The House passed three bills this week that benefit Wall Street, dismantle Dodd-Frank Wall Street Reform, and make it harder for the Wall Street police to do their jobs.
*Details on these bills can be found in Congressional Dish podcast episode CD031*
Background
Banks that were newly-free to gamble in the Wall Street casino after the banking deregulation craze of the 1990s gambled recklessly, causing the crash of the economy in 2008; the 111th Congress passed the Dodd-Frank Wall Street reform bill as a response. The bill delegated responsibility for creating new rules for swaps to the Commodities Futures Trading Commission (CFTC) instead of the Securities and Exchange Commission (SEC) which had proven itself to be way too friendly with Wall Street. The commissions have made progress in implementing the United States’ new regulations and the gamblers who fund Congressional campaigns are not happy with playing by new rules.
Bill Highlights
HR 742: “Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013”
Repeals a part of Dodd-Frank Wall Street reform.
When the Securities and Exchange Commission is going to share information with other regulators – such as the Department of Justice, foreign financial supervisors, foreign central banks, and foreign ministries – they need to get an agreement in writing that says that these other regulators will honor confidentiality agreements about the swaps and they need to reimburse SEC for any legal expenses that arise out of SEC giving these regulators the information.
This bill repeals the part the reimburses the SEC.
The consequences that I can envision are that the SEC will probably be less likely to share information about swaps with other regulators like the Justice Department and foreign regulators since they would now be liable for lawsuits.
Yet another way of sneakily making it harder for the Wall Street police to do their jobs.
Here’s the Republican justification for this bill. You decide what seems more likely.
This bill passed the House overwhelmingly, 420-2.
HR 634: “Business Risk Mitigation and Price Stabilization Act of 2013”
Regulators are required under Dodd-Frank Wall Street reform to set an amount of collateral that any gambler – be they banks, investment firms, or anyone else – trading in derivative swaps has to put up in order to make a deal.
This bill exempts certain gamblers – who are not banks – from putting up collateral on their swaps. Which gamblers? I can’t exactly figure that out. The bill defines the exempted transactions as those “initiated by a Special Entity on an exchange or swap execution facility.” I don’t know what that means. The bill is essentially written in code; it’s almost impossible for a regular person to understand. Maybe that’s the point.
If the bill were to become law, the new rules “shall be implemented without regard” to our Federal Information Policy and the normal rule-making process. Rules that do good things for the American people usually aren’t hidden from the American people.
I may not fully understand the details, but I know a shady bill when I see one.
This bill also passed the House overwhelmingly, 411-12.
HR 1256: “Swap Jurisdiction Certainty Act”
This is the most devious bill of them all.
If this bill were signed into law, the Commodity Futures Trading Commission and the Securities and Exchange Commission and would need to issue the same exact rules, essentially taking two Wall Street police forces and making them one – at least as far as international swaps are concerned – and putting Wall Street’s buddies at the SEC back in control of swaps regulations.
The new SEC/CFTC rules must allow foreign swaps gamblers from a country with one of the nine largest swap and security-based swap markets to be exempt from United States swap regulations. The bigger the casino, the less rules from the House.
The only way that foreign Wall Street swap gamblers would be subject to U.S. swaps regulations is if BOTH of the Commissions determine the country’s regulations are not “broadly equivalent” to the United States’ swaps regulations.
Who are the nine largest swap and security-based swap markets whose gamblers would be exempted? I don’t know; there’s no list.
The bottom line as Matt Taibbi – the Rolling Stone journalist who has dedicated his life to figuring out the financial scandals – put it, this bill “really just gives banks permission to go around the world regulator shopping.” The world’s biggest banks have subsidiaries around the globe; this bill would allow them to just gamble through a foreign subsidiary in a country almost guaranteed to have less bank regulations than the United States.
For this reason, the bill passed the House with some opposition, 301-124.
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