Asymmetrical Information - Megan McArdle
12.05.12 8:16 PM ET
Maxine Waters to Become Senior Democrat on Financial Services
Democrats just elected Maxine Waters to the top Democratic spot on the House Financial Services committee.
This is really an extraordinary development. "Flabbergasting" might be a more apt word. Leave aside the recent ethics investigation over whether she used her position on the committee to help a bank her husband was involved with (which ended with her chief of staff getting reprimanded). Maxine Waters reliably delivers the craziest questions and the most bizarre speeches on that committee, and tends to demonstrate a stunning lack of grasp of the committee's core subject matter.
The classic of the her oeuvre is, of course, the committee hearing on the financial crisis, in which eight heads of major financial institutions like Citi, State Street, Bank of America, Goldman Sachs, and Morgan Stanley were pretty ruthlessly grilled by members of Congress about how they had gotten the economy into the largest catastrophe since the Great Depression, and the greatest capital loss in history. Here is Maxine Waters, who uses her time to ask the following questions:
Did you raise your credit card interest rates or cut credit limits after you received TARP money?
Do you require people to be delinquent before you talk to them about modifying their mortgages?
(To Ken Lewis of Bank of America): Have you offshored some of your loss mitigation specialists?
Why did you pay yourself fees to accept TARP money?
The last question might arguably be relevant except that when Ken Lewis answered "I have no idea what you're talking about", it became fairly clear that Maxine Waters didn't either; she seemed unable to rephrase the question or explain further. After an awkward moment where everyone, apparently including Maxine Waters, wondered what the hell Maxine Waters was trying to say, Vikram Pandit, the head of Citibank, had to offer a guess as to what she might be asking after: the underwriting fees that the banks had paid in order to issue some of the debt that they needed to boost their capital.
This is who the Democrats think should have the senior spot on the financial committee: someone who asks the head of State Street to raise his hand if they raised the interest rates on their consumer credit card business, of which they have none. Neither, of course, does Goldman Sachs, Morgan Stanley, or Bank of New York.
Also someone who uses part of their five precious minutes to ask Ken Lewis whether he's letting foreigners service his collections department. Someone who doesn't know the difference between the fed funds rate and the discount rate. And someone who asks questions that they don't understand when it would have taken ten minutes or less to walk through the underlying issue.
The best hope is that this is entirely symbolic, and they figure it's safe to make her the senior member as long as she won't actually be in charge of anything. But having put her in a highly visible slot, it will be very difficult to dislodge her in the event that the Democrats retake the house, and Maxine Waters is expected to actually architect new legislation concerning the financial system. And even typing those words strikes terror into my heart.