailouts of the financial sector.

These days, a “shadow bank lobby,” has played a prominent role in shaping the financial reform process, pushing amendments that will weaken consumer protections, water down regulation of the Wall Street casino, and increase the likelihood of continuing fraud and future bailouts. I discuss this “shadow bank lobby” in Big Bank Takeover, the report on the big banks’ army of lobbyists released yesterday by the Campaign for America’s Future.

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Over the course of the financial reform process, the six biggest banks and their trade associations have waged an historic assault on democracy, hiring hundreds of revolving door lobbyists and spending hundreds of millions of dollars to push their legislative agenda, according to a report released today by the Campaign for America’s Future.

The report, Big Bank Takeover: How Too-Big-To-Fail’s Army of Lobbyists Has Captured Washington, shows how the six too-big-to-fail banks have hired 243 lobbyists who once worked in the federal government, including 202 who used to work in Congress, with others having worked at the Treasury, the White House, or a relevant federal agency like the SEC. (I authored the report, with assistance from researchers at LittleSis.org).

This translates into an average of 40 revolving door lobbyists per big bank.

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In a 2009 Wall Street Journal interview, the brand new president of BP America, Lamar McKay, answered a question regarding BP’s recent “mishaps and setbacks, ranging from a lethal explosion in a Texas City refinery to a spill in Alaska” by asserting that the company had learned “that consistency, rigor and constancy of operating standards is important and that accountability must be clear.” Apparently this is what “clear accountability” means to the new and improved BP, as CEO Tony Hayward shrilly makes his media rounds incessantly insisting that “the responsibility for safety on the drilling rig is Transocean. It is their rig, their equipment, their people, their systems, their safety processes.” In case you missed it the first time Hayward re-emphasized to CNN that “the systems processes on a drilling rig are the accountability of the per — the drilling rig company” (emphasis mine). This is just the latest example of a warped, unaccountable corporate culture that has become utterly incapable of accepting responsibility for its tragic and costly mistakes.

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Claire McCaskill has suggested that she will oppose the Fed audit admendment. This represents a flip-flop, as the Senator from Missouri voted for the Fed audit back in April.

One possible explanation for the shift: one of McCaskill’s top donors is Steven H Lipstein, chair of the St Louis Federal Reserve. Lipstein has given McCaskill and her committees $16,000 since she first ran for the Senate in 2006, including $11,200 for that campaign, the sort of outrageous sum that illustrates the complete meaninglessness of campaign finance limits. In February 2010, he gave her $4800, maxing out to both her primary and general accounts. His wife, Susan Lipstein, donated $2100 to McCaskill during her 2006 campaign.

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The Goldman-Paulson fraud suit threatens to throw a spotlight on a realm of Wall Street that has escaped most scrutiny throughout the financial crisis: the hedge fund industry. Top hedge fund managers profit from Wall Street’s business model of fraud and collusion more than any CEO at the big banks, but tend to evade accountability because of the opacity of their industry and their extraordinary power.

One such hedge fund manager is Richard Perry. Perry, a former Goldman Sachs trader, became known as one of the subprime winners in 2007 — one of the hedge fund managers who saw the crisis coming, and placed profitable bets that the housing market would collapse. Perry reportedly shorted $3 billion in subprime-related securities, netting a $1 billion profit on the trade.

Around the same time, in late 2006 and 2007, Perry’s hedge fund, Perry Corp, began buying up shares in a certain financial management company that had a close business relationship with Goldman Sachs. His stake grew from 5% to 8% (around $30 million in early 2007), to the point where Perry Corp was disclosed as a major shareholder in the company in the prospectus for one CDO put together by Goldman in August 2007.

That company: ACA Capital, the same firm wrapped up in the Goldman Sachs-John Paulson CDO deal that the SEC has deemed fraudulent.

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The Goldman fraud suit continues to dominate the media cycle. After the initial shock of the US government actually doing something to hold Wall Street accountable, the business press — led by Goldman Sachs and their lawyers at Sullivan and Cromwell — has turned to questions about the merits of the suit. Today, the New York Times gave A1 real estate to a piece headlined “A Difficult Path In Goldman Case.”

The article opens by saying that the SEC is “pursuing an unusual claim that could be difficult to prove in court” according to legal experts. But the article only quotes one legal expert clearly criticizing the substance of the case: Allen Ferrell, a professor at Harvard Law School. According to his CV, Ferrell has been engaged as an “expert for large financial institution involving subprime-related litigation (details confidential).”

This is clearly a potential conflict, but the entire article appears to be based around Ferrell’s lone, critical quote. This is irresponsible journalism, especially considering the landmark significance of the Goldman suit. So I wrote the following letter to the Times ombudsman to alert him to the conflict and request a proper correction/disclosure:

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