Sen. Elizabeth Warren (D-MA) and Rep. Elijah E. Cummings (D-MD) released troubling information from their investigation into the December, 2014 partial repeal of section 716 of President Obama’s 2010 Dodd-Frank Act, which was originally designed to prevent taxpayers from having to bailout big banks that were taking advantage of unregulated derivative transactions.
So alarmed are Warren and Cummings that they sent several letters – one urging the Securities and Exchange Commission and the Commodity Futures Trading Commission ( SEC and CFTC) to enact strong rules to protect taxpayers and the economy, and the other to the Government Accountability Office (GAO), urging them to investigate he impact of the repeal of this Dodd-Frank provision.
Why are they so alarmed? Their investigation reveals, per a press release from their offices:
Their investigation reveals that this repeal now allows banks to keep nearly $10 trillion in swaps trades on their books that – were it not for the Dodd-Frank rollback – would be “pushed out” to entities that are not insured with taxpayer funds. It also finds that regulators have not conducted an analysis of the financial and taxpayer risks posed by the repeal, despite the fact that it allows banks to trade trillions of dollars of risky derivatives.
How did this happen? The repeal was signed in December of 2014, after being inserted into the Appropriations Bill without debate, right before it was voted on. Tick tock, the country was unfunded, no time to debate! (Sounds like the WMD debate in Congress, no? Same tactics.) At whose behest? The financial industry, of course. The same people who screwed this country over the last time, due to a similar provision stuck last minute into another bill.
Dangerous amendments that can’t afford debate have to be done this way.
This wouldn’t have been possible, of course, if Republicans hadn’t been refusing to fund the government and holding the economy over the cliff in order to serve their financial industry masters. At the time, Senator Warren chastised Wall Street and House Republicans for giving big banks such a dangerous gift. The left was in full rebellion over this provision, and Warren urged Democrats to withhold their support, especially because some 50-60 House Republicans were planning to vote against the bill because they were displeased with the lack of action over Obama’s immigration executive orders.
The country was up against it again — socialize the losses again or the entire country gets it. Now that we see where this is going – again – they both go to the same place.
The Washington Post reported at the time:
But perhaps even more outrageous to Democrats was that the language in the bill appeared to come directly from the pens of lobbyists at the nation’s biggest banks, aides said. The provision was so important to the profits at those companies that J.P.Morgan’s chief executive Jamie Dimon himself telephoned individual lawmakers to urge them to vote for it, according to a person familiar with the effort.
Sure, Democrats were mad that Obama would sign this, but at the time, he was fighting to keep other provisions safe from the greedy hands of the financial industry/Republican party and some Democrats. At the time, he was trying to deal with Republicans who were holding the country hostage, yet again.
The financial industry – and real conservatives – know that this is pushing their risks off onto the taxpayers. They are using the fact that there is protection for deposits made by taxpayers. It’s a highly disingenuous thing for conservatives to back — socializing losses while privatizing gains.
In July of this year, President Obama made it clear to Republicans that he wouldn’t be compromising on Wall Street reform again, “Wall Street Reform turned the page on the era of ‘too big to fail.’ Now, in America, we welcome the pursuit of profit. But if your business fails, we shouldn’t have to bail you out. And under the new rules, we won’t – the days of taxpayer-funded bailouts are over.”
But it might be too late already unless swift action is taken to protect the taxpayers of this country from getting screwed over once again by the big banks. The repeal of that one provision undid the very protection that was needed to be a dam against the greed and recklessness of the big banks. Here they come again.
Ms. Jones is the co-founder/ editor-in-chief of PoliticusUSA and a member of the White House press pool.
Sarah hosts Politicus News and co-hosts Politicus Radio. Her analysis has been featured on several national radio, television news programs and talk shows, and print outlets including Stateside with David Shuster, as well as The Washington Post, The Atlantic Wire, CNN, MSNBC, The Week, The Hollywood Reporter, and more.
Sarah is a member of the Society of Professional Journalists.