Archive
The Systematic Death of Financial Reform
President Barack Obama meeting with Rep. Barney Frank, Sen. Dick Durbin, and Sen. Chris Dodd
Political polemic wonderboy, Matt Taibbi, wrote another great article in this May’s RollingStone on how exactly Dodd-Frank has been undermined by Wall Street and the Republican Congress that caters to it. Yanno, that law Obama said two years ago would end taxpayer bailouts for good. Dodd-Frank is one of those things a lot of people who care about the world mean to read, but never do because financial legislation is fucking boring. So thanks, Taibbi, for reading it for us and laying out the implications of its slow repeal. “How Wall Street Killed Financial Reform” gave me some terms I didn’t know and expanded with useful information on others.
Commodities Futures Trading Commission: The independent agency (required by Congressional statute, but outside the Executive dept. purview) that is tasked with regulating certain derivatives markets.
-Last year, Republicans tried to cut the agency’s budget by more than a third even though the financial market they were overseeing soared from $40 trillion to $340 trillion.
-Corporations love to sue to the CFTC (as well as the Securities Exchange Commission) for being “unreasonable.”
Son of Supreme ConvservaJudge Antonin Scalia, Eugene Scalia led the Chamber of Commerce’s legal team to sue on the proxy access rule
Proxy Access Rule: A rule that would allow shareholders of a company to remove directors from the board via a proxy ballot, which would increase democratic power among stakeholders.
-Wall Street then employed lobbyists from The Chamber of Commerce and the Business Roundtable to sue the SEC, claiming they had not done a proper cost-benefit analysis.
-They would use this lawsuit strategy again and again to rip apart the rest of Dodd-Frank rule by rule.
Orderly Liquidation Authority (OLA): Title II of Dodd-Frank. It was supposed to create an FDIC-style fund in the event of a catastrophic liquidation, so that taxpayers would never again foot the bill (at least $19 billion) for a bailout.
-Ted Kennedy died mid-2009, Republican Scott Brown took his seat, and then the watering down of the bill began.
-The $19 billion required corporate pay-in to the fund disappeared.
Positions Limits: The maximum number of contracts an investor is allowed to hold on one underlying security.
-Dodd-Frank regulation designed to prevent one speculator from controlling over 25% of a commodities market at any one given time. This is done to prevent crazy speculation, like what was seen in 2008 when average gas prices jumped over $4 a gallon.
-The CFTC was supposed to enforce the rule for energy and some other contracts starting January 17, 2011. But the machine-work of bureaucracy turned, it never happened, and if lawsuits go the way they’ve been going, it never will.
Volcker Rule: Proposed by former United States Federal Reserve Chairman Paul Volcker, this rule would restrict United States banks from making certain kinds of speculative investments that don’t benefit customers.
-I.e., it would restrict banks from making risky gambles with taxpayer-insured money.
-Dodd-Frank mandated the Vlocker Rule be implemented July 21, 2012. But after 17,000 comment letters representing Wall Street interests, the Federal Reserve announced in April that it actually won’t go into affect until 2014. Two more years time for potential lawsuits.
—–
Read Taibbi’s article online to learn the five steps that corporations use to kill any legislation. There is plenty of ammo in there for debating libertarians, including how this tedious, technical legislation affects us all.
We Had a Fed Audit? 16 Trillion in Secret Loans?
(^It’s over an hour and a half long. I can’t admit to watching the entire thing. The hearing was in October. The audit report was released in July.)
I’m copying this post verbatim from Facebook, because I hate not updating but I’m having writers block. The context of this post is that I have a Ron Paul supporter friend who told me we did a Fed Audit and loaned out 16 Trillion to foreign banks:
Our conversation of Ron Paul’s Fed Audit was bothering me. Mostly because I wasn’t aware there was a Fed Audit. The reason I hadn’t had heard about it, is because the Fed Audit that Ron Paul proposed hasn’t happened. Paul’s bill for a Fed Audit, HR 1207, was shot down by Congress in 2009.
What I think you were talking about was a July 2011 Government Accountability Office report, which was a far less comprehensive audit, specifically on Federal Reserve System approved emergency funding over a three year period. That audit was allowed due to parts of the Dodd-Frank bill, which, because of broader reasons, Ron Paul voted against.
News media reports, that, “The U.S. Federal Reserve gave out $16.1 trillion in emergency loans to U.S. and foreign financial institutions.”
News Article with the Audit report here: http://www.rawstory.com/rs/2011/07/21/audit-fed-gave-16-trillion-in-emergency-loans/
But this number is bullshit.
The number $16.1 trillion appears only once in the report, on a chart on page 131. This figure is actually irrelevant, because it’s not “term adjusted” and aggregate borrowing math tends to double count a lot of the same money. A term-adjusted chart a couple pages later brings it down to $1.1 trillion, and more accurately reflects “real risk.”
This is turning into something really long and technical, and I don’t really want to talk more about Federal Reserve Credit, so I’ll just end with the note that the important thing to take away is that these loans are highly regulated and backed by collateral, different from the some of the previous bailouts. The Fed has said it had “no credit losses” on any of the emergency programs, and collected $13 billion in interest.
This conclude this episode of “scandalousmuffin reads tedious economic shit so you don’t have to.”
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
