The House of Representatives wants to leave taxpayers on the hook for any future derivatives bust:
http://www.motherjones.com/politics/...roup-lobbyistsA year ago, Mother Jones reported that a House bill that would allow banks like Citigroup to do more high-risk trading with taxpayer-backed money was written almost entirely by Citigroup lobbyists. The bill passed the House in October 2013, but the Senate never voted on it. For months, it was all but dead. Yet on Tuesday night, the Citi-written bill resurfaced. Lawmakers snuck the measure into a massive 11th-hour government funding bill that congressional leaders negotiated in the hopes of averting a government shutdown. President Barack Obama is expected to sign the legislation.
"This is outrageous," says Marcus Stanley, the financial policy director at the advocacy group Americans for Financial Reform. "This is to benefit big banks, bottom line."
As I reported last year, the bill eviscerates a section of the 2010 Dodd-Frank financial reform act called the "push-out rule":
Banks hate the push-out rule…because this provision will forbid them from trading certain derivatives (which are complicated financial instruments with values derived from underlying variables, such as crop prices or interest rates). Under this rule, banks will have to move these risky trades into separate non-bank affiliates that aren't insured by the Federal Deposit Insurance Corporation (FDIC) and are less likely to receive government bailouts. The bill would smother the push-out rule in its crib by permitting banks to use government-insured deposits to bet on a wider range of these risky derivatives.The Citi-drafted legislation will benefit five of the largest banks in the country—Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America, and Wells Fargo. These financial ins utions control more than 90 percent of the $700 trillion derivatives market. If this measure becomes law, these banks will be able to use FDIC-insured money to bet on nearly anything they want. And if there's another economic downturn, they can count on a taxpayer bailout of their derivatives trading business.
Obama should veto any govt funding bill with this kind of stuff, and give all the details like above as to why.
shut the govt down rather that let the banks use depositors' funds for gambling. perfect example of private gain, public risk.
Lizzy Warren going hard after the Wall St Dems who vote, or support, this .
there's a good discussion of OTC derivatives here: http://www.businessinsider.com/bubbl...ves-otc-2010-5
"Under state gaming laws the speculative use of OTC derivatives, such as naked CDS (similar to naked shorts) and synthetic CDOs, was illegal in the US until state gaming laws were preempted by the federal government’s Commodity Futures Modernization Act of 2000 (CFMA)."
https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000
annulling the CMFA is essentially impossible due to Repugs blocking EVERYTHING that would protect the public and "harm" Wall st.
"the interconnecting web of OTC derivative contracts can “…lead to chaos or people even questioning the basic system.” "
question? even?
Goldman's Paulson at Treasury, as are all the Treasury/Fed officials, foxes guarding the hen house.
Shutdown deadline looms as opposition to ‘Cromnibus’ spending bill mounts
http://www.rawstory.com/rs/2014/12/s...e+Raw+Story%29
AS bad as I think Obamacare is; the banks ability to play with the taxpayer's wallets is the single most devastating issue that this country has faced, and, apparently is doomed to face again. Yoni might think the timing of the torture report was designed to distract from Obamacare details; I am more inclined to believe it is a diversion from this.
This is something Tea Partiers would have been opposed to a few years back; why is Rand silent? Props to Warren, but she is so far left, no one is going to listen to her; and will actually galvanize Republicans to assume it must be good if she is opposed. Obama has the pulpit, why is he silent?
We all know why those who ostensibly would be opposed to this are not.
ed and un able, right, B?
typed the previous while Boutons was posting his story, going to read that now. Edits probably to follow.
The article talked about the liberal Dems fighting the good fight; Are the conservative Republicans opposed to the bill for the same reason? It was not mentioned. Bias sucks.But the measure barely cleared a procedural hurdle as both liberal Democrats and conservative Republicans urged their colleagues to oppose it.
more on cromnibus:
The Spending Bill Includes a Huge Insurance Industry Giveaway Too
You can add insurance industry subsidies to the list of giveaways being shoved into the massive, last-minute government spending bill Congress is trying to vote on to avert a government shutdown. A seven-year extension of the Terrorism Risk Insurance Act (TRIA)—which is essentially a government promise to bail out insurance companies after a major terrorist attack—has become part of this appropriations measure. The insurance industry and some of its bigger corporate clients claim renewing the 9/11-inspired law is critical to keeping the industry alive. Critics, citing the industry's own risk analysis, say it's pretty much useless.
TRIA, which is set to expire December 31, was approved by Congress after the September 11 attacks. Before then, a major attack was considered such a far-off possibility that terrorism insurance was generally included in commercial policies without added cost. But the attacks were a catastrophe for the industry, costing more than $40 billion in today's dollars—the greatest loss for a non-natural disaster on record. After those payouts, many companies either stopped offering terrorism coverage or made it enormously expensive, according to a Congressional Research Service report on the subject. In 2002, Congress passed TRIA, which requires insurers to offer terrorism coverage—and promises to bail them out if a future terrorist attack causes losses above a certain threshold. With this law, the government acts as an insurer for the insurers—but it doesn't charge them a dime for the protection.
The TRIA renewal in the spending bill will shift more of the burden of covering losses due to terrorist attacks to the insurance industry relative to the previous law. The threshold for an industry bailout would double, from $100 million in damages to $200 million, and the portion of losses covered by the government would fall from 85 percent to 80 percent. The law does include a provision the government could use to get some of its bailout money back; it would allow the government to tax policyholders, but this is not mandatory.
Critics, including Sen. Elizabeth Warren (D-Mass.), have called TRIA a giveaway for the industry. Similar programs exist in Europe and Australia, but those programs bill insurance companies in advance for the protection, instead of giving it away for free and then possibly taxing policyholders after the fact.
If the government did charge for TRIA coverage, it could collect about $570 million annually, according to the Congressional Budget Office.
The Consumer Federation of America, citing the insurance industry's own risk analysis, notes that only the owners of "high-risk" terrorist targets— large, commercial buildings in New York City, Washington, DC, San Francisco, and Chicago—and their insurers benefit from TRIA.
Although terrorism insurance rates would increase if TRIA were repealed, the group says, few policyholders would see the difference.
If there were a terrorist attack on one of those large commercial buildings, the industry is probably equipped to handle the loss without a government backstop. In the first half of 2014, American property and casualty insurers (TRIA's main industry beneficiaries) were sitting on a record surplus of $683.1 billion, according to an industry report—enough to cover 15 times the losses endured on September 11.
In a September 8 letter to Congress, 400 companies and trade associations, from AIG to United Airlines and Walt Disney, contended that TRIA maintained "economic stability in the face of ongoing terrorist threats,"
and that without it insurance companies would be unable to provide adequate coverage. A few weeks later, the Insurance Information Ins ute, an industry-funded advocacy group, cited ISIS's promise to attack the United States as a reason for extending the law.
More than 100 companies and trade associations lobbied Congress on TRIA. Looks like it was money well spent.
http://www.motherjones.com/politics/...y-giveaway-too
I read about this a couple days ago... apparently Rep. Jeb Hensarling (R-Texas) was the one pushing to get rid of the push-out rule.
link: http://www.politico.com/story/2014/1...ks-113406.html
.
yeah, and TX Barton is pushing to remove ban on exporting US crude. TX Barton is the TX asshole who said USA should APOLOGIZE to BP for going after BP for the BP Gulf blowout.
http://www.theguardian.com/us-news/2...-spending-billRepublicans formed an unlikely alliance with the White House in a late-night scramble to pass a $1.1tn federal budget over the objections of House Democrats, who claim it has been hijacked by Wall Street lobbyists and campaign finance interests.
In dramatic scenes that mirrored the lead-up to the government shutdown of October 2013, White House chief of staff Denis McDonough spent three hours locked in talks with the House Democratic caucus on Thursday night trying to persuade its members to drop their opposition to the so-called “cromnibus” and pleading with them that it was the best deal available.
Eventually, with less than three hours to go until another government shutdown, House speaker John Boehner decide to gamble on receiving sufficient support from Democrats to overcome a rebellion on the right of his own party and called a final vote.
“Thank you and Merry Christmas,” said Boehner as he secured 219 votes, one more than he needed to guarantee passage and including support from 57 Democrats. The 206 no votes were bolstered by 67 Republicans, more than expected, who are angry that their party is not using the budget to challenge president Obama more aggressively on immigration reform.
That battle has been postponed until March when Congress will have to vote again on funding for the Department of Homeland Security, which was deliberately left out of the wider omnibus spending package and only funded through a short-term continuing resolution.
The passage of the omnibus spending bill in the House was followed by a two-day continuing resolution to allow the Senate time to follow suit and all but guarantees that most of the government will remain funded until next September.
So what do you think of Charles Schumer? You read NoNo post?
Schumer is DINO
US Rep. Kevin Yoder(R-KS) was responsible for carrying Citibank drafted language to leave us all on the hook for derivatives trading, should oil derivatives, e.g., cause trader/dealers structurally significant losses.
http://ellenbrown.com/2014/12/19/rus...l-derivatives/
Does anyone recall why Lehman went bust?
Last edited by Winehole23; 12-21-2014 at 01:17 AM.
Stewart destroys, but Congress s own words are self-destroying
https://www.youtube.com/watch?v=h0n_vD199bY
for Fox, Repugs, conservatives, blacks are demons to be murdered, Liz, too
Fox host: ‘Without question, Elizabeth Warren is the devil’ and Wall Street will defeat her
http://www.rawstory.com/rs/2014/12/f...e+Raw+Story%29
this demon is loved by you dumb Bible humpers.
Lots of screw jobs for the 99% in that bill
Under these new rules, the benefits you've been promised in multi-employer plans can actually be cut if your plan is in jeopardy of failure within 15 years and is less than 80-percent funded. (Retirees age 80 years old and older would be protected from cuts.) This is a huge change from longstanding federal rules that prohibit scaling back pension benefits.
http://www.huffingtonpost.com/terry-savage/some-pension-checks-vulne_b_6330932.html
a "solution"?
Wall Street Salivating Over Further Destruction of Financial Reform
Banks and financial ins utions are planning an aggressive push to dismantle parts of the Wall Street reform law when Republicans take control of Congress in January.
Fresh off a victory in the government funding debate that liberals decried as a giveaway to Wall Street, advocates for the financial sector aim to pursue additional changes to Dodd-Frank that they say would lighten burdens created by the 2010 law.
Among the top items on the wish list: easing new requirements on mortgages, loosening restrictions on financial derivatives and overhauling the Consumer Financial Protection Bureau....Another fight on the horizon is the push for “regulatory relief,” as financial ins utions and Republicans seek to require agencies to pursue more cost-benefit analysis when writing rules.
....In the face of loud opposition, financial lobbyists say they have a compelling case for revisiting the law. While the economy is improving, they argue the new rules have made it exceedingly difficult to obtain loans, including mortgages.
http://www.motherjones.com/kevin-dru...nancial-reform
the Bankers' Club, aka The Fed, helping killing Dodd-Frank, which the Repugs will finish off totally in 2015.
Fed Delays Volcker Rule, Giving Wall Street Another Holiday Gift
The Federal Reserve on Thursday granted banks an extra year to comply with a key provision of the Volcker Rule, a move that gives financial lobbyists more time to kill the new regulation before it goes into effect.
The Volcker Rule is a key element of the 2010 Dodd-Frank financial reform law that bans banks from engaging in proprietary trading -- speculative deals that are designed only to benefit the bank itself, rather than its clients.
Thursday's move by the Fed gives banks an additional year to unwind investments in private equity firms, hedge funds and specialty securities projects. The central bank also said it plans to extend the deadline by another 12 months next year, which would give Wall Street a two-year reprieve through the 2016 presidential election.
The Fed's delay comes less than a week after Congress granted Wall Street a reprieve from another reform that had been mandated by the 2010 Dodd-Frank financial reform law. The measure, known as the swaps push-out rule had eliminated federal subsidies for trading in risky derivatives -- the complex contracts at the heart of the 2008 banking meltdown. Bank watchdogs say the Volcker Rule delay adds insult to injury.
"Swaps pushout was a club," said Marcus Stanley, policy director for Americans for Financial Reform. "This is a stiletto."
Big banks including Goldman Sachs and Morgan Stanley have billions of dollars invested in private equity firms that they would have to sell at a loss based on current prices, according to a Bloomberg report from early December.
Dodd-Frank gave banks four years to unwind their investments in speculative enterprises, setting a deadline of July 21, 2014. The Fed had previously extended that deadline by one year, and now plans to push it out to July 2017.
"The Street has had years of notice to unwind these investments, and it appears that their self-serving complaints have been accepted fairly uncritically without a real analysis for the basis of the claim," said Dennis Kelleher, president and CEO of Better Markets, a financial reform advocacy group. "If you can't get out of a trade in seven years, it's probably not the kind of trade you should be doing."
http://www.huffingtonpost.com/2014/1...n_6351190.html
Why Mitch McConnell Plans To Troll Elizabeth Warren
Sen. Mitch McConnell (R-Ky.), looking forward to a GOP Senate majority, laid out the Republicans' 2015 financial policy platform: trolling Sen. Elizabeth Warren (D-Mass.).
"The [Senate] Banking Committee is certainly going to be taking a look at Dodd-Frank," said McConnell, who is widely expected to be the next Senate majority leader, in a Wednesday press conference. "I've called it frequently 'Obamacare for banks.'"
He continued, "The big guys are doing just fine under Dodd-Frank. The community bankers are struggling. I do think the Banking Committee will want to take a look at how much damage it's done to the little guys who had nothing whatsoever to do with the meltdown in 2008. I'd be surprised that the Banking Committee isn't going to look at it."
In other words, McConnell's big plan for bank policy seems to be calling the 2010 Wall Street reform law names and trying to dirty the public relations waters for bank reform advocates, like Warren, on vaguely populist grounds. Warren, an outspoken member of the Banking Committee, is known for pushing federal regulators to focus on the needs of ordinary Americans.
http://www.huffingtonpost.com/2014/11/06/mitch-mcconnell-elizabeth-warren_n_6117340.html?cps=gravity_2425_78760637774 82034819
govt and corps can violate contracts with consumers, but ever trie to violate a contract with govt or corp?
Cromnibus Pension Provisions Gut 40 Years of Policy, Allow Existing Pensions to Be Slashed
Under the bill, trustees would be enabled to cut pension benefits to current retirees, reversing a 40-year bond with workers who earned their retirement packages.
Michael Hilzick:
Under ERISA, the 1974 law governing pensions in the private sector, benefits already earned by a worker can’t be cut.
Now they can. That’s right. Even if you’re retired and vested in a private pension plan, your benefits could be cut. Congress retraded the deal (if I have the finance jargon right). That’s nauseating even for today’s official Washington. And the bill was passed in a thoroughly bipartisan fashion: Kline is a Minnesota Republican, and Miller is a “liberal” California Democrat.
The measure would give multiemployer pension trustees the option to cut vested benefits in order to save plans headed toward insolvency and would increase insurance premiums to the financially troubled Pension Benefit Guaranty Corporation (PBGC).
It works like this: Trustees submit an application of proposed benefit suspensions to the Treasury Department. The Treasury Department consults with the Pension Benefit Guaranty Corporation and the Labor Department before approving the application. Following Treasury approval, participants vote on the proposed cuts. If more than 50 percent of participants disapprove, trustees can’t make the cuts. There’s a loophole, however: If the Treasury, the Labor Department and the PBGC determine that the plan would cost the PBGC more than $1 billion [That’s not even real money these days!] upon becoming insolvent, trustees can still implement the cuts.
How many workers will be affected? Michael Hilzick again:
[M]ultiemployer pension plans are generally negotiated by a union to cover employees of all companies in a given industry. About 1,400 such plans cover about 10 million workers, according to the Pension Rights Center. About 150 to 200 of the plans, covering 1.5 million workers, are seriously underfunded and could run out of money sometime during the next 20 years.
measure included in Congress’s mammoth spending bill permits benefit cuts for retirees in one type of pension plan, a big shift that lawmakers and others believe could set a precedent for other troubled retirement programs.
Lawmakers and experts, while divided over the merits of the change, largely agreed that it could well be the first of many.
Alicia Munnell, director of Boston College’s Center for Retirement Research says the change:
“is letting the genie out of the bottle. Once it becomes legal to cut accrued benefits, then it’s a different world. It’s really precedent-making change. [While not opposed to giving trustees flexibility, she said] “It needs to be applied very, very judiciously.”
http://truth-out.org/news/item/28139...-to-be-slashed
http://www.nakedcapitalism.com/2014/...il-plunge.htmlExerts on regulation said that the Dodd Frank provision at issue, known as derivatives push-out, was simply about the big US financial firms keeping their profit margins via continued access to cheap funding. Banks weren’t barred from engaging in this type of business but they’d have to do it in different legal en ies. As American Banker explained:
What they won was the repeal of a Dodd-Frank Act provision that requires them to push out a portion of their derivatives business into subsidiaries. Big banks fought against its inclusion in the 2010 financial reform law and have been steadily fighting to repeal it ever since…This interpretation may be too benign. As structured credit expert Tom Adams said via e-mail:
Many analysts agreed that repealing the swaps provision, which was Section 716 of Dodd-Frank, is likely to only help banks on the margins, since they are allowed to continue engaging in the activity through affiliates. But by fighting so hard, some saw signs of darker motivations.
“Wall Street’s determined lobbying on Section 716 provides compelling evidence that Wall Street’s business model depends on the ability of large financial conglomerates to keep exploiting the cheap funding provided by their ‘too big to fail’ subsidies,” said Arthur Wilmarth, a professor of law at George Washington University. “Shame on Congress if it allows megabanks to continue to pursue the same business strategy that brought us the financial crisis.”
Why are the proponents pushing so hard, with respect to the Dodd-Frank provision on derivatives pushed out of insured banks, to get this done now? Why not just wait until Republicans have control of the House and Senate? Why is Jamie Dimon calling on members now, rather than just waiting? The timing is weird.
Perhaps there are political reasons that give various parties cover they want and that’s all there is to it.
On the other hand, I’ve been closely watching the blow up in the oil and energy markets and I wonder if there may be a link to the Cromnibus fight.
Much of the recent energy boom has been financed with junk debt and a good portion of that junk debt ended up in collateralized loan obligations. CLOs are also big users of credit default swaps, which was an important target of the Dodd Frank push-out. In addition, over the past 6 months banks were unable to unload a portion of the junk debt originated and so it remained on bank balance sheets. That debt is now substantially underwater. To hedge, banks are using CDS. Hedge funds are actively shorting these junk debt financed energy companies using CDS (it’s unclear where the long side of those CDS have ended up – probably bank balance sheets and CLOs).
Finally, junk financed energy companies have been trying to offset the falling price of oil by hedging via energy derivatives. As it turns out, energy derivatives are also part of the DF push-out battle.
Conditions in the junk and energy markets are pretty dire right now as a result of the collapse in oil, as you know. I suspect there are some very anxious bank executives looking at their balance sheets right now.
Since the derivatives push-out rule of Dodd Frank was scheduled to go into affect in 2015, the potential change in managing their exposure may be causing a lot of volatility for banks now – they need to hedge in large numbers at the best rates possible. Is it possible that bank concerns (especially Citi and JP Morgan) about the potential energy-related losses are why Dodd Frank has to be changed now?
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