Dems Fight Back Against Wall Street Attempts To Use ‘Cromnibus’ To Weaken 2010 Financial Reform
Last night we wrote about the giveaways to big money political donors tucked into the last-minute, 1600-page federal budget bill nicknamed the ‘Cromnibus’ that needs to pass today in order to avoid a government shutdown. But there’s another deeply troubling provision in the bill that would be a huge win for Wall Street at the expense of average Americans. It has nothing to do with keeping the government funded; instead, it’s a provision that would undermine the 2010 Dodd-Frank Wall Street reform law passed to prevent another economic crisis like the one in 2008 from happening again.
The provision, known as a “policy rider” because it is not a spending appropriation but a change to an unrelated law, would significantly weaken Section 716 of the Dodd-Frank law. Part of what caused the economic meltdown that led to the bailout was banks making high-risk trades that were insured by the federal government — and when those trades blew up, the taxpayers were left holding the bill. Section 716 of Dodd-Frank didn’t prohibit the Wall Street banks from making those trades, but it did make banks separate those trades from the rest of their business so they would no longer be backed up by the taxpayers. Wall Street banks don’t like having that responsibility with the new law, so their army of lobbyists went to work to kill the provision by writing a bunch of exemptions to it in the depths of the vital, last-minute spending bill to avoid a government shutdown.
Now that trick is in the light of day, and congressional Democrats are fighting back. Senator Elizabeth Warren has been leading the charge to get Democrats to vote against the must-pass spending bill with this provision still in it. Senator Sherrod Brown issued a statement saying that passing the Cromnibus with this provision in it would “open the door to future bailouts funded by American taxpayers.” Former Rep. Barney Frank, the namesake of the 2010 financial reform, has also urged his former colleagues to vote against the spending bill.
And this morning, the drama appears to have ratcheted up even farther. The House of Representatives just barely passed a key procedural vote on the bill, with all Democrats and some Republicans voting no. It’s not clear whether Republicans will have the votes on the actual bill later today. With House Minority Leader Nancy Pelosi calling the bill a “moral hazard,” it certainly appears that Democrats could stay united in their opposition until the rider is removed. And all bets are off for what will happen when the Senate votes later today.
Adding to the complexity of the issue is the fact that, with the exception of riders like this one, the Cromnibus is actually a relatively good spending bill. Imperfect, but an acceptable compromise. That is why President Obama, while fiercely denouncing riders like the Wall Street give away which the White House says would “weaken a critical component” of financial reform, is in support of the bill and would not veto. The Adminstration is, very reasonably, worried that if this version gets scrapped, the only alternative would be a short-term continuing resolution that would lack many other positive elements currently in the Cromnibus.
With so many moving pieces and time running out, there’s a lot that could happen before the clock strikes midnight. Stay tuned.
BOTTOM LINE: There is simply no place for secretive, special-interest provisions on unrelated issues written into critical, last-minute legislation. One of these efforts — pushed by Wall Street lobbyists and tacitly supported by the GOP — would remove important rules that protect average Americans and hold Wall Street accountable. This effort wrongly favors the big banks that are more profitable than ever, while most Americans struggle just to make ends meet. And it sets a dangerous precedent on future negotiations. We need to pass a spending bill, and the spending component of the Cromnibus is an acceptable compromise. But we don’t need special-interest riders like this Wall Street giveaway.
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