Our Opinion: Bad bill puts taxpayers on hook
Money sure talks in Washington. Case in point: the misleadingly named Swaps Regulatory Improvement Act, H.R. 992.
The measure, which easily passed the U.S. House with bipartisan support, was almost entirely written by Citigroup (one of the biggest banks in the United States) and guts Section 716 of the Dodd-Frank financial reform bill.
Dodd-Frank was passed back in 2010 after the near-meltdown of the nation’s financial system that began in 2008 and triggered the Great Recession that still haunts the economy.
Agriculture Committee ranking member Collin Peterson (D-Minn.) opposed the bill on the House floor, according to The Hill blog:
“This bill would effectively gut important financial reforms and put taxpayers potentially on the hook for big banks’ risky behavior,” Peterson said. “The provision is a modest measure designed to prevent the federal government from bailing out or subsidizing bank activity that is not related to the business of banking.”
Peterson noted that under current law, banks can still perform about 90 percent of the swaps hedges they were able to perform before Dodd-Frank.
“So banks can keep 90 percent in the bank,” he said. “But apparently this isn’t good enough for some of these big banks, which is why we’re here today with H.R. 992.”
According to the Daily Kos blog, here’s how the “improvement act” would work:
Under Dodd-Frank rules, banks are barred from using Federal Deposit Insurance Corporation (FDIC)-insured funds (that means funds insured by you, the average American depositor and taxpayer) to engage in the trading of certain types of high-risk derivatives (“swaps” are a type of derivative).
Remember derivatives, the risky financial instruments that were largely responsible for bringing down Countrywide Mortgages, Bear Stearns, AIG, Lehman Brothers, Washington Mutual, Wachovia and very nearly the Nation’s entire financial system?
Well, big banks want your guarantee that you’ll help them out if their investments head south once again In short, this bill socializes risk (we all pay for their gambles if they fail) and privatizes profit (they gain a whole lot with very little risk because of your guarantee).
The bill’s path through the House was sweetened with campaign contributions to key members, according to MapLight, a clean government group.
Since Jan. 1, 2011, Citigroup has given $503,150 to current members of the House of Representatives.
Rep. Jim Himes, D-Conn., has received $66,450 from Citigroup, more than any other member of the House of Representatives. Himes is a co-sponsor of the bill.
Co-sponsors of the bill have received, on average, 16.8 times more money from Citigroup than have members of the House who have not signed on as co-sponsors.
Speaker John Boehner, R-Ohio, has received $917,500 from interests supporting the bill, more than any other member of the House of Representatives.
Rep. Randy Hultgren, R-Ill., the primary sponsor of the bill, has received $136,500 from the Securities and Investment industry, more than from any other industry.
Money talks, and the more Congress weakens Dodd-Frank, the more likely taxpayers will again have to bail out banks that are “too big to fail.”