NACBA
12-16-2014, 08:13 AM
Want to really know how that provision watering down bank reform got in the CRomnibus? Here's the ugly truth
http://media.salon.com/2014/12/warren_dimon_reid.jpg
As the CRomnibus becomes law, many rank-and-file liberals have wondered how Democrats, needing to reconnect with the public after another midterm debacle, could in their first order of business help roll back a key Wall Street reform. The answer lies in the nature of this rollback, along with the real lack of communication between lawmakers ostensibly on the same side.
First of all, it’s worth mentioning that the CRomnibus was a horrible bill even without weakening Dodd-Frank. It was loaded with favors to wealthy and well-connected special interests, and its very existence, as a must-pass, short-term budget bill larded up with unrelated policy riders that will last forever, sets a dangerous precedent for the future.
But let’s just focus on this one Wall Street rider, and how it made its way into law.
The so-called swaps push-out provision of Dodd-Frank, Section 716, forced commercial banks that trade certain risky types of derivatives to split them off into a separately capitalized subsidiary, uncovered by FDIC deposit insurance. Those attempting to downplay Section 716’s importance, like Paul Krugman, highlight the fact that uninsured institutions like Lehman Brothers played a critical role in the last crisis, and that risk can cascade through an interconnected financial system no matter where those risks are initially housed. This theory actually made it easier to get the rider through Congress, giving lawmakers a plausible story that the provision wasn’t central to reform.
http://www.salon.com/2014/12/16/inside_wall_streets_new_heist_how_big_banks_exploi ted_a_broken_democratic_caucus/
http://media.salon.com/2014/12/warren_dimon_reid.jpg
As the CRomnibus becomes law, many rank-and-file liberals have wondered how Democrats, needing to reconnect with the public after another midterm debacle, could in their first order of business help roll back a key Wall Street reform. The answer lies in the nature of this rollback, along with the real lack of communication between lawmakers ostensibly on the same side.
First of all, it’s worth mentioning that the CRomnibus was a horrible bill even without weakening Dodd-Frank. It was loaded with favors to wealthy and well-connected special interests, and its very existence, as a must-pass, short-term budget bill larded up with unrelated policy riders that will last forever, sets a dangerous precedent for the future.
But let’s just focus on this one Wall Street rider, and how it made its way into law.
The so-called swaps push-out provision of Dodd-Frank, Section 716, forced commercial banks that trade certain risky types of derivatives to split them off into a separately capitalized subsidiary, uncovered by FDIC deposit insurance. Those attempting to downplay Section 716’s importance, like Paul Krugman, highlight the fact that uninsured institutions like Lehman Brothers played a critical role in the last crisis, and that risk can cascade through an interconnected financial system no matter where those risks are initially housed. This theory actually made it easier to get the rider through Congress, giving lawmakers a plausible story that the provision wasn’t central to reform.
http://www.salon.com/2014/12/16/inside_wall_streets_new_heist_how_big_banks_exploi ted_a_broken_democratic_caucus/