It’s a good time to be at Secretary of State Rex Tillerson’s old firm, Exxon Mobile.
Last week, in votes along party lines, Republicans got rid of the Dodd-Frank rule that forces huge oil and gas companies to disclose how much they pay to foreign governments while they’re doing business abroad.
Now, you can be excused if you feel like the obvious urgency for killing this specific rule seems to have come out of nowhere. Arguments for getting rid of Dodd-Frank — the 2010 legislation meant to help protect taxpayers from another financial crisis — usually involve helping over-regulated community banks that can’t lend, or helping small businesses get loans.
The arguments usually do not involve helping massive oil companies like Exxon Mobile keep its dealings in foreign countries secret. Yet, getting rid of this rule was first on the agenda.
“The fact that that’s what they’re singling out for their attack tells you where their agenda is heading. It tells you that they’re not serious about what they say they want to do,” said Michael S. Barr, a Professor of Law at the University of Michigan and expert on financial reform. “It’s not that they want to unleash lending in the US, it’s that they want to let Wall Street firms do whatever they want. It’s not helping families or small businesses.”
A CEO’s work is never done
Back in 2010, as this rule was being written into Dodd-Frank, then-CEO Tillerson personally visited then- Republican Senator Richard Lugar (IN) — one of the rules architects — in hopes that it would never see the light of day.
According to Politico, Tillerson argued that forcing his company’s dealings with foreign governments into the light would hurt its competitiveness in the market.
But Lugar was undeterred. By forcing transparency he hoped that governments in resource rich, poor countries would also be forced to give their own people a fairer shake. Exxon, for its part, continued to lobby against the rule. It expressed its displeasure with it to the SEC in a comment letter in March of 2016, when Tillerson was still CEO.
That aside, it could be considered a political success. After the rule was passed here in the US, other government’s like the European Union (EU), Norway, and Canada followed suit with their own versions. That means that a lot of Exxon’s competitors have to disclose to someone, even if not to the US government. Even state-owned Russian firms have to adhere to this rule to operate within the EU.
Rep. Maxine Waters (D-CA) pointed all of this out in a statement admonishing Republicans for rolling it back when the rule was undone last week.
“That rule helps fight corruption in the extractive industries sector, provides investors with crucial information on their investments, and enables citizens to demand greater accountability from their governments for spending that serves the public interest,” she said. “It also helps to diminish the political instability in resource-rich countries, which is not only a threat to investment, but also to our own national security.”
She also pointed out that non-state actors like ISIS benefit when oil money falls through the cracks, and that resource-rich countries like Venezuela and Angola have become unstable because of corruption and the lack of transparency in their energy sectors.
How it starts
Of course, this is just the beginning of what Republicans want to do with Dodd-Frank. The chairman of the House Financial Services Committee, Jeb Hensarling (R-TX), wants to replace it with something called The Financial Choice Act.
It’s dramatically different from Dodd-Frank. For one thing, it would eliminate the “orderly liquidation” option from banks. That is to say, banks would no longer have to have a plan for what to do in the event of another crisis — an emergency plan for a disaster we know is eventually coming.
“There’s an ideological opposition to it [orderly liquidation] from Republicans on the Hill that doesn’t make any sense,” said Barr. “It’s just a very blinded focus on the wrong set of issues that will take us back to the problems we faced in 2008, when the Bush administration had two choices, it could bail out Lehman and AIG or let them fail.”
Dodd-Frank put up consumer protections for everything from payday loans to credit cards, student loans to complex Wall Street derivatives. It even contains financial protections for military families.
“Trump campaigned saying he was going to go after Wall Street and he’s doing the opposite,” Barr continued. “Everything they want to do so far is an unmitigated disaster… It’s like they have this collective amnesia about the causes of the financial crisis. I think we’re in for just a horrible ride and I hope they don’t blow up the economy.”