Too Big To Fail Again

Just 12 banks control almost 70% of total bank assets. This week at a Banking Committee hearing, Elizabeth Warren grilled Treasury Secretary Jack Lew about capping the size of the Too Big To Fail banks. He danced around her questions and sounds as full of crap as any GOP bank shill who's looking forward to his future on Wall Street. Notice in Lew's weasely, misleading answers he says "we" shouldn't do anything because we're in the middle of implementing Dodd-Frank. But mostly what they're doing with Dodd Frank is figuring out how to water it down, eviscerate it and make it more amenable to the Wall Street predators. Matt Taibbi, who says it's as regular as the seasons, that Wall Street executives and lobbyists seek to gut any safeguards to their greed and recklessness, is on the case:

In the last two weeks, we've seen two major developments here. There was a wave of deregulatory bills that snuck through the House with surprisingly bipartisan support, and a series of regulatory decisions by the Commodity Futures Trading Commission that will seriously weaken the already-weak Dodd-Frank reform legislation, particularly with regard to derivatives trades.

If a story about a wave of bills designed to prevent the meager derivatives reforms passed in Dodd-Frank from being enacted sounds familiar, that's because it is. I wrote almost exactly the same story a year ago, in the middle of May, 2012, when a herd of Wall Street-friendly congresshumans teamed up in the House Financial Services Committee to push through a wave of nine ambitious bills targeting derivatives reform. This is from last spring:

The nine bills being contemplated by Congress take a variety of approaches to gutting Dodd-Frank. Two bills, H.R. 1840 and H.R. 2308, are essentially stalling tactics, requiring regulators to undertake more of those sweeping cost-benefit analyses that result in lengthy delays. Another bill, H.R. 3283, is more substantive: Sponsored by Connecticut Democrat and hedge-fund industry BFF Jim Himes, it exempts foreign affiliates of U.S. swaps dealers from all Dodd-Frank oversight.

The rule, if implemented, would make the next AIG possible, given that AIG was undone by half a trillion dollars in derivative bets produced by such a foreign affiliate – its London-based financial products outfit, AIGFP. If passed, says Rep. Brad Miller, a Democrat from North Carolina, H.R. 3283 would leave a "massive, gaping hole" in Dodd-Frank. "It would be very easy to move those trades to whatever the most indulgent country would be," Miller explains.

After those bills escaped the House, most of them stalled on the way to the Senate, where of course the Democrats still hold a majority and are reluctant to openly scrap Dodd-Frank just yet.

But this is the key to understanding how financial lobbyists succeed in getting what it wants on the regulatory front: They never stop. It's not a war of ideas, it's a war of resources. You march up the Hill with some crazy idea about overturning a bill prohibiting bailouts of companies that engage in risky derivative trades, you get knocked down, and you march up again, then you march up again, and again...

With each successive attempt, you peel off a few more Committee members in the House, slowly but surely weakening resolve. And while you're attacking on the legislative front, you also file a series of lawsuits that tie up the process by targeting reforms in court, and then you also send armies of lobbyists to sit in the laps of regulators during the rule-making process, so that key new laws (like the Volcker rule, designed to separate risky trading from federally-insured depository banking) are either written in reams of industry-friendly language, or delayed altogether.

No matter how bad your ideas are, and how unpopular they are (or, rather, would be, if anyone in the general public understood them and/or cared enough about them to complain to their congressional reps), you can still score huge wins just by continually attacking and chipping away.

Which brings us to this month: A little while back, I got a call from someone in the House. "You wouldn't believe the shit they just pushed through the Financial Services Committee,” he groaned. This person read off a list of bills, suggested I look them up, then specifically told me to look at how many Democrats voted "yea" on them.

"A lot of bad D votes on this one," was the editorial comment here.

Almost all of these bills turned out to be aimed directly at Title VII of the Dodd-Frank Act, i.e. the derivatives portion.

...[T]he Democrats have become the victims of their own pusillanimity on these issues. The main Wall Street argument against these new rules is that they're excessive and onerously complicated. But they're only complicated because the Democrats didn't have the stones in the original Dodd-Frank debate to insist on simple concepts like putting all trades on open exchanges.

Instead, they built a system based upon a series of fiendishly complicated compromises. They keep adding more and more fine print to the infrastructural rules for things like Swap Execution Facilities and deriviatives clearing, and the more fine print there is, the more cracks and crevices Wall Street's lawyers can find to slither through.

Anyway, this is just a reminder that when it comes to getting transparency in the financial markets, this is what it takes. You have to fight the same fight over and over and over again. And again...

Conservative and/or corrupt House Democrats on the Agriculture Committee and the Financial Services Committee are voting with Republicans to gut Dodd-Frank. In March, writing about what a corporate shill Ann Kuster had twisted herself into, I mentioned that the derivatives vote she backed "is an especially bad idea-- one that crosses a bright red line. Former Goldman Sachs banker Jim Himes (R-CT) is working with Republicans to pass it and Kuster was one of the Democrats who went along. She's touting her connivance with Murphy on a phony-baloney bipartisan caucus (which includes mostly extreme right-wing Republican sociopaths like domestic terrorist Steve Stockman) and she told a New Hampshire audience recently that 'On social issues, I am what they call progressive. But on the rest of the issues, I’m business-oriented.' So a Republican on economic justice?"

And doing the same thing on House Financial Services is another phony "liberal," careerist Kyrsten Sinema (New Dem-AZ).

Tuesday at a House Financial Services Committee meeting, Arizona freshman Kyrsten Sinema, who's racked up one of the most reactionary voting records of any Democrat in Congress, might have thought no one was looking when she sold out her own constituents in favor of Wall Street banksters. She backed all the GOP's deregulation proposals and then touted it in the Democratic caucus. She wasn't who I was talking about here... but she certainly could have been.

...Don't expect heroism from the Kyrsten Sinemas of the word. Careerism... sure, but not heroism or anything remotely resembling courageousness. Steve Israel dictates her votes; he told the "Frontline Democrats" how to vote and there are only 7 of them who have followed his orders "100% of the time," to quote one of them feeble enough to send me a note about it defending a crap record. These are the 7 freshmen with 40% ProgressivePunch scores (same as right-wing sociopath Paul Broun (R-Pit of Hell)-- who have voted as a block 60% of the time against progressive positions on crucial roll calls:

• Dan Maffei (New Dem-NY)
• Bill Foster (New Dem- IL)
• Cheri Bustos (IL)
• Ann Kuster (NH)
• Sean Patrick Maloney (New Dem-NY)
• Scott Peters (New Dem-CA)
• Kyrsten Sinema (New Dem-AZ)

None of these congressmembers is too big to fail. If you support any of them-- as the better of two evils-- you're perpetrating the cruel game fake Democrats play on America's working families. After Lew was finished in the Senate, he ambled over to the House Financial Services Committee, where Ranking Member Maxine Waters had suggested that the big Wall Street banks be indicted for laundering drug money for organized crime. She greeted Lew by voicing her concerned "that our financial system remains at risk from delays in implementation of Dodd-Frank and continued industry challenges, both here in Congress and in the courts, to weaken the rules before they’ve even been implemented. While Title VII of Dodd-Frank was designed to increase the transparency of the over-the-counter derivatives market, many of the most critical components remain stalled in rulemakings, challenged in the courts, or obstructed in the Congress.

This slow pace of Title VII rulemakings, combined with delays in implementation of the Volcker Rule, finalization of the living wills and the designation of systemically important financial institutions, are made only more troubling when considered in the context of the myriad financial scandals-- from the LIBOR and money laundering cases to illegal foreclosures-- that have occurred since the passage of the Wall Street Reform Act. For these reasons, I am concerned that our financial system remains fragile, despite substantial improvements since 2008.