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Just How Did Big Banks Get That Win In Washington?

Economy Politics Tribune News Service

Just How Did Big Banks Get That Win In Washington?

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By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — The rollback this week of a key part of Wall Street regulation adopted after the 2008 financial collapse caught much of Washington by surprise, creating an uproar among liberals who called it a payoff to big banks, threatening to derail a bipartisan budget agreement, and almost shutting down the government.

It was indeed the product of lobbying by the banks, which capped their long campaign this week with personal calls to Congress by the CEO of JPMorgan Chase.

But it should have been no surprise. It was in the works for more than a year. And it was supported by many Democrats. A bill doing just what this week’s provision does actually passed the House Financial Services Committee last year with 22 of 28 Democrats voting for it. The bill passed the entire House of Representatives with broad Democratic support.

“It passed the House, dude! With 70 votes from Dems,” said an aide to a key Democratic senator who spoke on condition of anonymity to talk about the party and the origin of the provision.

Yet when the House this week took up a $1.1 trillion budget bill needed to keep the government open when money ran out Thursday night, liberal Democrats rallied against the provision. They said it was sneaked in by Republicans doing Wall Street’s bidding.

Indeed, the nation’s five largest banks — JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley — desperately wanted the change.

Banks had balked ever since the government moved in the wake of the 2008 financial collapse to cordon off the riskiest of bets made in complex instruments called derivatives, the very same products that turned the financial crisis into a near meltdown of global finance.

At issue are swaps, speculative bets between private parties on whether the price of a stock or a commodity such as oil or corn will move up or down. Under the Section 716 of the Dodd-Frank Act, banks had to push the riskiest 5 percent of this trading into separate corporate entities where they would not be covered by taxpayer-provided protections.

The regulation was offered as an amendment by then-Sen. Blanche Lincoln, an Arkansas Democrat fending off a tough 2010 primary contest from a liberal challenger. The so-called Lincoln Amendment was criticized by Wall Street foes for being a political play that covered too little of the swaps market. Lincoln won the primary but lost the general election.

Since then banks big and small have fought first to delay its implementation and then to roll it back.

The rollback passed the full House of Representatives on Oct. 30, 2013, on a 292-122 vote, with 70 Democrats in support. It was not taken up in the Senate.

The measure was added to a House appropriations bill on June 25 to fund financial regulators, offered as a voice-vote amendment by Rep. Kevin Yoder (R-KS). It was in plain sight all along, just a question of whether it would stay in the final compromise spending bill or not.

While big banks stand to gain the most under the change, several congressional and industry sources privately said that what really helped sell the change was lobbying by regional banks such as Georgia’s SunTrust Banks Inc., Pennsylvania’s PNC Financial Services Group and Ohio’s Fifth Third Bancorp. The rules designed to limit big banks affected them, too, they argued.

The heaviest lift came from the American Bankers Association, which represents banks big and small. It has spent about $6.7 million in lobbying overall this year, according to the donor data culled by OpenSecrets.org.

The nation’s most prominent banker, JPMorgan Chase CEO Jamie Dimon, followed up with personal calls to members of Congress during the negotiations.

It wasn’t just lobbying. Old-fashioned Washington horse-trading greased the wheels.

In exchange for allowing the change Republicans sought, Democrats got significantly more funding for Wall Street cops — the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The rollback disappointed Barney Frank, the retired Massachusetts Democrat who spearheaded the 2010 revamp of financial regulation now called the Dodd-Frank Act. With Republicans taking control of both chambers next year, other parts of his financial revamp could be weakened.

“That’s why it’s so important to have this fight now,” Frank told McClatchy, saying the measure “raises the stakes” on preserving broader financial regulation.

Frank insisted lawmakers slipped it into a larger bill because the public would not support legislation on its own to favor big banks that brought the financial crisis.

Photo Credit: AFP/Stan Honda

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15 Comments

  1. bobnstuff December 15, 2014

    Well congress just hand the keys to the car to the drunk teen after they had wreck the last one. This should work out well.

    Reply
    1. Bill December 15, 2014

      We can’t win when we’re being sold out by both parties.

      Reply
      1. idamag December 17, 2014

        And we let that happen.

        Reply
  2. Dominick Vila December 15, 2014

    How did big banks win the same concessions (deregulation) that contributed to the Great Recession? The old fashion way: MONEY! Don’t bite the hands that feed you.
    Fear not, when new ENRONs, AIG, Lehman Brothers, Bernie Maddoffs, and the next President have no choice but to admit that the U.S. economy is once again on the verge of collapse, the GOP will blame anyone for themselves for the debacle. Don’t forget, these are the same guys that blame 9/11 on Clinton because Fatwas were issued when Bill was President, drone strikes against terrorists who deserve due process are evidence of extreme cruelty – equal or worse than torture – as opposed to benign carpet bombing and missile launches from Navy cruisers, Iran-Contra was the responsibility of an obscured Marine Lt. Col., the 2007 Great Recession was the result of Democratic policies, deficit spending and accumulation of debt are demonstrations of Tea Party style fiscal responsibility, efforts to achieve equality and justice for all are evidence of deliberate destruction of American values, and all the other Republican platitudes that make them the undisputed champions of “the buck stops everywhere but here”.

    Reply
    1. sigrid28 December 15, 2014

      As their fearless leader George W. famously said, “Fool me once….” It’s not as though any of these banks that will benefit from this provision are having trouble scraping together change to pay the copier repairman. Isn’t it just another money grab?

      Reply
      1. Dominick Vila December 15, 2014

        Especially when some of them own the company that makes the copier. Yes, this is a sequel to what happened in 2007, and the consequences are likely to be even worse.

        Reply
    2. charleo1 December 15, 2014

      Being Republican, means never having to say, we own that. We were at the helm, it happened on my watch, so I take full responsibility. That’s a sign of weakness, breaking ranks, is akin to snitching, and it’s so unnecessary. After all, their experience tells them, a mere two years after Bush. With enough lying, obstructing, and talking like a bunch of anti-government, insurrectionists. They could claw their way back to controlling half of Congress, and stopping the majority dead in it’s tracks. Then demagogue the President for doing nothing, and be rewarded with the entire Legislative Branch, after only six years.

      Reply
  3. idamag December 15, 2014

    This is what we get when we allowed our Congress to be sold. If we don’t resist the trend it will get worse.

    Reply
    1. Independent1 December 16, 2014

      Talk about our Congress being sold – if something isn’t done soon, CitiGroup will be running America (we’ve been thinking the Kochs are a big threat, but they’re a bit player compared to CitiGroup).

      If you haven’t heard Warren’s speech chastising CitiGroup – take a listen to it via this link (there may be a better link but this is one I received via an email from Moveon.Org):

      https://pol.moveon.org/contrib/quickpay.html?token_hash=st-6834-20141229-x7f7zngx-4Oc1cH&page=warrenvideo&id=105927-24407140-QHluFVx&t=130

      Reply
      1. idamag December 16, 2014

        Unfortunately, there is a large segment of the public who can’t be bothered with this or only sees that which fits their ideology.

        Reply
        1. Independent1 December 16, 2014

          Yup!! The fact that 69% of Americans say they don’t even want to know how our country supposedly keeps them safe, even if that involves torturing even innocent people, makes it clear that the majority of Americans like to live their lives with their heads in the sand.

          Reply
        2. plc97477 December 17, 2014

          There is a large segment of the public that can’t be bothered with anything more important than whom the kadashians are bedding now or the importance of baby booboo’s antics.

          Reply
          1. idamag December 17, 2014

            Yes, and when people, in other countries watch those shows, what can they think of us. If they asked Michelle Bauchmann if she was stupid, she’d probably say, “No, that’s my grandfather. He is so stuped, he is bent way over and can see his shoes when he walks. We have made stupidity a virtue and you can bet other countries haven’t.

            Reply
  4. jointerjohn December 15, 2014

    The key to correcting this and avoiding disaster is the Supreme Court and that lies in the hands of the next president, to be elected in 2016. Everything else is secondary now until the obscene amounts of campaign money can be limited. .

    Reply
  5. charleo1 December 15, 2014

    It seems odd, that rolling back a regulation that protected taxpayers from only 5% of a market widely recognized as the number one culprit that placed taxpayers on the hook for the insane gambling that nearly brought down the economy, should be characterized as something that, “created an uproar among Liberals.” Why only Liberals? Unless taxpayers, that do not consider themselves Liberals, have shunned what they’ve been told are lying Liberal Press outlets. And therefore have received a completely different description of the subject in question. Or, Liberals are being cleverly painted as a bunch of regulation zealots, that oppose the elimination of all regulations. If so, then explain to me what Conservative Taxpayer wants to be on the hook for all the debt, if they lose? While the banks rank in all the gains, if they pay off? Also, why only a token, 5%? And why spend millions to repeal it? Unless, there are so few things left in the Congressional Store to buy that hasn’t already been purchased, with so much money on hand left over! And finally, who are those 70 Democrats? That, we can find out. You know, every house needs a good cleaning every now and then. And it look like it’s getting pretty cruddy on the Left as well. “Pass the XL to help Mary Landrieu,” Give me a break!!!

    Reply

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