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Moment Of Truth

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May 24, 2010

Now that the Senate has passed its own version of a financial reform bill (S. 3217), the legislation must be reconciled with the House version before the bill can be signed into law by the President.  At this point, there is one big problem:  the President doesn’t like the bill because it actually has more teeth than an inbred, moonshine-drinking, meth head.  One especially objectionable provision in the eyes of the Administration and its kindred of the kleptocracy, Ben Bernanke, concerns the restrictions on derivatives trading introduced by Senator Blanche Lincoln.

Eric Lichtblau and Edward Wyatt of The New York Times wrote an article describing the current game plan of financial industry lobbyists to remove those few teeth from the financial reform bill to make sure that what the President signs is all gums:

The biggest flash point for many Wall Street firms is the tough restrictions on the trading of derivatives imposed in the Senate bill approved Thursday night.  Derivatives are securities whose value is based on the price of other assets like corn, soybeans or company stock.

The financial industry was confident that a provision that would force banks to spin off their derivatives businesses would be stripped out, but in the final rush to pass the bill, that did not happen.

The opposition comes not just from the financial industry.  The chairman of the Federal Reserve and other senior banking regulators opposed the provision, and top Obama administration officials have said they would continue to push for it to be removed.

And Wall Street lobbyists are mounting an 11th-hour effort to remove it when House and Senate conferees begin meeting, perhaps this week, to reconcile their two bills.  Lobbyists say they are already considering the possible makeup of the conference panel to focus on office visits and potential fund-raising.

The article discussed an analysis provided to The New York Times by Citizens for Responsibility and Ethics in Washington, a nonpartisan group:

The group’s analysis found that the 14 freshmen who serve on the House Financial Services Committee raised 56 percent more in campaign contributions than other freshmen.  And most freshmen on the panel, the analysis found, are now in competitive re-election fights.

“It’s definitely not accidental,” said Melanie Sloan, the director of the ethics group. “It appears that Congressional leaders are deliberately placing vulnerable freshmen on the Financial Services Committee to increase their ability to raise money.”

Take Representative John Adler, Democrat of New Jersey.  Mr. Adler is a freshman in Congress with no real national profile, yet he has managed to raise more than $2 million for his re-election, more than any other freshman, the analysis found.

That is due in large part, political analysts say, to his spot on the Financial Services Committee.

An opinion piece from the May 24 Wall Street Journal provided an equally-sobering outlook on this legislation:

The unifying theme of the Senate bill that passed last week and the House bill of last year is to hand even more discretion and authority to the same regulators who failed to foresee and in many cases created the last crisis.  The Democrats who wrote the bill are selling it as new discipline for Wall Street, but Wall Street knows better.  The biggest banks support the bill, and the parts they don’t like they will lobby furiously to change or water down.

Big Finance will more than hold its own with Big Government, as it always does, while politicians will have more power to exact even more campaign tribute.  The losers are the overall economy, as financial costs rise, and taxpayers when the next bailout arrives.

At The Huffington Post, Mary Bottari discussed the backstory on Blanche Lincoln’s derivatives reform proposal and the opposition it faces from both lobbyists and the administration:

The Obama Administration Wants to Kill the Best Provisions

Lincoln’s proposal has come under fire from all fronts.  Big bank lobbyists went ballistic of course and they will admit that getting her language pulled from the bill is still their top priority.  Behind the scenes, it is also the top priority of the administration and the Federal Reserve.  Believe it or not the administration is fighting to preserve its ability to bailout any financial institutions that gets in trouble, not just commercial banks.  Yep that is right.  Instead of clamping down Wall Street gambling, the administration wants to keep reckless institutions on the teat of the Federal Reserve.

The battle lines are drawn.  The biggest threat to the Lincoln language now is the Obama administration and the Federal Reserve.  There will no doubt be a move to strip out the strong Lincoln language in conference committee where the House and Senate versions of the bank reform bill now go to be aligned.

Meanwhile, President Obama continues to pose as the champion of the taxpayers, asserting his bragging rights for the Senate’s passage of the bill.  Jim Kuhnhenn of MSNBC made note of Obama’s remark, which exhibited the Executive Spin:

The financial industry, Obama said, had tried to stop the new regulations “with hordes of lobbyists and millions of dollars in ads.”

In fact, the lobbyists have just begun to fight and Obama is right in their corner, along with Ben Bernanke.



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