Wall Street wins in $1.1 trillion spending bill, but who loses?
Call it a big win for Wall Street. The $1.1 trillion dollar government spending bill passed the House Thursday night after a contentious run-up. Tucked inside was a neatly-wrapped present for the financial industry which weakened a key part of financial reform legislation.
Following the House vote, the Senate passed a two-day stopgap measure that kept the government from shutting down Thursday. The Senate could vote on the House-passed measure as soon as Friday night. If not, a Senate vote could be pushed to Monday.
Yahoo Finance Editor-in-Chief, Aaron Task says, “This is exactly what Wall Street wanted and, as often is the case, what Wall Street wants, Wall Street gets from Congress.”
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Progressive Democrats, led by Massachusetts Senator Elizabeth Warren, railed against the Wall Street-friendly provision which made its way into the bill at the last minute: The weakening of the so-called “swaps push-out rule” from the 2010 Dodd Frank financial reform law. The push-out rule bans big banks from using taxpayer-insured depositor funds to back certain risky derivatives trading. It also requires financial institutions to move parts of their business involved in those trades to separate groups or affiliates.
On the floor of the Senate on Wednesday, Warren pleaded with her House counterparts to vote down the bill. “Who does Congress work for?” she asked. “Does it work for the millionaires, the billionaires, the giant companies with their armies of lobbyists and lawyers? Or does it work for all of us?”
Dramatic but perhaps valid questions. Financial services companies spent $1.2 billion on campaign contributions and lobbying between January 2013 and mid-November 2014, according to a new report from Americans for Financial Reform, a nonpartisan coalition of civil rights, consumer and public interest groups.
Supporters of rolling back the so-called swaps push-out rule claim the change was designed to "help small- and medium-sized businesses manage their risk," as Rep. Sean Duffy (R-Wis.) said on MSNBC's Morning Joe. "You have have med-sized banks, regional-sized banks that are offering products to manage risk to manufacturers to farmers. This is common-sense stuff."
But common sense also says that if JPMorgan chairman Jamie Dimon personally lobbyied for a rule change, it's probably a good thing for the mega-banks too.
The controversy and drama surrounding the spending bill could be a sign of things to come in terms of the future of Dodd Frank.
Lawmakers rallied around the idea of financial reform in the immediate aftermath of the financial crisis. But pushback from the financial industry grew as Dodd Frank legislation took shape. “For years, they delayed implementation,” says Task. “And now that it’s the law of the land, Wall Street has continued to and will continue to fight back against it. And they won a big one here.”
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